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Google-Leased Campus for Sale in Playa Vista, California

Tuesday, October 04, 2016

The Google Hangar at Hercules West Campus For Sale

On behalf of the owner, HFF is marketing for sale Hercules Campus West, the future centerpiece of Google’s Southern California campus. The commercial property for sale is located in the heart of Playa Vista, California, an area known as an integral part of “Silicon Beach.”

Hercules Campus West contains four buildings that are 100 percent leased to Google over a 16-year term with three percent annual rent escalations. Conceived during a prolific period of discovery and innovation under Howard Hughes, the historic buildings include the soaring, voluminous hangars in which Howard Hughes built the Hercules H-4, also known as the “Spruce Goose.” Inside the envelope of these beautiful buildings, Google plans to build new state-of-the-art structures containing a total of 524,759 square feet in three stories and a mezzanine floor. The asset and its investment grade “bond-like” cash flow present a rare opportunity to acquire an iconic, one-of-a-kind property, leased long-term at significantly below market rate to one of the most desirable companies in the world.

Hercules Campus West will be an integral part of Google’s Southern California Campus. Through its YouTube subsidiary, Google already leases the entire Hercules South Campus and a portion of Hercules East Campus. Google purchased approximately 12 acres of land directly north of the hangar buildings for $120 million in December 2014. Collectively, Google owns or leases approximately 32 acres of land with entitlements to potentially build to more than 1.5 million square feet.

Commercial Property for Sale Investment Highlights

  • Highly-Desirable Investment Grade Credit Tenant:  Rated AA by S&P, Google is one of the world’s largest companies by marketThe Google Hangar at Hercules West Campus For Sale capitalization with virtually no long-term debt. Google has grown from a startup search engine into, arguably, the single most important influence on global culture and business in the 21st century. Through commitment to continual innovation, an open mind and a sharing culture, Google has changed the way we access information, interact with technology and media and how we consume news throughout the world. With only three public bond offerings in Google’s history, the investment provides the opportunity to acquire Google credit exposure at a significant term not available in the market today along with three percent annual rent increases.
  • One-of-a-Kind Trophy Property:  One of the largest wooden laminate buildings in the United States, the property presents the rare opportunity to acquire a historic Los Angeles landmark building with a storied history. In the main hangar (Building 15), Google plans to construct buildings within the buildings that pay homage to the history of Hughes’ legacy while incorporating cutting edge design elements. The immediate plan is to construct three-story buildings plus a mezzanine level for addition office and production space. This will increase the square footage from 357,857 to 524,759. Google will still have entitlements to build 253,853 square feet on the site in the future.
  • Long-term Lease at Below-Market Rents:  Google has a 16-year triple net primary lease term with three percent annual increases and three five-year extension options. Additionally, Google’s rent is more than 50 percent below current market rents. This presents a rare opportunity to replicate a 16-year Google bond that is not available in the market today. The asset’s location, credit and the below-market rent will protect an investor’s reversion upon Google’s purchase option in year 16.
  • Playa Vista Live-Work-Play Location:  At the center of Los Angeles’ creative hub, Playa Vista is home to industry leaders in entertainment, media and technology. This new master-planned urban community in West Los Angeles is part of tech-centric “Silicon Beach” and integrates live-work-play spaces. Playa Vista is the first new master-planned community to be established in West Los Angeles in more than 50 years. Nearing completion of development, the 1,087-acre site is expected to serve 12,000 residents and contain 3.3 million square feet of commercial space, with 70 percent of its acreage dedicated to permanent open space. Google anchors the office market in Playa Vista, but other major area employers include YouTube (Google), Electronic Arts, Sony Playstation, Facebook, Microsoft, TMZ, Belkin, IMAX, California Pizza Kitchen, Yahoo, Verizon and the USC Institute for Creative Technology. Playa Vista also boasts world-renowned advertising agencies such as 72andSunny, TBWA/Chiat/Day, OmniCom/OMD, Team One and Deutsch.

Hercules Campus West represents an extremely unique opportunity to acquire the “crown jewel” of the historic buildings that formerly comprised the Hughes Corporation’s headquarters and will be the centerpiece of Google’s Southern California campus. For more information on this property for sale and other commercial properties in Southern California, please contact HFF Director John Crump or Senior Managing Director Michael Leggett.

Holliday Fenoglio Fowler, L.P., acting by and through Holliday GP Corp., a real estate broker licensed with the California Department of Real Estate, License Number 01385740.





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