BURBANK, CALIF. —Hudson Pacific Properties (NYSE: HPP) has entered into a joint venture with M. David Paul & Associates/Worthe Real Estate Group (MDP/Worthe) to acquire The Pinnacle, a two-building Class A office property in the Burbank Media District, for $342.5 million. MDP/Worthe, the developer of Pinnacle I and Pinnacle II, will contribute their existing ownership interests in The Pinnacle to the newly formed joint venture.
The Pinnacle spans 625,640 square feet and is located directly adjacent to Warner Bros. Studios and Burbank Studios in Burbank. The office complex is currently 95 percent leased to several media and entertainment companies, including Warner Bros. Entertainment, NBC Universal, Sony and Clear Channel Communications. The property is expected to secure long-term cash flow due to the limited capital improvement requirements and minimal leases expiring.
“The Pinnacle will be extremely complementary to our portfolio and will provide Hudson with an immediate foothold in one of the top media and entertainment submarkets in Los Angeles,” says Victor Coleman, chairman and CEO of Hudson Pacific Properties. “The quality of the asset, its location and tenancy exemplifies the company’s acquisition strategy to own and operate best-in-class office properties, with a strong media and entertainment tenancy.”
Pinnacle I spans 393,776 square feet and its purchase was financed with a new $129 million 10-year project loan that will amortize in 30 years. Hudson Pacific contributed $83.9 million in exchange for approximately 98 percent of the joint venture, using available cash on hand and a $38 million draw on its unsecured credit facility.
MDP/Worthe owns 100 percent of Pinnacle II, which it has agreed to contribute to the joint venture for a purchase price of $130 million, which includes the assumption of an $89.6 million loan with a 30-year amortization schedule. Warner Bros. Entertainment has fully leased Pinnacle II.
Upon completion of the transaction, Hudson Pacific expects to own approximately 65 percent of the joint venture and will assume day-to-day property management responsibilities. Worthe Real Estate Group will oversee leasing.
Hudson Pacific’s portfolio consists of approximately 5.5 million square feet, primarily in California. The MDP/Worthe portfolio includes interests in 21 properties totaling more than 5 million square feet. The MDP/Worthe portfolio also includes 3 million square feet of development rights and Burbank Studios.
Hudson Pacific’s stock price closed at $18.70 per share on Thursday, up from trading at $12.22 per share this time last year.
— John Nelson