Newmark Arranges Sale of 1.1-Million-Square-Foot Office Building in Downtown Los Angeles for $153.5 Million
- Aon Center is the third tallest building in Los Angeles and the fourth tallest in California, making it an iconic landmark of the Downtown Los Angeles skyline.
- The property was extensively renovated in 2020, offering modern amenities and a visually appealing architectural lobby.
- Aon Center is 64% leased at the time of sale to a diverse roster of tenants with strong national and regional credit profiles, ensuring income diversity for investors.
- The property boasts a walk score of 99 and a transit score of 100, providing immediate Metro access and surrounded by world-class walkable amenities.
- None.
Insights
The sale of Aon Center for $153.5 million represents a significant transaction within the commercial real estate sector, particularly in the Western U.S. market. The transaction's magnitude, being the largest office sale in Q4 of 2023, signifies a robust interest in premium commercial assets despite potential headwinds from economic uncertainties and shifts towards remote work. The property's strategic location in the Financial District, coupled with its high walk and transit scores, underscores the continued value placed on accessibility and amenities in real estate valuation.
From an investment perspective, the building's 64% occupancy rate at the time of sale presents both an opportunity and a risk. The opportunity lies in the potential upside from leasing the remaining unoccupied space, especially considering the building's diversified tenant base, which mitigates the risk of income concentration. However, the risk involves the challenge of attracting new tenants in a potentially saturated market or one that is shifting due to evolving work patterns. The diverse roster of tenants with strong credit profiles is a positive indicator of the asset's stable income stream.
Furthermore, the extensive renovations made in 2020 suggest that the building is up-to-date with modern amenities, which can be attractive to potential tenants and may command higher rents. The presence of environmental considerations, such as EV charging stations, aligns with growing sustainability trends in real estate.
The involvement of Newmark Group, Inc. in the transaction, particularly given their role in four of the last five significant sales in the Downtown Los Angeles market, highlights their dominance and expertise in the region. This could potentially influence investor perception of Newmark's market positioning and operational efficiency, potentially impacting its stock performance.
Carolwood Equities' acquisition of Aon Center as a backup buyer illustrates the competitive nature of the commercial real estate market in Los Angeles. This competitive landscape may lead to a premium on high-quality assets, as evidenced by the number of offers and property tours conducted during the sales process. Such robust demand for premium properties could signal a positive outlook for the commercial real estate market, which may be of interest to investors monitoring sector trends.
Lastly, the sale's timing at the end of the fiscal year could have tax implications for the undisclosed seller and may be part of strategic financial planning. For stakeholders, the timing of such transactions can influence earnings reports and financial forecasts for the upcoming year.
The sale price of $153.5 million for the Aon Center, when contextualized against the building's net rentable area and current leasing status, can provide insights into the cap rate and yield expectations in the Los Angeles commercial real estate market. Investors and analysts can use this transaction as a benchmark for evaluating the performance and valuation of similar Class A office properties in the area.
Additionally, the financing facilitated by Newmark's Vice Chairman is a critical aspect of the transaction, as debt structuring can significantly impact the investment's long-term profitability. The terms of the financing, while not disclosed, will affect Carolwood Equities' return on investment and could serve as a precedent for future commercial real estate financing deals in the region.
The undisclosed seller's decision to divest from a major asset like Aon Center could reflect a strategic portfolio realignment or capital raising effort. This move may prompt investors to consider the implications of such divestitures on the broader market, including potential shifts in asset allocation strategies among institutional investors.
Transaction Marks Largest Q4 2023 Office Sale in
LOS ANGELES , Dec. 29, 2023 /PRNewswire/ -- Newmark Group, Inc. (Nasdaq: NMRK) ("Newmark"1 or "the Company"), a leading commercial real estate adviser and service provider to large institutional investors, global corporations, and other owners and occupiers, announces it has arranged the sale of Aon Center, a 62-story trophy Class A office tower located in the heart of the Financial District in
Newmark Co-Head,
"As the exclusive sales broker, Newmark ran a broad global marketing process for Aon Center, which included exposure to more than 119,000 principals, generating 156 confidentiality agreements, 26 property tours and 18 offers," said Shannon. "Having sold four of the last five sales in the market, including Union Bank Tower, 801 Grand, 444 Flower and now Aon Center, our team has an unmatched pulse on the unique audience of predominately family office buyers for
Located at 707 Wilshire Boulevard, Aon Center is comprised of over 1.1 million square feet, offering sprawling views of the
Aon Center was
Situated in Downtown's Financial District, the property boasts a walk score of 99 and a transit score of 100. Aon Center provides immediate Metro access and is surrounded by world-class walkable amenities such as Crypto.com Arena and LA Live.
About Newmark
Newmark Group, Inc. (Nasdaq: NMRK), together with its subsidiaries ("Newmark"), is a world leader in commercial real estate, seamlessly powering every phase of the property life cycle. Newmark's comprehensive suite of services and products is uniquely tailored to each client, from owners to occupiers, investors to founders, and startups to blue-chip companies. Combining the platform's global reach with market intelligence in both established and emerging property markets, Newmark provides superior service to clients across the industry spectrum. For the year ending December 31, 2022, Newmark generated revenues of approximately
Discussion of Forward-Looking Statements about Newmark
Statements in this document regarding Newmark that are not historical facts are "forward-looking statements" that involve risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements. These include statements about the effects of the COVID-19 pandemic on the Company's business, results, financial position, liquidity and outlook, which may constitute forward-looking statements and are subject to the risk that the actual impact may differ, possibly materially, from what is currently expected. Except as required by law, Newmark undertakes no obligation to update any forward-looking statements. For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see Newmark's Securities and Exchange Commission filings, including, but not limited to, the risk factors and Special Note on Forward-Looking Information set forth in these filings and any updates to such risk factors and Special Note on Forward-Looking Information contained in subsequent reports on Form 10-K, Form 10-Q or Form 8-K.
1 Dba Newmark Knight Frank in
2 By Sales Price, according to CoStar data
3 According to CoStar data
4 By Sales Price, according to CoStar data
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SOURCE Newmark Group, Inc.
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