Middle Market Digest: This Week in Southwest
Here’s a look at this week's trends, announcements and deals that you may have missed in Southern California, Utah, Arizona and Nevada.
BY THE NUMBERS
SOUTHERN CALIFORNIA—Southern California closed a strong quarter in many asset classes. The multifamily vacancy rate fell to 3.9% across the region, down 30 basis points from last year. Los Angeles County led the region with vacancy rates at 3.7%, down 40 points over last year. The Inland Empire and Ventura County both closed the second quarter with vacancy at 3.8%, while Orange County’s vacancy rate was the highest in the region at 4.9%. For the industrial sector, vacancy fell to 3.1% for the Southern California region, down 10 basis points over last year. Orange County led the region with a 2.2% vacancy rate, down 40 basis points from last year, while Los Angeles and Ventura Counties followed with 2.5% and 2.3% respectively. The Inland Empire market was down 30 basis points to 4.5%. The office sector, however, faltered. Vacancy rates for the region were up 10 basis points to 10.1%. The Inland Empire has the lowest vacancy rate, down 50 basis points to 7.8%. Orange County came in second with 10.2% vacancy, while Los Angeles and Ventura Counties closed the quarter at 11% and 11.4% respectively.
(SOURCE: NAI CAPITAL)
PHOENIX—With more than 2.7 million square feet of office space now under construction, metro Phoenix is seeing the most seen since 2015. But, according to the Q2 2018 Phoenix Office Insight report from the Phoenix office of JLL, it still may not be enough to meet an estimated 4.6 million square feet of demand that is in play by companies ranging from business and financial services to high-tech and healthcare. Nearly 100 companies are now in the market, looking for 20,000 square feet or greater of Phoenix office product. Of those, 24% are business services companies, 21 percent are healthcare, 14% are high-tech and 10% are financial services. Together, they represent 4.6 million square feet of demand. This is above and beyond the 2.7 million square feet of office space that is currently under construction, which itself is already 30 percent pre-leased. If there is one geographical leader on the construction front, Abramson says it would be the Southeast Valley, which represents 77% of active office construction—36% in Chandler, 29% in Tempe and 12% in South Tempe.
(SOURCE: JLL)
NEW & NOTABLE
Irvine, CA—Faris Lee Investments has hired Jay Quinn as senior managing director of capital markets. The firm plans to further integrate its capital strategies to maximize value and manage risk as an integral aspect to providing comprehensive investment solutions to its clients. In this new role, Quinn will focus on origination, structuring, and marketing of debt and equity finance transactions across the U.S. Over the course of his career, Quinn has completed approximately $800 million of development transactions and approximately $3.4 billion in financing, capital market transactions and debt/equity placements. He has also assisted in more than 500 note sales, participated in the disposition of more than $2 billion in assets, as well as completing over $9.1 billion in commercial property restructuring and discounted payoffs. Quinn brings significant long term relationships with national, regional and local funding sources including, but not limited to, agency lenders such as Fannie Mae, Freddie Mac, regional and national commercial banks, CMBS lenders, life insurance companies, debt funds, REITs, and private and public funds.
LOS ANGELES—DJM Capital Partners has named Ken Lee as CFO and Becky Sullivan as COO. Lee had previously held the title of Vice President at DJM, working in both acquisitions and asset management capacities to close more than $1 billion in new financing, recapitalizations and acquisitions. He joined the firm in 2011 from US Bank where he was AVP of Commercial Real Estate. Prior to US Bank, Lee worked on Bank of America Merrill Lynch’s real estate investment banking platform and began his career as a public accountant at KPMG. Sullivan has been with the company for more than 14 years and most recently as SVP of construction and development. At DJM she has overseen more than $500 million of development projects including Pacific City, a 191,000 square-foot, mixed-use development in Huntington Beach; Lido Marina Village, a boutique retail, restaurant and creative office development totaling 116,000 square feet in Newport Beach; and Bella Terra, a mixed-use open-air shopping, dining, entertainment and residential complex totaling more than 1 million square feet in Huntington Beach.
