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 multifamily rents were up 3.1% year-over-year in 1Q18. Los Angeles led the gains with a 4.5% increase in multifamily rents. The Inland Empire also saw significant rental increases, up 2.9% for the quarter. Although the market saw significant increases, average rental rates remain the least expensive in the Southern California market with average rental rates at $1.40 per square foot. Ventura County multifamily rents were up 2.6%, inching the market closer to Orange County at an average of $2 per square foot. Orange County had relatively flat rental rate gains, up only .5%, with average rental rates hovering just above $2 per square foot.
(SOURCE: NAI CAPITAL)
Limited development activity in the self-storage market will only have a minimal impact on self-storage vacancy rate. The influx of new apartments and office space bodes well for retail sales and underlying self-storage demand, namely in Downtown Los Angeles and Westside Cities. For a metro of its size, Los Angeles County will see largely subdued development activity this year with total inventory on pace to expand just 2.1%. Of the 647,000 square feet slated for delivery in 2018, most is in the South Bay or South Los Angeles, with minimal finalizations in either downtown Los Angeles or Westside Cities. Vacancy/Rent Overview A lack of new space during the past two years allowed vacancy to hover in the low-5 percent range. In 2018, a slight uptick will be witnessed as the metro’s vacancy rate reaches 5.4%. Limited availability continues to warrant rate gains with operators increasing the average rent by nearly 4% this year.
(SOURCE: MARCUS & MILLICHAP)
NEW & NOTABLE
IRVINE, CA—Derek Landry has joined JLL’s capital markets team as an EVP. Landry brings more than 20 years of commercial real estate experience to the firm, serving as a principal with roles in portfolio and asset management, acquisitions, capital raising, finance and dispositions. His experience ranges the risk spectrum from core to value-add and development. As a senior member of JLL’s Capital Markets platform, Landry will be primarily focused on office investment sales in Southern California, and will partner with G. Ryan Smith and is based in the firm’s Irvine, California office. Landry comes to JLL from a leading global real estate investment firm where he was a Managing Director of Portfolio and Asset Management working on various separate accounts. Prior to that, he was with TH Real Estate for twelve years, holding various roles from Portfolio Manager to Head of Asset Management – Western Region. He also worked in New York City doing value-add acquisitions, asset management and dispositions for Max Capital (now Monday Properties) and Rockwood Realty Associates. He began his career with WCI Communities, a Florida-based homebuilder.
DEALTRACKER
SALT LAKE CITY—Buchanan Street Partners has acquired a 160-unit multifamily property in the Salt Lake City community of Cottonwood Heights from RK Properties for $31.75 million. The purchase follows Buchanan’s 2017 acquisition of another Salt Lake City area property, a 298-unit apartment project, and signals the company’s expanding value add investment strategy in the multifamily sector in the Western U.S.
PHOENIX—The Corporate at Pima Center, a two-building class-A office property in the 232-acre, mixed-use Pima Center business park in Scottsdale, Arizona, has traded hands for $56.5 million.. Located at the northwest corner of the Loop 101 and Via de Ventura on the Salt River Pima Maricopa Indian Community, the two buildings—located at 9000 and 9200 E. Pima Center Pkwy—sit on more than 20 acres and total nearly 272,000 square feet. Originally developed in 2006 and 2008 by Opus West, the buildings feature high-end finishes, expansive floor plates and ample parking with a ratio of 4.85 spaces per 1,000 square feet. Will Mast, Vice President with CBRE Capital Markets, Institutional Properties in Phoenix, and Jim Fijan, with Fijan Advisors, assisted the seller, a partnership between Hopkins, Minn.-based CarVal Investors and Scottsdale-based MainSpring Capital. The buyer was City Office REIT of Vancouver, Canada. The property was 99.4 percent leased at the time of sale to a diverse tenant base that spans across financial services, insurance, real estate and renewables. Notable tenants include First American Title Insurance, Nationwide, Mutual of Omaha Bank, Yardi Systems, Taylor Morrison, FirstService Residential AZ, Mattany Homes and DEPCOM Power.
ANAHEIM—A 20-unit apartment complex Anaheim has traded hands for $4.25 million in Anaheim, CA. CBRE’s Dan Blackwell represented the seller, a local investor, in the transaction. The buyer, a private investor, was represented by The Mogharebi Group. The two-story building, located at 1521 East Canfield Lane, was built in 1969 and contains 20 units, totaling 15,058 square feet. The complex sits in proximity to several amenities and is only a few miles from Fullerton Town Center, Downtown Anaheim, California State University Fullerton and Disneyland. By continuing the interior renovation plan, the investor will be able to significantly increase value and improve rental income. The complex has undergone recent improvements such as new exterior paint, signage, new screen doors for all units, and recently installed security cameras. It also features ample parking, secured gated entry, swimming pool and an on-site laundry facility.
LOS ANGELES—CBRE has secured $15.9 million in debt financing for the recent
acquisition of a multi-tenant industrial portfolio in Riverside and Redlands, CA.
