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G E N E R A T I O N A L , M I X E D - U S E C O A S T A L , I N V E S T M E N T O P P P O R T U N I T Y
APRIL 2019
1 2 2 1 H E R M O S A A V E N U E | H E R M O S A B E A C H , C A
EXECUTIVE SUMMARY
THE OFFERING
Newmark Knight Frank (NKF), as exclusive advisor, is pleased to present the generational opportunity to acquire the fee-simple interest in The Bijou Building (the Property), a 94% leased, jewel box, three-story office/retail building in Downtown Hermosa Beach, California.
Just one block away from both the Pacific Ocean and the Hermosa Beach Pier, the Property is situated at a true, “Main & Main” location in Hermosa Beach—within walking distance of a wide variety of restaurants, bars, coffeehouses, boutique shops, and entertainment venues and adjacent to an abundance of garaged and surface parking.
Originally built as a theatre in 1923, this extraordinary Neo-Classical style building has been tastefully upgraded to attract a modern tenant mix drawn to the asset’s historic character, beachside location, and abundance of walkable amenities.
TOTAL SIZE23,172RSF
YEAR BUILT1923
LEASED94%
STORIES3
PROPERTY SUMMARY
1221 HERMOSA AVENUE, HERMOSA BEACH, CAADDRESS
INVESTMENT HIGHLIGHTS
HISTORIC, COASTAL, MIXED-USE PROPERTY
Originally developed in 1923 as the Metropolitan Theater, the asset was aptly renamed The Bijou—French for small and elegant—Building as part of an adaptive reuse initiative. Today, The Bijou Building offers its tenants high character space that includes hardwood floors, exposed brick walls, intricate plaster detail, and an abundance of natural light. The juxtaposition of the asset’s historic architectural features set in the heart of one of the most bustling coastal urban communities on the West Coast makes The Bijou Building truly one of one, and an irreplaceable fixture of the fabric of Hermosa Beach.
DIVERSIF IED INCOME STREAM
The Bijou Building is 94% leased to a diverse mix of office and retail tenants in the finance, fitness, real estate and apparel industries. The asset is anchored by Chase Bank (S&P: A+), which represents 31% of the rentable square footage and provides the investor with a predictable investment grade income stream for the foreseeable future.
TENANT RSF SECTOR % TOTALChase Bank (NYSE: JPM) 7,167 Banking 31%
Clothing Shop 5,150 Apparel 23%
Beach City Capital 4,510 Real Estate 20%
Steel Partners (NYSE: SPLP) 3,082 Investments 14%
Bar Method 1,530 Fitness 7%
TENANT SUMMARY
MARK TO MARKET RENTAL UPSIDE
43% of the rent roll expires by 2020, providing a mark to market opportunity with in-place rents that are currently 17% below market. The only current vacancy is a high image ground floor retail suite that fronts Hermosa Avenue and only recently became available, providing an investor the opportunity to add immediate value through lease-up. With an average suite size of only 3,800 square feet, a modest increase in rental rate on a percentage basis translates to a palatable increase in total monthly rent from a tenant’s perspective.
LOCATION HIGHLIGHTS
EXCEPTIONAL, “MAIN & MAIN” DOWNTOWN HERMOSA BEACH LOCATION
The Bijou Building provides an investor the highly coveted combination of coastal walkable amenities with professional office functionality and adjacent parking options—all with an ocean view—a combination that is nearly non-existent in this highly desirable submarket.
MARKET WITH H IGH BARRIERS TO ENTRY
Height and density limitations—coupled with severe development restrictions in Hermosa Beach—all but guarantee that no directly competitive product will be developed in the foreseeable future.
SCARCITY OF PRODUCT
Market vacancy rates are a mere 2.7% (office) and 2.1% (retail) in Hermosa Beach, which will continue to place upward pressure on market rents.
SIL ICON BEACH INFLUENCE
With migration of creative titans (Google, Facebook, Apple, Amazon, HBO) to the Lower Westside businesses are actively migrating and expanding to the South Bay, where quality office space is available at comparatively lower rental rates.
ROOM TO RUN IN THE BEACH C IT IES
Since 2012, neighboring lower Westside submarkets Culver City and Playa Vista have experienced dramatic 70%+ surges in office rental rates. While rental rates in El Segundo and the Beach Cities have increased nearly 50% over the same time period, rents remain a 25% to 45% discount to Culver City and Playa Vista.
OUTSTANDING DEMOGRAPHICS WITH PREMIER EXECUTIVE HOUSING
Hermosa Beach is one of the most affluent communities in Los Angeles—driven by quality schools, a coastal location, and strong executive housing options. In 2018, home prices in Hermosa Beach averaged $1.7 million, which will increase as tech and creative industries continue to expand throughout the Lower Westside.
Since 2012, rental rates in the Beach Cities have increased 50%, but remain a 25% to 45% discount to Playa Vista and Culver City.
SCOTTY’S ON THE STRAND
THE COMEDY AND MAGIC CLUB
BKB SWIMWEAR
LOCALE90 NEOPOLITAN
PIZZA
POKE BAR
B OF A
CITIBANK
CAFE BONAPARTEPALMILLA COCINA
Y TEQUILAPLAYA HERMOSA
FISH & OYSTER
SLATER’S 50/50 THE
DECK
GOOD STUFF
HERMOSA CYCLERY
PIER SURF
TOWER 12
AMERICAN
JUNKIE
BAJA
SHARKEEZPATRICK MOLLOY’SLIGHTHOUSE CAFEWATERMANS
SAFEHOUSE
HENNESSEY’S
TAVERN
HERMOSA BEACH PIER PLAZA
HERMOSA BEACH PIER
GREENBELT
PAISANO’S PIZZA & PASTA
ZANE’S
MONTCE SWIM
STEAK & WHISKY
ROK SUSHI KITCHEN
LAUREL TAVERN
BEACH HOUSE HOTEL
DIA DE CAMPO
SOHO YOGA
SEA SPRITE MOTEL
11th Street
13th Street
Pacific Ocean
Hermosa Avenue
Pier Avenue
REBEL REPUBLIC
SOCIAL HOUSESPYDER SURFBOARDS
THE BIJOU BUILDING
Corporate License #01355491
The information contained herein has been obtained from sources deemed reliable but has not been verified and no guarantee, warranty or representation, either express or implied, is made with respect to such information. Terms of sale or lease and availability are subject to change or withdrawal without notice.
INSTITUTIONAL INVESTMENT SALES CONTACTS
KEVIN SHANNONCo-Head, U.S. Capital [email protected] RE Lic. #00836549
KEN WHITEExecutive Managing [email protected] RE Lic. #01788506
ROB HANNANExecutive Managing [email protected] RE Lic. #01505847
LAURA STUMMSenior Managing [email protected] RE Lic. #01914207
PRIVATE CAPITAL INVESTMENT SALES CONTACTS
SEAN FULPExecutive Managing [email protected] RE Lic. #01389064
RYAN PLUMMERManaging [email protected] RE Lic. #01765854
LOCAL MARKET CONTACTS
BRAD FELDVice [email protected] RE Lic. #01011030
GEOFF LUDWIG Executive Managing Director 310.491.2077 [email protected] CA RE Lic. #01232244
FINANCING CONTACTS
DAVID MILESTONEVice [email protected] RE Lic. #01515842
BRETT GREENSenior Managing [email protected] RE Lic. #01892016
APRIL 2019
1 2 2 1 H E R M O S A A V E N U E | H E R M O S A B E A C H , C A