DEALTRACKER
RIVERSIDE, CA—Shopoff Realty Investments has sold a 7.9-acre site of entitled land located within the Spring Mountain Ranch Specific Plan in Riverside County to Lennar. Shopoff entitled the project, Spring Mountain West, for 72 single-family detached homes. The land is part of Spring Mountain Ranch, a 785-acre master plan, which Shopoff originally entitled in 2003. Shopoff also secured entitlements for several other projects in the surrounding area including Springbrook Estates and Box Springs Estates. Entitlements secured for the Spring Mountain West property include a tentative tract map for 72 single-family detached condominium homes. A courtyard cluster project, the two-story units will range from approximately 1,500 to 1,800 square feet, and be clustered in groups of four or six units. Currently, the site is graded, with all street frontage improvements completed.
Rialto, CA—Westcore Properties has purchased a 130,599-square-foot warehouse/distribution facility on a nine-acre lot at 360 South Lilac Avenue in Rialto, California from Legacy Ranch for $11.4 million. Plans to reposition the property include a thorough interior and exterior cosmetic upgrade and paving approximately 1.7 acres of unimproved land for trailer parking and other uses. Westcore’s $1.5 million upgrade plans include new paint, landscaping, new warehouse lights, new dock doors and office reconfigurations and upgrades, in addition to paving the unimproved dirt. Rialto enjoys a low industrial vacancy rate, which Voit Real Estate Services cited as 3.98 percent in its second quarter 2018 industrial market report. Chase MacLeod of Voit Real Estate Services represented the seller in the transaction. Westcore represented itself.
SALT LAKE CITY—A subsidiary of Alpha Wave Investors has acquired Park Station Apartments, a 94-unit multifamily property in the Salt Lake City submarket of Midvale, Utah. This is the third multifamily property the firm has acquired in the greater Salt Lake area within the past nine months. The firm will invest approximately $1.5 million in capital improvements to the property, including the addition of a pool, fitness center, and leasing office. Alpha Wave will also address deferred maintenance and renovate exteriors and interiors, including adding washers and dryers to each unit. Brock Zylstra and Danny Shin of Marcus & Millichap represented both the buyer and seller in this transaction.
David Walkin of Meridian Capital Group arranged acquisition financing for Alpha Wave. The loan was provided by Texas-based ReadyCap.
LOS ANGELES, CA—The Andalucia, a newly built, 118-unit, resort-style multi-housing community in Pasadena, California, has traded hands for $66.8 million. The HFF team marketed the property exclusively on behalf of the seller, a joint venture between Mack Real Estate Development LLC, Mill Creek Development, Pacifica Capital Investments, LLC, ARKA Properties and their capital partner. The property was purchased by a private foreign investor. The Andalucia is located at 686 East Union Street in Pasadena’s coveted Playhouse District a short walk to the boutiques and restaurants situated along Colorado Boulevard. Completed in 2017, the property’s design reflects the city’s timeless Spanish architecture and encompasses approximately 7,500 square feet of ground-floor retail in addition to the 118 studio, one- and two-bedroom flat and townhome-style units. The six-story, podium-style building has 11 affordable units and community amenities, including a rooftop lounge, outdoor community lounge, fitness center, clubhouse and secured underground parking. The HFF investment advisory team representing the seller included managing director Blake Rogers and senior managing director Sean Deasy.
LOS ANGELES—Co-working firm SPACES has signed a new 66,306 square foot lease in West Los Angeles’ Westchester neighborhood at the former Univision building. CBRE’s Daniel Rainer represented SPACES in the transaction. CBRE’s Bryan Dunne and Kent Handleman at Lincoln Properties represented landlord CBRE Global Investors, which acquired the property in 2016 and has since completed an extensive renovation of the asset at 5999 Center Drive. The site is in proximity to the tech hubs of Playa Vista and Culver City and has undergone a multi-million-dollar capital revamp, to reposition it from a building that was originally constructed for a single occupier to a multi-tenant alternative for flexible workspace. It is designed with indoor-outdoor ground floor access and a newly constructed deck, patio and lounge, offering varying work environments with WiFi connectivity.
OXNARD, CA—BLT Enterprises has leased an 89,811 square-foot industrial and office facility to Volkswagen Group of America at 3301 Sturgis Road in Oxnard, California. The property is adjacent to the company’s existing Test Center California, which BLT developed as a build-to-suit for Volkswagen in 2010. BLT Enterprises, along with Volkswagen Group of America, will complete a series of improvements at the property to completely renovate the existing building. Planned renovations include interior partitions, new roll-up doors and paint, new amenities such as EV charging stations and carwash systems, as well as important exterior upgrades such as landscaping and parking lot updates, a new roof, new rooftop HVAC units, and removal of the fence between the two properties to create a unified campus feel.
