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CNN Tower

A Hollywood landmark, the CNN Tower was located in what is now a bustling redevelopment area. Thanks to a close broker relationship, we were privy to information that CNN was looking to vacate the building. We also knew that the investor owners were eager to exit, convinced that the office leasing market was flat. Our research proved otherwise.

We found that the market was ripe for expansion, supported by a growing entertainment industry and a shrinking supply of Class A office space. The Tower offered easy access for commuters from affluent, feeder neighborhoods, incremental revenue from a 510-stall parking garage, and opportunities for unrealized revenue. We jumped on the opportunity, only to be outbid by +$750,000. Still we won the sale, as a result of our ability to expedite the due diligence process, offer non-refundable earnest money and close on time.

By bringing in a well-known leasing firm, we were able to improve occupancy rates from 87% to 95%. We increased rental rates by 10%, doubled parking revenue by automating the garage and securing after-hours parking contracts, converted ground-floor office space to more valuable retail space, and convinced CNN to remain in the Tower. As a result, we reduced our projected hold term from five-seven years to just two years, selling the property for a sizeable profit.




Located in the Sunset and Vine retail corridor on Sunset Boulevard on a 1.16 acre site at the center of what is now Hollywood’s redevelopment area, CNN Tower is a 14-story, 198,713 SF, Class A office building. Home to CNN’s West Coast broadcast studios, the Tower is an iconic, Hollywood landmark. CNN’s massive sign is prominently located at the top of the building, and the building is one of only four Class A office buildings in this submarket.

At the time of the offering in 2004, the property’s investor group of owners determined the West Los Angeles office leasing market was flat and that their return on investment was optimized. It also was rumored that CNN was looking to relocate. Based on that, they chose to sell. Through its longstanding relationship with the broker, SKB was quickly introduced to the asset and the opportunity to purchase it. SKB immediately commenced our own internal due diligence into the opportunity.

Despite the ownership’s determination that it was time for them to sell, SKB saw significant upside in the near term and beyond:

  • In years prior to the sale, Hollywood had posted record positive, net absorption of commercial square footage, attributed to the continued strength and expansion of the entertainment industry and limited supply of Class A office space within the submarket. Submarket vacancy at the time was 19.9%, but it was expected to decrease significantly to 8% by 2007. According to REIS, a widely used national research firm that tracks national, regional, market and submarket trends, no new office product was projected to come online.
  • SKB’s own market analysis showed three, directly competitive office buildings had been or were about to be sold for conversion to residential use. This provided the opportunity to acquire one of the most signature office properties in a transforming neighborhood and to pursue quick, substantial occupancy increases, since neighborhood demand for more desirable office space appeared likely to grow.
  • Additionally, the majority of competitive office space in the micro-marketplace surrounding the building was Class B or third tier, older, tired office buildings, making CNN Tower one of the most desirable destinations in Hollywood for potential office tenants.
  • The project also included a five-story, above-ground parking structure containing a total of 510 parking stalls, yielding one of the highest parking ratios (2.57/1,000 SF) in Hollywood and generating $84,000 annually in revenue (through an evening license agreement to the Sunset Room, a popular, upscale cocktail lounge located across the street).
  • CNN Tower is convenient to the 101 Freeway, has easy access to the Metro Rail and sits in the Westside market, a highly desired location for key business centers of influence residing in the Hollywood Hills, Hancock Park, Westwood, Brentwood and other surrounding upscale residential neighborhoods, which logically would want an easy commute to a quality location.
  • Ground floor retail opportunity. With 22 foot ceiling heights on the ground floor, and properties less than a block away leasing retail at double our current office rental rate, we saw the opportunity to increase revenue by converting the ground floor office space to retail space.
  • Additionally, our initial analysis of the opportunity surfaced the potential for capturing unrealized revenue through building elevations, advertising on Sunset Blvd., installation of automated parking control equipment and redevelopment of the ground floor as retail, capitalizing on Sunset Boulevard frontage.



Despite being outbid by some $750,000, SKB was able to purchase the property, based on our willingness to expedite due diligence, offer a non-refundable deposit and close according to the agreed-upon timeframe. SKB’s purchase of this landmark asset was at $171 PSF, well below the replacement cost of $250 PSF. After closing, SKB moved quickly to:

  • Stabilize the asset through the lease-up of vacant space, increasing rental rates as tenants renewed and converting ground-floor office space to more valuable retail space.
  • Replace the seller’s own, in-house team with a nationally renowned property management firm charged with managing and leasing-up vacant space. Thanks to their efforts and to the fact that the projected upswing in Hollywood’s Class A office market came to fruition (it was one of the few submarkets within Los Angeles to have positive absorption during the recessionary cycle prior to acquisition of the CNN Tower), we saw almost immediate improvement in leasing and revenue generation. This was largely attributable to the expanding entertainment industry and significant redevelopment in the submarket, trends which continued during the holding period.
  • Institute the range of planned, physical plant improvements (detailed above), all of which contributed to the property’s increased appeal and translated to significant revenue increases from improved occupancy (from 87% to 95%) and rental rate increases of 10% during the first 17 months of ownership.
  • Additionally, SKB moved swiftly and decisively to counter the rumored CNN move to other quarters. Our market analysis showed three, directly competitive office buildings had been or were about to be sold for conversion to residential use. As well, an analysis of anchor tenant CNN’s impact on the building showed their 24/7/365 use of the building and unusual tenant demands continued to cause high operating costs. Plus, their rent was well below market. (We even considered that not renewing CNN might well improve net operating income!)
  • In the end, however, the sum total of this information enabled SKB to take a stronger negotiating position with renewing CNN. We also went into the market and used the possibility of acquiring naming rights to the building to counter CNN‘s desire to move. With relative speed, we arrived at a lease renewal at market rent with CNN.



Our success with the CNN Tower came from several places. SKB not only saw what it was, but what it could be. First, a strong broker relationship gave us access to the opportunity early, allowing us to conduct thorough research and formulate a compelling acquisition strategy prior to making an offer. When we were outbid, we were ready to counter with an irrefutable proposal. Then, by making several physical updates to the property, securing a more advantageous CNN lease and having faith that the marketplace economy would improve as we predicted, we were able to transform the property. As a result, we reduced our projected hold term from five to seven years to just two years, selling the property for a sizeable profit.
















*This overview does not necessarily reflect or predict the performance of any future transaction, or the actual performance of any other past transaction. The returns shown do not represent an overall track record, and returns and performance vary substantially transaction to transaction. In some cases transactions have resulted in the total loss of investment.

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