MPG Office Trust, Inc. (MPG), the largest office landlord in
downtown Los Angeles, sold the 72-story U.S. Bank Tower and a
related property to a real estate concern controlled by Indonesia's
Riady family for $367.5 million, the company said Monday.
The deal is the latest disposition from MPG Office, which has
been pruning its portfolio of highly indebted properties for the
past few years. An affiliate of Overseas Union Enterprise Limited
(LJ3.SG) purchased the 1.4 million square foot Los Angeles tower
and the adjacent Westlawn Garage from the real-estate investment
trust. The U.S. Bank Tower, currently about 56% occupied, is the
tallest building west of the Mississippi River and was one of MPG's
high-profile properties.
The sale, which is to close on June 28 and includes a $7.5
million nonrefundable deposit from the buyer, brings the number of
MPG's office buildings to five, including the angled brown granite
KPMG and Wells Fargo towers, both in downtown Los Angeles.
MPG has been on a troubled path ever since its founder and
then-chief executive, Robert Maguire, made ill-timed acquisitions
in 2007 right before the financial crisis. The values of MPG's
properties declined in 2008 and the company struggled to manage its
hefty debt load at a time when the financial industry was sharply
contracting and rents were falling. Analysts say also say that
downtown Los Angeles has been slower to recover from the economic
downturn that other major cities because it competes with more
popular office markets in places like West Los Angeles, Santa
Monica and Beverly Hills.
The company last year tapped real-estate adviser Eastdil Secured
to scout out firms to buy the company or make a significant cash
investment, according to real-estate executives with direct
knowledge of the planning. But, the company's shares slid last
month following a report by Real Estate Alert that it was moving to
just liquidate its portfolio.
"I don't think they've found buyers willing to pay the kind of
prices they were hoping for," said Jed Reagan, an analyst at Green
Street Advisors. MPG's "portfolio has a lot of leasing challenges
in a very difficult market."
He said the properties are probably more valuable on an
asset-by-asset basis.
A company spokeswoman declined to comment on MPG's disposition
strategy.
MPG said in a statement that it estimates net proceeds from the
deal to total around $103 million and will be used for general
corporate purposes, including refinancing its upcoming debt this
year.
Overseas Union, which develops mainly hotels and offices, said
it is seeking to diversify its predominantly Singaporean portfolio
with acquisitions in gateway U.S. cities, including New York, Los
Angeles and San Francisco.
Chun Han Wong contributed to this article
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