Shaun Moothart, Bruce Francis and Dana Summers of CBRE’s Debt and Structured Financing team arranged the 7-year loan for the buyer, Davis Partners & TH Real Estate. The Redlands properties at Nevada Street Plaza are located at 1915 West Redland Boulevard and 721 Nevada Street, totaling 126,292 square feet. The two buildings are 100% leased with 37 tenants. The Riverside properties Arlington Airpark Plaza are located at 7201-7209 Arlington Avenue, totaling 86,334 square feet, with 29 tenants. These buildings are 93.5% leased.
REDLANDS, CA—Cypress Villas, a 83-unit apartment property located in Redlands, has traded hands for $19 million to an unnamed investor. Jim Kordell, an investment specialist in Marcus & Millichap’s Ontario office, represented the buyer in the deal. Cypress Villas is located at 301 E Cypress Avenue in Redlands, California. This property was built in 2006 on ±4.68 acres. This property has 14, one-bedroom/one-bath, 61, two-bedroom/two-bath, 7, three-bedroom/two-bath, and 1, three-bedroom/two-bath units. Conveniently located by Interstate 10 Freeway, Downtown Redlands and the University of Redlands.
MOORPARK—MCA Realty has acquired a 137,465 square-foot, value-add industrial property in the Ventura County submarket of Moorpark, California. The property was acquired off-market. The industrial complex is comprised of two buildings, 14399 Princeton Avenue, a 45,916 square-foot industrial building, which is 100-percent leased to Turbonetics Holdings Inc., a manufacturer of turbochargers for the defense and specialty automotive industries, and 14401 Princeton Avenue, a 91,549 square-foot industrial and office building. Robert Griffith and Rick Sheckter of Newmark Knight Frank and Bennett Robinson and Robert Valenziano of CBRE brokered the deal. 14401 Princeton Avenue is currently vacant and features 31,020 square feet of second floor mezzanine.
LAS VEGAS—Pordes Residential has reached $203 million in closed transactions to date on its stake in Veer Tower, a condo tower in Las Vegas. In late 2012 while the condo market in Las Vegas, Nevada, was at a historic low, Pordes Residential, in partnership with a New York hedge fund, acquired 427 residences at Veer Towers for $119 million from MGM Resorts International. The sellout has outpaced projections with Pordes Residential, achieving the highest price per square foot, allowing them to stand out from the rest of their competition by consistently exceeding market expectations. Completed in 2010, the two 37-story residential towers are located within CityCenter on the Las Vegas Strip. Each tower consists of 335 luxury residences ranging from studios to three-bedroom units. CityCenter, a 64-acre mixed-use community, is Las Vegas’ ultimate destination for dining, gaming, shopping and entertainment with incomparable amenities and an unbeatable location. The development includes ARIA Resort & Casino, Vdara Hotel & Spa, Mandarin Oriental Las Vegas, and The Shops at Crystals.
PHOENIX—The Alturas Real Estate Fund has acquired the Country Club Manor office property located in Phoenix, Arizona at 1221 & 1313 Osborn, and has renamed the property “The Ashby on Osborn.” The 90,000-square-foot office property further establishes the firm’s presence in the Phoenix market having acquired Siete I in 2017. This is the sixteenth commercial real estate acquisition since September 2015 for the Alturas Real Estate Fund, having acquired properties in Idaho, Arizona and Washington. The Ashby is centrally located within the fast growing Phoenix metro area. Positioned in an affluent area adjacent to the Phoenix Country Club the property is well situated in a Central Business District location, which is in the midst of a revitalization including thousands of new class-A apartments and a wide array of new retail and restaurants. Alturas is working with Michael Crystal and his team at Newmark Knight Frank to lease the property.
MESA, AZ—MIG Real Estate has acquired Trails at Harris Apartments, a 209-unit multifamily property in Mesa, Arizona. The property will undergo significant enhancements as MIG Real Estate creates a more attractive for-rent housing option in one of the fastest-growing cities in the nation. Originally constructed in 1983, the garden-style community is located on 9.94 acres on the Gilbert-Mesa border at 1653 South Harris Drive. One and two-bedrooms average 766 square feet, and include all-electric kitchens, walk-in closets, standing showers and linen closets. Outdoor balconies or patios and stackable washer and dryers are available in select units.
LAS VEGAS—Dornin Investment Group has sold Marnell Corporate Center 4, a 93,650-square-foot class-A office building to Nidnats Corporation for $30.75 million, or $328 per square foot, setting the record for the highest price per square foot paid for a multi-tenant non-medical office building in Las Vegas, NV. At the time of the sale, MCC4 was 88% leased. Tenants include GSA/TSA; internet gaming and technology company Machine Zone, America Family Mutual Insurance, and HDR Engineering, Inc. Dornin acquired the asset in 2014, as part of a $39 million, three-building portfolio. The sale of MCC 4 marks Dornin’s successful stabilization of the building, which had suffered from high vacancy and long-term leases at below market rates. The record sales price of approximately $328 psf paid for MCC 4 is more than 50% higher than the average for the market, according to seller’s attorney Mark Nicoletti of the Los Angeles-based law firm Sklar Kirsh.
