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
PHOENIX— Phoenix’s current industrial inventory offers only enough contiguous space to accommodate less than half of these requirements, and speculative development will provide much-needed space solutions as Phoenix’s industrial inventory tightens. The Valley’s 1.3 million square feet of Q1 industrial absorption is light compared to the gains of 2017, strong demand remains, including more than 100 industrial tenants each looking for at least 100,000 square feet of local space. Increases in government spending have benefitted key industries in the submarket, with aerospace and defense, in particular, expected to experience mergers and consolidations. Other industries fueling activity in the submarket include high-tech/advanced manufacturing, semiconductor and pharmaceutical/nutraceutical. This growth has pushed the size range of the average southeast Valley industrial user from 15,000 to 50,000 square feet up to 30,000 to 60,000 square feet. Across metro Phoenix, industrial vacancy at the end of Q1 had fallen to 7.3 percent, just 100 basis points above its lowest point. As existing lease and purchase options dwindle, developers can’t seem to deliver new space quickly enough, especially highly functional developments able to attract large, sophisticated single-user operations while still maintaining the potential to become a multi-tenant building. Key amenities important to users are increased clear heights, wider column spacing and additional dock doors.
(SOURCE: JLL)
NEW & NOTABLE
SANTA BARBARA—Yardi has acquired Phoenix Broadband Ltd., an innovative business technology firm specializing in infrastructure and hardware solutions for shared workspaces. Based in Stirling, Scotland, Phoenix Broadband is known for its Medusabusiness brand. Medusa is a service platform for managing technology resources in a shared workspace. When multiple companies share a common office space, access to secure, easy-to-manage technology is important. Centralizing access to cloud-based business networks, Internet, Wi-Fi, voice services and more, Medusa provides simple hardware and seamless IT for coworking spaces.
PASADENA—C.W. Driver Companies has promoted Brent Hughes to VP of operations. In Hughes’ new role, he will oversee projects in the retail, commercial, office, hospitality and gaming, mixed-use and entertainment industries in addition to spearheading signature projects across California. He also will provide leadership and guidance for project teams to ensure they are equipped with the resources needed to see projects through from construction to completion. Hughes has more than 20 years of construction experience, with projects spanning commercial, offices, resorts, casinos, hotels, parking structures and more. He has served as a critical team member of notable company projects including Soboba Band of Luiseño Indians’ new casino and resort; Hollywood Casino Jamul; Hillsdale Shopping Center, North Block Redevelopment and multiple projects for Qualcomm.
IRVINE—Ware Malcomb has promoted Michael Petersen to principal of Architecture in the firm’s Irvine, Calif.-based headquarters office. In this role, Petersen is responsible for the overall leadership and growth of the firm’s commercial business for the Irvine office. With over 25 years of experience as an architect, Petersen was most recently Director, Architecture, which encompasses the firm’s commercial, healthcare, science and technology studios. He is a key member of Ware Malcomb’s management team and oversees these specialized teams in the Irvine office. Petersen joined Ware Malcomb in 2012 as Director, Healthcare Design, and has successfully grown and expanded this practice to include not only medical office buildings and tenant improvements but also higher acuity projects such as outpatient surgery centers.
LOS ANGELES—Brad Wilmot has joined CBRE Capital Markets’ Debt & Structured Finance team as an EVP. Based in the firm’s downtown Los Angeles office, Wilmot will enhance CBRE’s presence in the large commercial loan space, bringing more than 25 years of experience to the firm. He has an extensive background in originating, structuring and closing loans across all major asset classes in markets located in North America, and he has been involved in the origination and closing of over $15 billion in commercial real estate loans.
IRVINE—Center Street Lending has promoted Dan Baruch to CEO. Baruch previously served as President of the firm and will now oversee the day-to-day operations and strategic direction moving forward. Center Street Lending provided more than $220 million in financing across 12 states in 2017 and $800 million since 2010.
