LOS ANGELES-In December, BH Properties ended the year with the $13.4-million purchase of Gilbert Town Square. The transaction, involving a 159,000-square-foot class A retail shopping center located within the highly affluent Phoenix submarket of Gilbert, AZ., was another in the firm's strategy for the Arizona market.“This purchase was a key component in our Southwest strategy,” says Steve Jaffe of BH Properties. Jaffe noted that subsequent to the Gilbert Town Square purchase the company purchased another multifamily apartment complex as well as another retail shopping center in January. “We expect to continue our growth in Arizona and in our other core markets in 2014 by purchasing both stabilized assets with some opportunity for growth as well as non-performing assets.” GlobeSt.com recently chatted with the EVP and general counsel of the firm on the Phoenix multifamily market, why industrial is interesting, and future plans in the region.

GlobeSt.com: BH Properties ended the year with a big class-A retail purchase in Gilbert, AZ and said it was looking to acquire more in the Arizona market. What kind of assets are you seeking and why?

Steve Jaffe: We have been primarily focused on the B-/C class apartment market over the past few years. Over the past 36 months, roughly 80% of our acquisitions were in Arizona and 80% of those purchases were multifamily. We are gradually taking a more aggressive stance regarding other property types in Arizona—which is what had led us to buy Gilbert Town Square.

While we are bullish on multifamily, industrial is very interesting to us. We have also made purchases in suburban office, as well as a few retail centers. We are looking at a few more retail properties at the moment and are hoping to build some momentum with the Gilbert asset.

GlobeSt.com: Are you seeking distressed assets with value-add? Stabilized assets? Non-performing assets? What specifically speaks to your investment interest at the moment and why?

Jaffe: The buying history of BH Properties has always been in the distressed part of the market. We typically look for undermanaged assets that require patient capital to turn the properties around. This, historically, has included everything from vacant former Walmart stores in tertiary markets to vacant office space in Houston and Los Angeles. Our platform encourages us to seek these types of assets—cash flow is always important to us, but it's not required.

This model enables us to step up and buy assets that many institutional buyers won't touch—as well as purchase assets that the smaller investors typically can't purchase (due to cash flow issues, inability to finance, etc).

When we find an appealing property, we move quickly to closing, which owners or lenders on non-performing assets find helpful. We spent a great deal of time late 2013 restructuring our debt with our lenders, further increasing our access to capital to continue to grow in the new year.

In addition, we just secured a combined $236.7 million in financing with two institutions -- Wells Fargo ($135 million), U.S. Bank ($60 million) and a CMBS loan, also through Wells Fargo ($36.7 million). Given that the prices have rebounded fairly quickly, we are picking our shots carefully which is all adding up to a fun year.

GlobeSt.com: You previously mentioned more purchases on the horizon in Arizona. Why here? What is the draw now, and do you see that changing anytime soon?

Jaffe: In January 2014, we purchased two more properties—another multifamily property and a retail center. We continue to look for assets in our core investment groups. I don't see us changing as our investment goals enable us to move from one asset class to another easily. Our flexibility enables us to respond to unique seller requirements as well.

We like Arizona a great deal--it's a very desirable place to live and it's affordable. We will continue to see migration into the state—and big companies are looking to relocate there. The construction industry is picking up the pace which, in turn, will fuel job growth, occupancy and values. Arizona does have cycles so we spend a great deal of time discussing our view of where the state is on that axis. In the near term I think Arizona will remain a target for many investment firms.

GlobeSt.com: What other markets are appealing to you? I know for a while you had looked at east coast assets. Is that market still a contender or are you focusing on markets a little closer to your L.A. based home?

Jaffe: Shortly before the last downturn we had greatly expanded our east coast presence. We bought in Florida, Georgia, Virginia and the Carolinas. Strategically, we have been selling our east coast properties with the goal of redeploying the capital in markets that would enable us to be at the asset and back in a day. We just find that our 'hands on' management style really is only effective when we can see the assets regularly.

Given our current geographic focus, we still like our core markets—Southern California, Utah, Texas—and we have been working on growing our small group of assets in Denver. We have also been looking at a few opportunities in the Northwest. We're flexible. Even as I say that we won't be buying on the east coast, you just never know when a great property will show up that we can't pass by. I know we wouldn't let geography stand in the way.