CT Realty Corp. has acquired the 65-unit Casa Granada Apartments at 400 Merrimac Way in Costa Mesa from GBW Investments for $11.98 million. Both the buyer and the seller were represented by VP Pat Swanson of the Orange County office of Colliers International. Built in 1968, the complex sold at a 5% cap rate, said Swanson. “What made the deal attractive to the buyer was the upside in rents, the potential to establish a RUBS program to bill back the tenants for water and trash, as well as the location, adjacent to Orange Coast College in West Costa Mesa,” Swanson said.

LOS ANGELES COUNTY

NSB El Segundo Property

NSB Associates of Beverly Hills has signed an entertainment industry company to a 10-year lease to occupy two buildings totaling 61,000 square feet on Utah and Alaska Avenues in El Segundo. The agreement covers all of the available space in the first phase of a planned creative campus development of several former industrial buildings, which when completed will total over 250,000 square feet. NSB, at the tenant’s request, did not name the company, which is scheduled to occupy the space in the first quarter of 2012. The two buildings originally were occupied by aviation and high-tech manufacturing companies. The property owners were represented in the lease by Michael Preiss of KLabin/CORFAC. Architect Michael Jones of Sidley Jones Inc. oversaw the conversion of the properties. Pacific Commercial Builders was the general contractor. Construction began in mid-2010 and was completed in April of 2011. The buildings, originally box-like concrete structures, now feature upgraded facades and a host of other features as a result of the conversion. Larry Field, chairman and CEO of NSB, noted that El Segundo, once known as a center of aviation and aerospace manufacturing, has emerged in recent years as a highly desirable location for creative, technology and new media companies. Field said NSB originally planned to subdivide the two buildings, creating spaces of 5,000 to 20,000 square feet which would be made available to multiple tenants. However, when executives of the entertainment industry company saw the property, they expressed an interest in leasing all of the space. Future phases of the development will bring another 190,000 square feet of property to the market. These will also likely follow the multi-tenant model, Field said.

Seahaven Apartments

The 58-unit Sea Havens Resort Apartments in Redondo Beach has been refinanced with an $11.9 million Freddie Mac loan originated by Centerline Capital Group that closed within 30 days of the start of processing. “Freddie Mac helped immensely by providing a loan commitment in less than a week,” commented Richard Olrich, a Centerline managing director. The loan was a cash-out refinance that will enable the property owner to fully leverage the value of the facility, Olrich added. He said the borrower “needed to close quickly due to a maturing loan.” The Sea Havens Resort Apartments is across the Esplanade from Redondo State beach and the Pacific Ocean, with commercial developments located nearby. The property’s location across from the beach, its design and its ocean views create a high demand for the units, Olrich added. “These factors, combined with the owners’ solid track record made this an attractive deal for Centerline and Freddie Mac.” The transaction was sourced by Centerline’s team headquartered in San Rafael, CA.

Downtown Los Angeles-based 1111 Sunset LLC has acquired the seven-story, 110,000-square-foot former Metropolitan Water District headquarters at 1111 Sunset Blvd. in Los Angeles from 1111 Sunset Blvd. LP for $6.8 million. The new owner plans to convert the building to approximately 92 housing units, according to SVP Armando Aguirre and senior associate Jesse Munoz in the Downtown L.A. office of Colliers International, who represented the buyer. The seller was represented by Phillip Sample, Chris Caras and Brendon Monaghan of Grubb & Ellis. The buyer is a developer of mixed-use, urban infill communities. The property was a portion of the former Metropolitan Water District Headquarters in the early 1990s and was previously entitled for residential use.

The owner of a 196-unit single-room-only hotel in Downtown Los Angeles has financed it with a $4.2 million loan arranged by George Smith Partners. VP Bryan Shaffer of GSP, who led the loan origination process, notes that the property was originally built as a hotel in 1910 and features ground-floor, street-front retail. According to Shaffer, most lenders are not comfortable financing SRO properties because of the perceived additional risk over other types of multifamily housing. In the past, many SROs were operated as affordable daily-stay hotels and often had a negative impact on the surrounding community, he explains. Today they frequently serve as one of the last affordable housing options in major urban areas, offering more stability for lenders by operating as affordable apartments, while reducing the negative impact on the area they serve. The property was one of the worst projects in Downtown Los Angeles, with many characteristics that made it undesirable to potential lenders, requiring expertise and industry relationships to find suitable funding, explained Shaffer. He added: “Most challenging was that nearly 99% of lenders are unwilling to lend on SRO properties. To make matters more complicated, because the property is under major rehabilitation, it is 100% vacant and was in the Rent Escrow Account Program for violating various safety codes as a result of severe neglect by the previous property owner. Properties in the REAP program carry various legal burdens with the City of Los Angeles, making them extremely undesirable candidates for financing.” Several prospective buyers tried to arrange bond financing on the project but were unsuccessful. Shaffer, however, has a background in affordable multifamily projects and tax-exempt bonds financing, suitable for understanding and closing this deal. “Unstable properties like this one can usually only obtain expensive bridge or hard money financing. The key to completing and achieving such an attractive loan for our client was not getting sidetracked by all the reasons this project could not be financed,” Shaffer explained. “Instead we focused on the fact that the new owners were extremely experienced with multifamily properties, and when the renovations were complete and the property was fully leased, it would be a very valuable investment that would have a very positive impact on the area.” The hotel owner's new financing is a 10-year term loan priced at 6.25% fixed with 30-year amortization and a step-down pre-payment penalty before stabilization.