IRVINE, CA—Airport tenants that are priced out of the market are seeking other areas of Orange County in which to locate, so values are elevating in those markets, Newmark Grubb Knight Frank's executive managing director, investment services, Robert Griffith tells GlobeSt.com. As we recently reported, NGKF Capital Markets has completed six transactions totaling 1.18 million square feet in the Southern California and Las Vegas regions on behalf of Sunbelt Enterprises LLC and its affiliated entities. Griffith and NGKF's Rick Sheckter were tapped last year to market the portfolio of diverse property types. We spoke exclusively with Griffith about the sale, trends in the Orange County market and challenges to managing such a large transaction.

GlobeSt.com: What stands out for you about the Sunbelt portfolio sale?

Griffith: When we were hired to market this sizeable portfolio consisting of 43 buildings with a total value of approximately $220 million, we advised the seller on a strategy to maximize its value by creating five smaller portfolio offerings based on geographic location and product type. These smaller, product-specific portfolios were targeted to the demand in the marketplace.

This strategy enabled us to target buyers' specific investment appetites, as opposed to selling the entire portfolio—or a large portion of it—at a discounted price to one buyer. As a result, we have had strong interest from institutional buyers, REITs and high-net-worth individuals and have been exceeding the sellers' expectations on pricing, with considerable additional interest on the properties currently being marketed.

GlobeSt.com: What are the challenges to managing such a large portfolio sale?

Griffith: The greatest challenge is creating accurate and detailed offering memorandums for the various portfolios being marketed. Prospective buyers need to feel confident with the information being presented. Some of this key information includes tenant descriptions and rental info, lease assumptions, up-to-date local-market data and, finally, physical information about the property itself. Buyers need to understand fully the level of risk with each asset so they can underwrite it successfully and feel confident in the pricing.

GlobeSt.com: What trends are you noticing in the Orange County market?

Griffith: Orange County's market fundamentals are very strong. Vacancy rates are falling, lease rates are increasing and cap rates continue to compress. The Airport market is leading the county with class-A office and retail sales at pre-recession levels. A number of class-A office buildings are trading north of the $350-to-$375-per-square-foot range. Two years ago, cap rates were averaging 6.5%; they are now at 5%. With the economy recovering and more jobs being created, this market has single-digit vacancies, whereas three years ago they were in the mid-teens.

The rest of the Orange County submarkets are seeing the trickle-down effect from the Airport area as well. Airport tenants that are priced out of the market are seeking other areas of Orange County to locate, and therefore, we are seeing the values in these markets elevate as well.

GlobeSt.com: What else should our readers know about the Sunbelt portfolio?

Griffith: We still have a few properties available in Ventura County and are marketing the opportunities to investors with capital who are actively seeking to place it before year end.