Investor offering to sell option on L.A. arco towers. (Up Front).

Moving swiftly to capitalize on a deal struck after gaining control of the debt on Arco Plaza, Kings Capital is seeking to sell its option to purchase the 2.6 million square foot downtown office complex.

The option is said to specify a purchase price for the property of $255 million. A source familiar with the offering said San Juan Capistrano-based Kings, headed by investor Kenneth Picerne, could get between $25 million and $50 million for the option, which is being marketed through L.A.-based Eastdil Realty.

"Put yourself in his shoes," said a source familiar with the offering. "Do I try to raise $250 million (to buy the site) and hope to make a $100 million, or do I take no risk and flip for $25 million to $50 million?"

According to an offering memorandum being circulated for the option, Picerne's operating companies "invest primarily in real estate and portfolios of performing and non-performing loans."

Kings acquired about $900 million worth of debt on properties held by Japanese real estate investment company Shuwa Corp., whose U.S. subsidiary Shuwa Investments Corp. owns Arco Plaza, in March and April. The bulk of the debt was associated with properties in Japan, the source said, with less than 10 percent associated with Arco Plaza.

Shuwa has staggered under its debt load, and sources said Piceme was able to use the prospect of foreclosure to exact the purchase option. Facing the prospect of no cash out on its investment, Shuwa, which purchased the twin-towers in 1986 for about $650 million, agreed.

Neither Picerne nor Eastdil officials returned calls.

Shuwa was one of a number of Japanese companies to make high profile buys in downtown during the '80s, but since its acquisition of Arco Plaza, the buildings have been a symbol of corporate exodus from downtown. Arco, bought by BP Amoco in 2000, has reduced its occupancy to 200,000 square feet and Bank of America sliced its occupancy to 350,000 square feet from a high of 600,000.

Downtown real estate sources were hard pressed to tack a value to the property, which is nearly half empty and in need of extensive upgrades.

Shuwa has retained CB Richard Ellis to sell the property, though Tom Bohlinger, senior vice president at CB, said no price had been attached to it. Officials at Shuwa did not return calls seeking comment.

Because Eastdil is marketing an option, it is not in conflict with CB's offering of the property itself.

"It could be one of the best bargains in town," Bohlinger said. "The value of the property could exceed $300 million if someone has optimistic lease-up assumptions or comes to the table with a major tenant--that's the big unknown."

In its offering memorandum, Eastdil markets the complex as "an opportunity for a well-capitalized new owner with a focused leasing and management plan."

The marketing of the option marks another twist in the tumultuous history of the 3 1-year-old property. For the decade or so after being built in 1971, the twin 52-story black towers at 515 and 555 S. Flower St. were considered downtown's premier business address, with its namesake tenant occupying as much as 900,000 square feet.

Despite two of the county's largest office leases being signed there last year--law firm Paul Hastings Janofsky & Walker LLP and Aecom Technology Corp. (parent of architects DMJMH+N) took a combined 334,000 square feet in deals worth more than $120 million--49.5 percent of the 2.2 million square feet of office space is vacant.

Whether Arco Plaza is worth $280 million to $305 million remains a question. At $305 million, or $135 a foot, Arco Plaza would sell for far less than nearby buildings like Figueroa Plaza, Union Bank Plaza and BP Plaza, which all recently sold for $148 a foot, $170 a foot and $193 a foot, respectively.

As for potential buyers, Bohlinger named Maguire Partners, Thomas Properties Group, Trizec Properties Inc. (which recently bought out its partner's 75 percent interest in Ernst & Young Plaza for $112 million) and Equity Office Properties Trust as potential suitors.

Thomas Properties officials would not comment on their interest in the property while officials from Maguire and Trizec did not return calls seeking comment.