Orleans

Hertz buys LL&E building

L.A. investor owns nearly 15 percent of CBD's top office space

Friday, May 06, 2005

By Greg Thomas

Real estate writer

Los Angeles real estate investor Judah Hertz, adding another trophy tower to his New Orleans portfolio, confirmed that he has closed on his purchase of the LL&E office building at 909 Poydras St.

Hertz in the past two years has become the largest individual owner of the highest class of office space in the Central Business District. With the purchase, his Hertz Investment Group owns nearly 15 percent of the 10 million square feet of Class A office space, which consists of 15 buildings in the CBD.

The seller, Equity Office Properties, would not allow brokers representing the company to speak about the deal. But Equity Office spokeswoman Paige Steers did say that the sales price for the 36-story tower was $45 million.

That price is higher than earlier speculated by local real estate specialists. The price comes to $82.55 per square foot for the 545,157-square-foot building.

Local broker Hayden Wren, not involved in the deal, said "Judah is buying a trophy property" at a very aggressive price, showing that the investment is "a long-term project."

The building, considered one of the city's premier office buildings, was developed in 1987 by local businessman Joseph Canizaro. Louisiana Land & Exploration Co. was the largest tenant for years, and the building was named for it. But the company slowly began giving back space as it moved divisions to Houston, and it left the building when it became Burlington Resources Inc. The building is presently 70 percent occupied, Equity Office reported.

Canizaro in 1997 sold the building to Equity Office, headquartered in Chicago, the nation's largest office real estate investment trust.

The $82.55 per-square-foot price that Hertz paid is a significant discount from the estimated $107 per-square-foot price that Equity Office paid. That is believed to be the highest price paid for office property in the CBD .

Hertz's holdings also include the 492,000-square-foot, 26-story Dominion Tower at 1450 Poydras St., and the 555,000-square-foot, three-level New Orleans Shopping Centre at Dominion's base. He paid $73.17 a square foot for the tower .

Hertz's entry into the New Orleans market was the 2003 purchase of Poydras Center, a 27-story, 453,000-square-foot office building at 650 Poydras St. He paid $77.22 a square foot for it.

At the time, Hertz said he liked New Orleans, and he thought properties were priced well below replacement value. He said he could see opportunities to turn around properties.

Hertz is considered by many a turnaround specialist, buying promising properties -- often historical buildings -- and repositioning them in the market.

He began his real estate career in New York creating loft apartments and condos in now-famous residential areas of the city. Then he became an investor-developer in Miami before moving on to Los Angeles.

One local Hertz project that still is being worked on is the New Orleans Shopping Centre. It does not have a replacement tenant for Lord & Taylor, which closed in July, leaving Macy's as the only other big-box style anchor tenant. However, dozens of smaller tenants remain.

Wren, the local broker, pointed out that Edward DeBartolo Sr., doing business as the DeBartolo Group, developer of the New Orleans Shopping Centre in 1988 and the country's largest owner of malls, couldn't make the retail center reach its full potential.

"DeBartolo was the best in the nation and for whatever reasons couldn't make it work. But Judah's a good turnaround guy," Wren said.

Jones Lang LaSalle Americas Inc. -- Greg Riera locally and Evan Stone in Houston -- represented Equity Office in the deal. They declined to comment.