SAN DIEGO, CA— Phase 3 Real Estate Partners has secured a $149 million loan to refinance Genesis Campus Point, a three-building, state-of-the-art life science campus totaling 314,135 square feet in the UTC submarket of San Diego, California. HFF worked on behalf of the borrower to secure the 48-month floating-rate loan. Genesis Campus Point is located at 4224 and 4242 Campus Point Court and 10210 Campus Point Drive in San Diego, which ranks as the third largest biotech market in the country behind Boston and San Francisco. Situated just east of Interstate 5 and directly south of its interchange with Interstate 805, the property is positioned within the heart of the UTC submarket, referred to as the “Golden Triangle”, and is proximate to the UCSD health system, Scripps medical campus, Westfield UTC Mall, Torrey Pines Reserve and Golf Course and numerous dining and entertainment venues. The property comprises three Class “A” life science buildings, an underground parking facility and an amenity building that features a fitness center with lap pool, yoga studio, spin studio and showers/lockers; an on-site restaurant/bar and conference centers. Tenants at the life science campus include Poseida Therapeutics, MabPlex USA, Heron Therapeutics, Celgene, Tocagen, BioLabs San Diego LLC and AveXis Inc. The HFF debt placement team representing the borrower included senior managing director Tim Wright, managing director Todd Sugimoto and senior associate Olga Walsh.
LAS VEGAS—A joint venture vetween Tower 16 Capital Partners and Henley USA has acquired a 512-unit multifamily project in Spring Valley, one of Las Vegas’s top submarkets for approximately $50 million. Tower 16 will be overseeing close to $7 million in renovations and upgrades to the project including new outdoor amenities, gym, leasing office and interior renovations. The community is located close to I-15 and the Las Vegas Strip, allowing quick access to Summerlin, Henderson and McCarran International Airport. It includes 512 oversized one-, two- and three-bedroom apartments and townhomes with central air conditioning and individual electric metering. Community amenities include three swimming pools, two spas, two basketball courts, four laundry facilities, a business center, a large playground and dog runs. In keeping with Tower 16’s commitment to implementing superior management, the partners hired Pinnacle, a leading multifamily property management firm that handles more than 14,000 units in Las Vegas, to manage Foothill Village on behalf of the joint venture.
BUILDING BLOCKS
SAN DIEGO— Greystar Real Estate Partners’ Park 12, a luxury apartment building located immediately across the street from Petco Park and San Diego Bay, has begun move-ins at its 37-story tower. Featuring 371 luxury apartments, the tower is the first building in the community. It is comprised of one high-rise and three mid-rise buildings, and offers studio, one-, two- and three-bedroom floor plans as well as penthouse suites with square footage spanning from 518 to 2,824 square feet. Rents start at $1,705. Completion of the iconic mixed-use project is slated for Fall 2018, with move-ins planned for the remaining one six- and two seven-story midrise buildings – featuring an additional 347 residential units, for a total of 718 rental homes. Eighty apartments have been leased to-date. According to Jerry Brand, senior managing director of west coast development for Greystar, the resort style community appeals to a wide range of tenants, with a variety of floor plans and price points to meet their unique needs and lifestyles.
LOS ANGELES—Realm Group, a joint venture between Realm Estate and The Bascom Group, has acquired a 1.7-acre parcel of land in the Fashion District of Downtown Los Angeles for $24.3 million. The sale closed on July 6, 2018. The site is entitled and planned for the development of a 33-story, 452-unit high-rise multifamily community, the first tower to be built in the emerging Fashion District. HFF’s capital team, led by Charles Halladay, Andrew Hornblower, and Jamie Kline, secured a land loan from Ladder Capital for the acquisition of the site. HFF continues to represent the project’s vertical construction financing. Realm Group rezoned and entitled the existing parking lot, located at the corner of 7th Street and Maple Avenue, to approve the high-rise development, including 13,600 square feet of ground floor commercial space. The modern, concrete, steel and glass tower with a bold loft style design will feature a rooftop lounge providing striking city skyline views and 1-acre amenity deck at the 6th floor with a pool terrace and oversized dog park.