Los Angeles Real Estate Investment Firm Buys Office Despite Market Turmoil

Tristar Realty Group Acquires Building in Desirable Encino Neighborhood

The roughly 183,000-square-foot Encino Executive Tower recently sold. (CoStar)

By Jack Witthaus

CoStar News

July 6, 2023 | 2:58 P.M.

A Los Angeles real estate investment group feels confident in its most recent acquisition — a more than half-century old office building in the desirable L.A. neighborhood of Encino — despite growing issues facing the market.

Tristar Realty Group, a Los Angeles-based real estate investor, bought the roughly 193,000-square-foot Encino Executive Tower for around $39.2 million, or about $203 per square foot, according to public records and CoStar data. That's below the Encino office market average of $337 per square foot. The property is located at 16633 Ventura Blvd.

Office real estate demand has been suffering since the start of the pandemic due to the popularity of working from home. Now, as interest rates rise, office space values continue to fall, presenting opportunities for investors willing to stomach the risk.

"Our plans for the building are to continue to operate it as a general office building," Tristar Realty Group CEO Danny Kashani told CoStar News in an email. "While generally the office market is in turmoil, we believe that quality Class A office in proximity to people’s homes will continue to be in demand. The building has a diverse tenant roster with occupants that want to be in the office and that live in the area."

The office sale joins other below-average trades this year in America's second-biggest city, bringing down the greater L.A. average office sales price to $400 per square foot. That sales price is down 10% year over year, according to CoStar data.

Stagnant Office Sales

Encino Executive Tower is among less than a dozen offices to trade above $30 million in Los Angeles County since the start of the year and gives insight on what investors are paying for pricier physical workstations. Only two offices that have traded for above $30 million in Los Angeles County this year have sold above $300 per square foot, according to CoStar data.

Meanwhile, the Los Angeles office market recorded its highest availability rate ever of 26.6% in the second quarter, according to a Savills report.

"At mid-year 2023, many occupiers continue to take a wait-and-see approach which has contributed to lower leasing activity. In addition, rising interest rates, deteriorating property fundamentals outside of the top end of the office market, and lower asset valuations, has resulted in high profile loan defaults over the past few months, mostly in downtown Los Angeles," according to the report.

Despite falling demand, roughly 24,000 square feet is being marketed for lease in the Encino Executive Tower, according to the office's website. That would make the building roughly 88% occupied, which is higher than the Encino market average of 84.7%, according to CoStar data.

A $2.3 million mansion tax was paid as part of the sale of Encino Executive Tower, according to public records. Encino, located northwest of downtown Los Angeles, is considered one of the city's most affluent enclaves.