Access Industries Tapped CMBS Market for DTLA Ford Factory Buy
When it was time for Access Industries to finance its purchase of the former Ford Factory in L.A.’s Downtown Arts District, the CMBS market was a perfect fit.
“A long-term fixed rate loan solution was the best execution given the predictable, income-producing profile of the property and the current low interest rate/spread environment,” Jonah Sonnenborn, Access Industries’ head of real estate, told Commercial Observer. “The combination of these variables result in an attractive cash-on-cash return for the investment.”
Bank of America provided the $135 million CMBS loan.
Access, the parent company of Warner Music Group (WMG), acquired the 255,000-square-foot adaptive reuse project at 777 South Santa Fe Avenue from Shorenstein Properties in early April, paying $195 million according to property records.
Warner Music previously held a 13-year lease at the 1912 property, and the landmark building is now its official headquarters. Warner has relocated its 650 West Coast employees to the bustling stretch of Santa Fe Avenue, where their neighbors include Spotify—at 555 Matteo Street—and also trendy Italian restaurant Bestia. The Arts District, at the eastern edge of Downtown L.A., earned its moniker back in the 1970s when artists descended on the then-largely-industrial neighborhood.
“We had a significance presence on the West Coast but in a number of different locations, which was rather inefficient,” Sonnenborn said. “We decided it would be ideal to have all of our employees in one location, so we started asking ourselves where in L.A. would be interesting and most fitting.”
Various L.A. neighborhoods were considered, including Santa Monica, Playa Vista and Venice, but the Arts District was the ultimate choice.
“There wasn’t enough square footage in Venice and rents were high in other locations,” Sonnenborn explained. Additionally, the trendy Arts District possesses numerous similarities to other hip neighborhoods where Access has investments, including the Meatpacking District in New York City and Shoreditch in London.
“It’s in a very attractive work-live-play location that’s improving dramatically and is extremely desirable for employees, with top art galleries and restaurants in walking distance,” Sonnenborn said.
And that’s not all. Soho Warehouse—Soho House‘s third L.A. location—will soon open a mere two blocks away at 1000 South Santa Fe Avenue. Soho House Group is converting a five-story warehouse, built in 1917, into one of its luxury members clubs, which will include three restaurants, six bars and one of its signature rooftop pools.
“We’re very excited about the transformative nature of the area, and [the Ford Factory] property as a centerpiece,” Sonnenborn said. “Our choosing it as Warner Music’s headquarters is only going to add to the neighborhood’s dynamic nature and bring additional creative energy to the area.”
The former factory assembled Ford ‘Model T’ cars between 1913 and 1929 and was later used as a toy factory and then by American Apparel. Shorenstein acquired the property for $37 million in 2014, embarking on a full renovation shortly thereafter and working closely with neighborhood stakeholders to ensure the preservation of the landmark building.
Several of the architectural elements throughout the building were salvaged during its restoration by Rockefeller Kempel Architects, and Rockwell Group spearheaded its redesign into state-of-the-art creative work space. Today, it includes recording studios, artist lounges and a live performance space.
Access—which has over $30 billion in assets under management—invests across multiple sectors including natural resources and chemicals, media and telecommunications, venture capital and real estate.
The Ford Factory acquisition was the company’s third transaction with Bank of America, who Sonnenborn described as “extremely constructive to work with.” The two previously transacted when the lender provided a $350 million loan for another of Access’ investments; the “Jenga” tower at 56 Leonard Street in New York.
Officials at Bank of America could not immediately be reached for comment.
Ford Factory. Credit: Access industries
from Commercial Observer http://bit.ly/2IwpnrQ