LOS ANGELES-BH Properties, a real estate investment company focused on purchasing distressed assets in all commercial sectors, has shifted its strategic focus to the West and Southwest, according to Steve Jaffe, BH Properties EVP and general counsel. As part of this strategic shift, the company plans to sell some East Coast assets, in what Jaffe describes as “strategic pruning,” and then reinvest the capital in properties in the Western part of the US.
“As we grew and expanded, we had the opportunity to shed properties that were just too remote for us to adequately manage,” Jaffe tells GlobeSt.com. “That led us to do a lot more buying over the last couple of years in Arizona, Nevada and Southern California. For investors like us, a shift with a lower cost allows us to achieve our goals closer to home.”
In the last year, BH Properties has acquired 20 properties on in West and Southwest markets, focusing particularly on Southern California, Denver, Nevada and Arizona. “The markets that were hit really hard during the recession, like Phoenix and Arizona provided some good opportunities for us,” says Jaffe, who estimates that 75% of the company's acquisitions in the past two years have been in Phoenix and Tuscan, AZ. These markets provide some of the best value opportunities for the distressed class-B- and C+ assets the company typically seeks. Recently, it has found the best opportunities in the multifamily and industrial sectors, especially in Arizona. The company is also currently under contract to purchase retail properties, which it has not done for several years.
The new focus might also be described as a homecoming. The Los Angeles-based company has historically purchased assets in the West, but began finding opportunities further away in the years leading up to the recession. Now, the company is finding more opportunities for pricing that meets its unique criteria in the West. “We have been focused on disposing of assets where we are no longer the right owner, and redisposing the capital closer to home as pricing comes out West for us,” Jaffe explains.
The company most recently disposed of an 18-story office building in Richmond, Virginia, for $7 million. The property was distressed, in need of redevelopment and needed complete repositioning. BH Properties found an owner willing to take on those tasks. However, the company also owns fully leased and stable properties in Eastern and Midwest markets that aren't “management intensive.” Those properties, it plans to keep.
BH Properties isn't alone. Other companies are finding increased opportunities on the West Coast. New York-based private commercial real estate lender Terra Capital Partners LLC, for example, recently opened a Los Angeles office to better pursue West Coast opportunities. With Doug Vikserat the helm, the lender will focus on originating mezzanine, preferred equity and bridge financing for borrowers.
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Kelsi Maree Borland
