Israeli financial services company Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) continues to invest in real estate assets on the US West Coast. Harel, in an investment sponsored by REIT Colony NorthStar (NYSE: CLNS), has acquired an office building in downtown Los Angeles, California for $460 million, reflecting a price of $440 per square foot. Harel will hold 45% of the property. The total equity in the transaction will be $160 million, of which Harel’s share will be $74 million.
The property is a 42-story Class A office building with 1.05 million square feet. The building is considered one of the trophy assets in the submarket, and it is has LEED Platinum (green building) certification for construction quality and energy conservation. The property, which is almost 90% occupied, is leased to a list of credit tenants. The average lease is 7 years and most of the leases are linked to a 3% annual rent increase.
Over the past few years, Harel’s investment department has examined and analyzed the growth of downtown Los Angeles, which has undergone gentrification and the area has been transformed into a work, live and play scene. There has been significant construction and development, involving large-scale investments that have been made in diverse fields including infrastructure, transport, leisure and cultural activities, hotels, advertising companies and residential accommodation. Harel’s real estate department believes that this trend of development and gentrification in the submarket will be reflected in the property’s performance and expected return on the transaction.
Harel said, “The partnering up with a key, dominant investment company such as Los Angeles based Colony NorthStar, is an indication of the capabilities, professionalism and advantage of Harel’s real-estate department in making significant real-estate investments. Investing alongside experienced partners, the quality and location of the property make the transaction and its return to be attractive”. Harel emphasized that “the transaction was made for the benefit of its beneficiaries, as part of its commitment to diversify its investments, create a stable, ongoing yield by acquiring prime assets and continuing to invest in locations, assets and strategic areas that are expected to generate growth”.
Harel also noted that “The acquisition of that property is Harel’s fourth real-estate transaction on the West Coast in recent years, transactions which consist of office buildings and multifamily portfolios.”
Published by Globes [online], Israel business news - www.globes-online.com - on October 30, 2017
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