DEALTRACKER OCEANSIDE, CA—A 143,274-square-foot industrial building in Oceanside has traded hands for $20 million. The subject property is part of the Rancho Del Oro Technology Park located at 4039 Calle Platino. Tim Moore of Lee & Associates – North San Diego County, represented the seller, 6th & K Ltd of San Diego. The buyer was Rexford Industrial Realty and was represented by CBRE’s Adam Molnar and Greg Lewis.
LOS ANGELES—Calmwater Capital has provided $28.5 million in senior debt to an affiliate of Champion Realty Ltd, a borrowing entity owned and controlled by Bob Champion, Parker Champion and Garrett Champion, for the acquisition of a 2.76-acre property located at 801 W Adams Blvd. in Los Angeles near the University of Southern California. The borrower plans to develop 100 townhomes on the property. The Calmwater-structured loan includes an initial commitment of a $15.67 million senior secured term loan and a $12.85 million delayed draw term loan for future expenses. Located a half mile from USC, the property is within the university’s security perimeter and in close proximity to its Greek Row. The future housing complex will address the undersupply of residential housing in the area.
TUCSON—Alpha Wave Investors has completed its tenth full-cycle property investment with the sale of Skyline Park Apartments, a two-story, 60-unit apartment community in Tucson, Arizona. Alpha Wave acquired the asset in August of 2017 and implemented a repositioning and renovation campaign that increased property value by 35-percent in just eight months. The property, which was formerly known as Park Village Apartments, was re-branded and re-positioned under Alpha Wave’s ownership, with a host of capital improvements including exterior paint, roof repairs, parking lot resealing, and a completely new landscape. The firm also conducted an overhaul of the pool and upgraded pool equipment, installed a new children’s play area with shade structure, and renovated more than 90-percent of the property’s interiors, including the installation of environmentally-friendly, low-flow toilets and showerheads.
SAN DIEGO—1450 Frazee, a 140,477-square-foot, institutional-quality office building in Mission Valley, has traded hands between Menlo Equities Inc. and a joint venture between Hill Properties and a fund managed by DRA Advisors, LLC for $33 million. Leading the JLL team on this transaction were senior managing director Lynn LaChapelle, Managing Director Bob Prendergast and Vice President Sach Kirpalani. 1450 Frazee is a seven-story office building adjacent to State Route 163. The building is currently 90.6 percent leased to 27 tenants. Two strong credit tenants, UC San Diego and ADP, occupy over 40% of the leasable space. 1450 Frazee’s location in the live-work environment of Mission Valley is surrounded by amenities including several hotels, many restaurants and two regional malls. Situated ten minutes north of downtown San Diego, the building is close to on ramps for Interstates 5, 8, 805 and 15 and is served by the San Diego Trolley system.
ONTARIO— DCG Fulfillment, a third-party logistics (3PL) provider has signed a lease at a 771,839-square-foot lease at 1300 California Street in Redlands. The property is a distribution cross-dock warehouse with 36-foot minimum warehouse clearance. NKF Senior Managing Directors Mark Kegans and Ron Washle represented the tenant in the lease transaction with the owner Black Creek Group. This lease represents an expansion for DCG. To underscore demand for Inland Empire industrial space, in late 2017, Kegans and Washle completed a 1.4-million square-foot warehouse lease in Chino for an undisclosed tenant with landlord Majestic Realty Company. The deal represented the largest single building lease transaction to date since 2014 in Southern California. The tenant will occupy the entire building that is now under construction.
TEMPE, AZ—Dennis Williams, senior vice president/managing director and Briana Harney, senior investment analyst of NorthMarq Capital’s San Francisco regional office, arranged the $38.5 million refinance of a 292,000 –square-foot office property located at 1501 & 1620 Fountainhead Parkway in Tempe, Arizona. The transaction was structured with a 2-year interest only term. NorthMarq arranged financing for the borrower entities, Harbert Management Corporation (HMC) and Cypress Office Properties, LLC through a debt fund. Harbert Management Corporation is a Birmingham based alternative asset management firm with approximately $5.9 billion in assets under management as of February 2018.
