(Save the date: RealShare Los Angeles comes to the Hyatt Regency Century Plaza in Los Angeles, CA, on March 27, 2013.)
LOS ANGELES-GlobeSt.com has learned exclusively that Westwood Financial Corp., a locally based owner-operator of retail properties, has had one of the most successful years in its 42-year history with more than $200 million in acquisitions and dispositions in 2012. Among the highlights for WFC in 2012 are:
- the $46.6-million sale of the 248,322-square-foot Sonora Village retail center at 15448-15704 N. Pima Rd. in Scottsdale, AZ, on which GlobeSt.com previously reported;
- the $11.55-million sale of the 95,791-square-foot Willow Run Shopping Center at 12900-12910 N. Zune St in Westminster, CO;
- the sale of 19 former McDonald’s Corp.-owned properties across the country, part of a 68-asset portfolio the firm purchased in September 2010. The sold assets span 11 states and comprise a mixture of former McDonald’s restaurant locations, non-restaurant locations, vacant buildings and land. WFC sold the properties in a series of one-off transactions for values between $900,000 and $1.235 million, leaving three remaining assets for sale. The firm is scheduled to dispose of the remaining assets prior to the end of the year.
- the $7.4-million sale of the 43,902-square-foot Pacific Plaza at 2544 KS. Archibald Ave. in Ontario, CA;
- the $7-million sale of the 39.739-square-foot Highland Commons retail center at 5775 Airport Blvd. in Austin, TX.
As GlobeSt.com previously reported, in May, following a 13-year hold of Sonora Village, WFC sold the retail asset to Sonora Village Investors LLC, an entity formed by Phoenix investors Bob Mariash and Ryan Denk. The retail property was 82% leased at the time of sale.
Many of the acquisitions above represent WFC’s strategy to use funds from numerous 2012 dispositions to invest in upscale retail and expand its outreach in the Southeast, Midwest, West and Southwest markets. The firm also has several deals pending that are scheduled to close this month.
“It’s definitely a time that’s driven equity,” Westwood’s EVP Joe Dykstra tells GlobeSt.com. “If sponsors have access to real cash, there’s debt available to make deals work. But we all know that even though there are great loans out there at great interest rates, more than at any time in the last ten years lenders require more equity.”
Dykstra says the market’s generally working in terms of deals getting done; there’s just a lot of equity invested in each project. “It’s helping to keep pricing stable in many of the asset classes, although in many of the core-plus segments, pricing is a runaway freight train. But there are a lot of areas where buyers can exploit the recovery and take a fair deal for themselves with good loans.”
He emphasizes that there’s a fine line between prudence and foolhardy investing. “It’s still choppy out there. Equity doesn’t have a lot of great places to invest their capital, but we do see a lot of deals getting done for seemingly the reason that there’s no better place to put your money. But people still have to be very cautious and strike a balance between product, pricing, equity and to the right sponsors.”
For 2013, Dykstra predicts “more of the same. It’s a very small world, and anything could change the direction of our economy and spook lenders, partners and buyers. But without some kind of unforeseen problem, I think it’s more of the same.”
The “new normal” in terms of pricing and NOI is really settling in, he adds. “The further we go in the recovery, the more real market rents become obvious. You used to see underwriting that was a little optimistic on the rent side, but for most shopping centers that we’re buying, we still see some rent erosion—leases are expiring, and retailers want to talk about what the rent should be as opposed to what the lease may require. Until every lease expires on every rent roll, we think here’s a lot of caution and concern that buyers, landlords and lenders need to have about what is the real NOI.”
Dykstra concludes by saying that fundamentals are strong for retail landlords. “There’s a growing supply of lenders, there’s a good balance between buyers and sellers, and while pricing isn’t as good, leasing activity is dramatically improving.”