UTC does have mix of grad students, young professionals and couples who live here because they can get anywhere in the county quickly. It's kind of a sleepier place; if you were to come here on the weekend and walk or drive down the streets, it's fairly quiet. There are a lot of garden communities; they're building on the corner of Genesee and La Jolla Village Dr. Westfield is partnering with Greystar for a luxury high-rise on back side of the mall that will be the highest point or one of the highest points in the county for views. This market is fairly dense, and people still see it as more of an office/weekday market, but even though are a lot of residential units here, it's quiet. The Coaster will help it feel more like a community—it will change that.

GlobeSt.com: How has pricing changed in this market over time, and where it is heading?

Peterson: This market has always been seen as an infill location, a class-A location for San Diego. It's been a market, from a valuation standpoint, that's done as well as any other in San Diego. You do have the component of making sure you don't have a high concentration of students, but that's the only thing an investor will look at to assess additional risk. But that being said, most students are more grad students signing year leases, and they do have alternative income sources, so there's not the same risk profile as you would have if you were next to San Diego State.

The size of most assets here is “institutional.” You do have a full profile of buyers, from high-net-worth investors to institutions, and they've always gotten top dollar for apartments here. I guess rental trends here are consistent with the rest of the market. All the land here in UTC is spoken for—it's not like the East Village situation or Little Italy with older, smaller projects that can be torn down and redeveloped. That could happen over time here in UTC, but that doesn't currently exist. The office market is stronger here than Downtown traditionally; you don't have a spread differential where it makes sense to tear down a C office building and go high rise or mid-rise. The valuations of garden-style apartments are higher than the land value going up.

GlobeSt.com: How are lenders viewing this market, and are they likely to continue this type of large-scale multifamily financing in the UTC submarket?

Peterson: You don't see a whole lot of trades here because most projects are owned by people who want to be here and own here. Where else will they go? Over the long run, there's a high potential for rent and valuation growth, particularly with a risk perspective. A lot of our clients based here in San Diego do a lot of financing outside of San Diego. People who own here know it's a great market, and they're not selling their projects; they're keeping their projects here, and as they have new capital for new projects, they have to go outside of San Diego. The number of trades, especially on the institutional side in UTC, compared with other infill markets, it not high because people know what they have.

We have a lot of clients here in San Diego who are having to go to markets like Seattle, Phoenix and Denver, where have more trades than they do here. Garden Communities is one of the largest owners here. There's probably more refinancing activity here than we would know; that's not public information. Most of the lenders have probably been life companies because they focus on high-quality, class-A areas and locations, which tend to be lower risk and lower rate. The positive attributes that a market like UTC has is the ideal environment for life companies to lend on versus Fannie and Freddie, where the pricing is higher. Life companies are looking for safer assets with a better rate.

SAN DIEGO—Life-insurance firms prefer to finance safer assets, and borrowers often get better loan rates from them than they would from the agencies, CBRE SVP Scott Peterson tells GlobeSt.com. The firm's Capital Markets' Debt & Structured Finance team recently arranged $145 million in financing for two class-A apartment communities in the UTC submarket here: La Jolla International Gardens, 400 units ($77.5 million loan) and La Scala Apartment Homes, 354 units ($67.5 million loan) on behalf of the developer, the Premiere Residential. The new loans will replace the existing CMBS loans and were funded by Prudential Mortgage Capital Co. We spoke exclusively with Peterson about current apartment financing trends in UTC.

GlobeSt.com: What are some current trends you're noticing in apartment financing in the UTC submarket?

Peterson: In general, the UTC market has always been a very strong multifamily market given its central location in the county. It has the perfect mix of students from UCSD—but it's also not overwhelmingly students. Given the price points of UTC, it's not a great place necessarily for as many undergrads. The students you see in UTC apartments are often grad students; they may have other jobs. They are close to campus, but central to the county, so they can get places quickly.

It will be great to see what happens with the UTC mall expansion; in fact, we're moving into the mall. I think this market, too, will transform into something that will be much more lively in the future, with the UTC mall expansion as well as the light-rail Coaster coming up to the mall and the school. Right now, if you're going Downtown for a 5 p.m. dinner, it's difficult to get there quickly. It will be nice when we are in the mall and the Coaster is right there—it will be transformative/.

UTC does have mix of grad students, young professionals and couples who live here because they can get anywhere in the county quickly. It's kind of a sleepier place; if you were to come here on the weekend and walk or drive down the streets, it's fairly quiet. There are a lot of garden communities; they're building on the corner of Genesee and La Jolla Village Dr. Westfield is partnering with Greystar for a luxury high-rise on back side of the mall that will be the highest point or one of the highest points in the county for views. This market is fairly dense, and people still see it as more of an office/weekday market, but even though are a lot of residential units here, it's quiet. The Coaster will help it feel more like a community—it will change that.

GlobeSt.com: How has pricing changed in this market over time, and where it is heading?

Peterson: This market has always been seen as an infill location, a class-A location for San Diego. It's been a market, from a valuation standpoint, that's done as well as any other in San Diego. You do have the component of making sure you don't have a high concentration of students, but that's the only thing an investor will look at to assess additional risk. But that being said, most students are more grad students signing year leases, and they do have alternative income sources, so there's not the same risk profile as you would have if you were next to San Diego State.

The size of most assets here is “institutional.” You do have a full profile of buyers, from high-net-worth investors to institutions, and they've always gotten top dollar for apartments here. I guess rental trends here are consistent with the rest of the market. All the land here in UTC is spoken for—it's not like the East Village situation or Little Italy with older, smaller projects that can be torn down and redeveloped. That could happen over time here in UTC, but that doesn't currently exist. The office market is stronger here than Downtown traditionally; you don't have a spread differential where it makes sense to tear down a C office building and go high rise or mid-rise. The valuations of garden-style apartments are higher than the land value going up.

GlobeSt.com: How are lenders viewing this market, and are they likely to continue this type of large-scale multifamily financing in the UTC submarket?

Peterson: You don't see a whole lot of trades here because most projects are owned by people who want to be here and own here. Where else will they go? Over the long run, there's a high potential for rent and valuation growth, particularly with a risk perspective. A lot of our clients based here in San Diego do a lot of financing outside of San Diego. People who own here know it's a great market, and they're not selling their projects; they're keeping their projects here, and as they have new capital for new projects, they have to go outside of San Diego. The number of trades, especially on the institutional side in UTC, compared with other infill markets, it not high because people know what they have.

We have a lot of clients here in San Diego who are having to go to markets like Seattle, Phoenix and Denver, where have more trades than they do here. Garden Communities is one of the largest owners here. There's probably more refinancing activity here than we would know; that's not public information. Most of the lenders have probably been life companies because they focus on high-quality, class-A areas and locations, which tend to be lower risk and lower rate. The positive attributes that a market like UTC has is the ideal environment for life companies to lend on versus Fannie and Freddie, where the pricing is higher. Life companies are looking for safer assets with a better rate.