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:
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:
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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