Foreign investors lining up for L.A. property purchases: Stockbridge outbids British, Irish and others on land for Santa Monica hotel.

A partnership of Los Angeles developer Jeff Worthe and Delaware-based Stockbridge Real Estate Funds has purchased an ocean view hotel development site in Santa Monica.

The half-acre property, at 1327, 1333, and 1337 Ocean Ave., is entitled for a 73-room lodging. The seller was Hill Street Realty LLC, a local partnership headed by Joe Penner of Legg Mason Real Estate Investors Inc., an investment firm. The deal is valued at $34 million, or about $466,000 per room.

The sale stands out because it is rare that a significant piece of development-ready real estate in Santa Monica changes hands. But the losing bidders also make the deal noteworthy.

The bidding process, with twelve parties participating, highlighted an emerging trend in the local real estate market: increased international interest. Half of all bidders were from Ireland, England, India, Southeast Asia and the Middle East, according to Arthur Buser, president of lodging capital markets for Jones Lang LaSalle Hotels.

"Particularly from the United Kingdom, the view was, 'Jeez things just feel inexpensive,' said Buser, who represented the seller in the deal. "They believe the dollar may continue to devalue and the fact that entitlements were in place gave offshore bidders a lot of comfort because the challenges of developing in Santa Monica are well known."

The sale comes on the heels of several marquee purchases by foreign real estate firms. In nearly every case, foreign companies are making plays for irreplaceable or gateway assets.

Such recent deals include England's Candy & Candy paying $500 million for the 9900 Wilshire Blvd. condo development site in Beverly Hills, Dubai's Emaar Properties paying almost $100 million for a Wilshire Corridor condo development site and the $275 million purchase of the Two Rodeo shopping plaza by an Irish partnership.

Buser said foreign interest in local trophy properties has increased. But some real estate industry observers say that foreign buyers may be overvaluing the Los Angeles market, especially since the residential side is in the midst of a significant downturn.

And there is precedent: Japanese investors notoriously paid top dollar for downtown L.A. high rises at the height of the 1980s real estate boom only to sell out at huge losses when the the market bottomed out in the early 1990s.

Still, Buser said that when it comes to unique assets, the interest will likely not wane. The buyer represented itself on the deal. Jeremie Babinet of Jones Lang LaSalle Hotels, a unit of brokerage Jones Lang LaSalle Inc., also represented the seller.

Staff reporter Daniel Miller can be reached at [e-mail] or [phone], ext. 263.