Fox Plaza Buy Has Eyebrows Ascending

The flash and frenzy of Los Angeles’ Westside is far removed from the planned community Irvine Co. created in Orange County, but the company’s agreement last week to buy a Century City skyscraper for more than $350 million is just the latest ambitious move outside its home turf.

The record-breaking sum for Fox Plaza gives Irvine Co. a much higher profile on the Westside and continues its expansion beyond Orange County. In recent years, Irvine Co., headed and owned by billionaire Donald Bren, has purchased clusters of suburban office buildings and swaths of industrial parks in Silicon Valley and San Diego.

On the Westside of Los Angeles, however, the firm has focused on so-called trophy properties, buildings that command widespread recognition and the highest rents. It apparently doesn’t matter that demand for Westside office space has cooled a bit or that Irvine Co. remains a relatively small player in the Los Angeles real estate scene. Bren and his firm are known as long-term investors who ride out the highs and lows in real estate markets.

“He’s coming in and buying the top-class properties,” said one real estate executive familiar with the Fox Plaza sale. “He wants to make sure he gets them.”

Privately held Irvine Co. is far better known for the development of its namesake Irvine Ranch, one of the nation’s most successful master-planned communities. The approximately 54,000-acre property has been transformed into a popular and lucrative development where more than 300,000 people live and work.

The bulk of the company remains in Irvine, but it has stepped up its expansion outside of “the ranch” as part of a plan to diversify its portfolio. In the Silicon Valley, it has purchased more than 30 buildings and has plans to develop more than 1 million square feet of space in Milpitas. Irvine Co.’s holdings in San Diego County include nearly a dozen research and development facilities in the Sorrento Mesa area.

The company is following a strategy pursued by other real estate firms that have plowed the profits from land development and sales into properties that generate income, said Orange County real estate consultant Alfred Gobar.

“Eventually, they will run out of land . . . and they recognized that they will have to transition into another kind of company,” Gobar said.

In Los Angeles, Bren and his company have conducted a cautious expansion on the Westside, where office rents and land values are among the highest in Southern California.

Irvine Co. entered the market in 1985 when it built the 22-story, marble-clad Westwood Gateway near the intersection of Santa Monica Boulevard and the 405 Freeway. A few years later, the firm constructed two additional towers across the street, creating an office complex of more than 800,000 square feet.

Despite the recession of the early 1990s and a location on an unremarkable stretch of Santa Monica Boulevard, Westwood Gateway has been able to command premium rents based in part on Irvine Co.s reputation, real estate brokers said.

“Bren’s properties have always been first class,” said broker Nick Christensen of CB Richard Ellis.

In Santa Monica, Irvine Co. has spent an estimated $80 million to buy and remodel a 16-story apartment building on Ocean Boulevard. Rents at the 121-unit building start at more than $4,000 a month--among the highest in the western U.S.

The purchase of Fox Plaza--at a record price of nearly $500 a square foot--more than doubles the size of Irvine Co.’s Westside portfolio with a landmark skyscraper populated with high-profile tenants, including Fox Entertainment Group Inc., Goldman Sachs & Co. and former President Ronald Reagan. The elegant high-rise got international exposure as the make-believe takeover target of terrorists in the 1988 film “Die Hard.”

But the price has generated a few raised eyebrows as well as gasps in Los Angeles real estate circles. The sale takes place as Westside rents and property values--while still robust--have flattened out a bit. In addition, Fox Plaza’s seller, Marvin Davis, is known for his knack of buying properties at the bottom of the market and selling at the top.

“It’s a strong office market,” Gobar said. “But I kind of blanched a little bit myself when I saw the price.”

Officials at Irvine Co. declined to comment.

Despite its Fox Plaza purchase, Irvine Co. lags behind many other major Westside landlords, such as Arden Realty Inc. and Douglas Emmett Co., with its two area office properties. In recent years, many large real estate companies have clustered their holdings to increase their market share and clout with tenants and suppliers. There are no signs that Irvine Co. has any plans for a major Westside expansion, industry brokers say.

“The Irvine Co. isn’t trying to come to West Los Angeles and build a large market share like they have in Orange County,” said Clay Hammerstein, a broker in the Los Angeles office of Insignia/ESG. “If that was the case, they would have done it years ago.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Expanding Empire

Donald Bren’s recent record-breaking purchase of Fox Plaza in Century City continues his push to expand and diversify his company’s interests outside the Irvine Company’s home base of Orange County. Here a look at some of Bren’s other commercial properties:

* Westwood Gateway

The high-rise office towers near the intersection of Santa Monica and Sepulveda boulevards, completed in 1989, have more than 800,000 square feet of office space.

* La Jolla Gateway

In San Diego County, the mid-rise executive office buildings have 333,000 square feet of office space.

* McCarthy Center

The 68-acre, campus-like McCarthy Center encompasses 19 low-rise buildings with more than one million square feet of office space in the Silicon Valley. Cisco Systems, Inc. recently signed leases to occupy the entire center.

Sources: Times files, Company website

Researched by NONA YATES/Los Angeles Times

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Expanding Empire

Donald Bren’s recent record $350-million deal to purchase Fox Plaza in Century City continues his push to diversify his company’s interests outside Irvine Co.’s home base of Orange County. Here a look at some of Bren’s other commercial properties:

Westwood Gateway

The office towers at the intersection of Santa Monica and Sepulveda boulevards, completed in 1989, have more than 800,000 square feet of office space.

La Jolla Gateway

In San Diego County, the mid-rise executive office buildings have 333,000 square feet of office space.

McCarthy Center

The 68-acre, campus-like center will encompass 19 low-rise buildings with more than 1 million square feet of office space in Silicon Valley. Cisco Systems Inc. recently signed leases to occupy the entire center.

*

Sources: Times files, company Web site

Researched by NONA YATES/Los Angeles Times