Janss retail building in Santa Monica sells at a premium.

Janns Court, one of the early projects in what eventually became Santa Monica's Third Street Promenade, was sold to a Northern California investment group last week for $30 million.

San Francisco-based Office Opportunities Fund bought the 131,000-square-foot combination retail, office and movie theater complex from Janss Court Associates LLC, according to Bob Safai of Santa Monica-based Madison Partners, which brokered the deal.

That works out to $225 a square foot, a price that has become commonplace for commercial buildings in and around Santa Monica.

The seven-story Janss Court building includes approximately 13,000 square feet of ground-floor retail space occupied by the Broadway Dell and Remi restaurants and about 21,000 square feet occupied by a Cineplex Odeon theater complex. The upper floors include approximately 60,000 square feet of office space and 32 apartments that account for the remainder of the space.

The project was developed in 1989 by a partnership of longtime Los Angeles developer Janss Corp. and real estate concerns affiliated with billionaire investor Marvin Davis. Janss Court Associates bought the building after the Janss-Davis partnership went into Chapter 11 bankruptcy in 1995.

Matthew May, a broker with Madison, said one reason the building commanded a premium price - besides its Promenade location - is its 260 parking spaces. "It's the only building on Third Street with its own parking," May said.

He added that investors are looking at Promenade properties as appealing investments because retail rents have been heading skyward there of late. He said rents have increased by 50 percent in the last six months, with landlords now asking $6.50 per square foot per month for retail space.

That has prompted concern in some quarters that Promenade rents might eventually force out some of the smaller, locally based businesses.

"One of the factors that has made Third Street a success is that it has had unique shops," May said. "You could always go there and find shops that you don't see in all the other malls. If the rents go too high, we could see a situation in which only the big national chains could afford to be there."

Sky-high retail rents are considered one of the factors that hurt Westwood Village, which is now trying to regain its popularity as a shopping and entertainment center. Competition from the Promenade and Pasadena's Old Town is often cited as one of the reasons Westwood Village has lost much of its popularity in recent years.

Westwood fever

Joining the feeding frenzy of commercial property acquisitions in Westwood Village is Arden Realty Inc., the Beverly Hills-based real estate investment trust.

Arden has listed the landmark "Monty's" building in Westwood as one of nine pending property purchases in the prospectus for its recent secondary stock offering.

Although its formal name is the Westwood Center Building, the 21-story office tower is known as the Monty's building for the prominent sign that advertises the top-floor restaurant of the same name.

The 282,000-square-foot building is 51 percent empty, according to the Arden prospectus, which does not say how much the REIT expects to pay for the property.

Richard Ziman, founder and chairman of Arden, wouldn't comment on the expected purchase price, saying the company is still negotiating with the current owner, Westwood Center Ltd.

However, Ziman said Arden plans a "major renovation" once the sale closes. He said Arden hopes to close the deal by Aug. 15.

Arden is the latest in a number of investors who see new hope in Westwood Village lately; among them is Malibu developer Larry Taylor. As reported in the Business Journal July 28, Taylor and a New York investment fund operating as CDC-Relpopco LLC have bought a host of Westwood properties from the Borinstein family, longtime owners of the properties. Another investor who apparently sees an upside in the village is Donald Sterling, long considered one of L.A.'s savviest real estate investors, who has bought three apartment buildings and a small hotel there within the last year.

Betting on downtown revival

Downtown Los Angeles investment firm the Hertz Group has bought the downtown University Club building from Nomura Real Estate Co. for "under $3 million," according to Tom Gilmore, president of Hertz.

The six-story, 110,000-square-foot office building on Sixth Street near Hope Street, has been vacant for five years, according to Wolfgang Kupka of Cushman & Wakefield Inc., who represented Hertz in the transaction. Kupka said as far as he knows, Nomura made no effort to market the building during what has been a very weak five years in the downtown L.A. office market.

Gilmore said Hertz bought the building because it believes the downtown market is coming back. It is one of three properties the company has bought in the past year. The others include the Oviatt Building on Olive Street near Sixth and the International Jewelry Center on Hill Street near Sixth.

Gilmore said Hertz likes to buy "specialty buildings" and "buildings with character." Despite what he called "weak demand for the past five years" in the downtown office market, Gilmore said he has received a number of inquiries already from prospective tenants interested in possibly relocating to the former University Club building.

They'll have to wait, however, because Gilmore said Hertz plans a thorough renovation of the property before opening it to tenants.

He said the renovation will begin sometime after Oct. 19 because Hertz has donated the use of the building to the Downtown Arts Development Association for an exhibit of 500 artists from Oct. 4 to 19. After that, the building will require another six to eight months of renovations, he said, meaning it will probably be finished in the summer of 1998.

Gilmore said Hertz initially planned to turn the building into a combination retail and banquet hall and to convert three of its floors to parking because the company didn't think demand in the office market was strong enough,

"But now, oddly enough, I'm in negotiations with a couple of people to fill up the building with office tenants," he said. "All of a sudden, it seems like things are happening down here."

Bob Howard covers the real estate industry for the Los Angeles Business Journal.