BUILDING BLOCKS
HUNTINGTON BEACH, CA—DJM Capital Partners has started construction on a new public space area at the Bella Terra. Set for completion in November 2018, the reinvented space is designed with inspiration from Southern California’s Spanish roots, with additional design cues taken from Huntington Beach’s casual, informal, but aspirational lifestyle. The reimagined public space replaces the former amphitheater and will welcome Bella Terra guests daily with epicurean fare, alfresco dining, an open-air beer and wine garden, free Wi-Fi, concert stage, children’s area, and feature inviting seating options and conversation areas as well as new landscaping.
PHOENIX—DoubleTree by Hilton has opened its doors at a Phoenix, Arizona hotel property owned by Brixton Capital. The 284-room, five-story property, located at 10220 North Metro Parkway East, includes a restaurant, courtyard, pool, fitness center, business center and over 14,000-square-feet of event space. Mary Lambert will serve as general manager for DoubleTree by Hilton Phoenix North. Property owner Brixton Capital invested $3 million into a robust property improvement plan in advance of DoubleTree by Hilton moving in.
TEMPE—Lincoln Property Company, Goldman Sachs and City of Tempe Mayor Mark Mitchell has broken ground on the second class-A office building at The Grand at Papago Park Center. Totaling 352,000 square feet at 1027 W. Roosevelt Way in Tempe, Arizona, The Grand Building Two is one of Arizona’s largest ever office buildings to break ground as a purely speculative endeavor. It is scheduled for completion in second quarter 2019, becoming the second of eight Class A office buildings slated to be built by Lincoln Property Company within the 60-acre mixed-use project called The Grand at Papago Park Center. The newest office building at The Grand will provide state-of-the-art creative office space with a two-story lobby, modern and flexible floorplates, and an open office concept highlighted by 12-foot floor-to-ceiling vision glass windows. Among the project’s distinctively unique features are a 10,000-square-foot amenity lounge with a full-service restaurant, indoor/outdoor seating, TV viewing area and two conference facilities will full audio-visual technology. Other Building Two amenities include a private fitness facility and a modern rooftop lounge designed for tenant events and collaboration, with seating areas, an architectural shade element, catering conveniences and sweeping views of the Papago Buttes, Hole in the Rock and Camelback Mountain.
LAS VEGAS— Silverton Casino, LLC and Majestic Realty Co. have broken ground on Silverton Village. The $60 million property will feature a luxurious 150 room-Hyatt Place Hotel, a new iconic Starbucks location with a drive-thru, Blaze Pizza, Firehouse Subs and Panera Bread. Silverton Village will be developed on 9 acres of undeveloped land on the property. The Hyatt Place will sit adjacent to the existing Cracker Barrel facing the I-15 and on the west edge of the property, the retail district will be developed at Blue Diamond and Dean Martin. The project will be constructed by a Majestic affiliate, Commerce Construction, LLP., Las Vegas. The Hyatt Place and Starbucks will be owned and operated by Majestic and Silverton Casino Hotel. All initiatives are part of Silverton’s ongoing expansion plans, which includes its partnership with The Berkley, a 400 room-all suite timeshare resort. Located in the South Strip area of Las Vegas, with easy access right off of the I-15 and Blue Diamond Road, the Silverton Village will enable residents and the guests at Silverton Casino, The Berkley, and the future Hyatt Place an enhanced variety of unique shopping, dining and entertainment experiences.
MESA—The first phase of Aviva, the East Valley’s newest luxury apartment community, is complete. Phase I of Aviva includes four residential buildings totaling 166 units delivered. Thus far, 73% of the first 166 units delivered are leased and more than 50% of the total 325 units at Aviva are leased. The list of indoor amenities now available to residents include the spectacular 9,000 SF Clubhouse which features a media and game room, custom billiards table, co-working spaces, an outdoor fire pit with lounge seating, premium outdoor kitchen grills, and a state-of-the-art-health and wellness center that includes smart cardio machines, free weights, boxing and a yoga/spin studio with a 24/7 virtual trainer. The outdoor amenities available include one of the largest pools in Arizona—a resort-style, 150-foot long outdoor infinity pool with a Jacuzzi spa– surrounded by ultra-chic cabana beds, chaise lounge chairs, fire pits, custom corn-hole toss, and an outdoor ping pong table. Phase II of Aviva includes seven residential buildings totaling 159 units and a list of amenities that, five outdoor fitness stations with stationary fitness equipment, premium outdoor kitchen grills, a wraparound seated fire pit, a playground with covered seating areas, a basketball court, and Aviva’s Bark Park—a 140-foot long dog park with a covered seating area and ample room for dogs to enjoy the challenging agility course. Phase II of Aviva is currently slated for an overall completion date of June 2018.