PHOENIX—Six tenant-in-common investors have purchased One Camelback, located at 1 E. Camelback Road in Phoenix, from One Camelback Inc for $14 million. The six TIC companies—CD Camelback LLC, Randhurst Camelback LLC, KOT Camelback LLC, SS Camelback LLC, SD Camelback LLC and RH Camelback LLC—have purchased the property for $14 million. Eric Wichterman, Greg Valladao and Mike Coover of Cushman & Wakefield Phoenix negotiated the sale. One Camelback, an 11-story, 203,122-square-foot office property, was almost vacant (3.4% occupancy) at the time of the sale.
DENVER, CO—Denver’s Best Inn & Suites, a 190-room hospitality property located in Denver, CO, has traded hands for $11 million. Joshua S. Tammen and Gordon Allred, investment specialists in Marcus & Millichap’s Phoenix and Ontario offices, had the exclusive listing to market the property on behalf of the seller, a limited liability company. The buyer, a limited liability company, was secured and represented by Dustin Robinett, Chris Gomes and Allan Miller, investment specialists in Marcus & Millichap’s Austin, Dallas, and Kansas City offices. Denver’s Best Inn & Suites is located at 4590 Quebec Street in Denver, Colorado. This hotel is a five-story limited service hotel located eight miles from Downtown Denver. It consists of 190 interior corridor rooms with excellent visibility from Interstate 70. Amenities include a heated indoor pool and spa, fitness center, complimentary breakfast buffet and guest laundry facilities. Business amenities include a business center and 2,136 square feet of meeting space. The buyer intends to renovate and convert to a branded hotel.
NEWPORT BEACH, CA—Brea Imperial Center, a two-building medical office/office complex totaling 194,312 square feet in Brea, California, has secured $42.3 million. The HFF team worked on behalf of the borrower and its representative, HPA Growth Fund and Healthcare Property Advisors to secure the two-year, floating-rate loan via debt fund capital. Loan proceeds were used to acquire the property. Brea Imperial Center comprises 2727 and 2767 E Imperial Highway, which are located in the North Orange County submarket, one of the strongest office markets in Orange County. 2727 E Imperial Highway has 104,662 square feet and is fully occupied by Goodrich, a subsidiary of United Technologies Corporation. 2767 E Imperial Highway is an 89,650-square-foot building that is 100 percent leased to St. Jude Medical Center. The two-story buildings were renovated in 2000 and feature parking for 775 vehicles on a 10.48-acre site. The HFF debt placement team representing the borrower included senior directors John Chun and Zack Holderman.
CHANDLER, AZ—The Met at Fashion Center, a three-building, 303-unit multi-housing investment property in Chandler, Arizona, has traded hands for $64.8 million, which equates to $213,861 per unit. Steve Gebing, and Cliff David, also an IPA senior managing director, represented the sellers, HCW Development and the Statesman Group, and procured the buyer, an institutional investment manager. Built in 2016, The Met at Fashion Center is adjacent to the Chandler Fashion Center, a 1.3 million-square-foot super regional shopping mall. The location provides immediate access to the Price Corridor, which accounts for nearly one-third of the city’s total employment base. Chandler Regional Medical Center is three miles away and Downtown Chandler is within four miles.
BUILDING BLOCKS
PHOENIX—Mark Roth is developing Luna Azul, a permanent housing community for people with special needs. The property is located at 16th St. and Loop 101, and is the nation’s first for-sale residential community for adults with special needs. The project is scheduled to break ground next month and the first residents can expect to move in mid-next year. Roth decided to develop the community when looking for a permanent housing solution for his daughter with special needs. When penciling out the cost of lifelong housing and the support she’d need, he found that buying her a suitable place and having help come to her was the most economical option. Since residents will own their own homes, they will be able to customize their homes to fit their needs, and hire in whatever level of help they require. The neighborhood will be comprised of 30 independently owned cottages. The 2- and 3-bedroom homes will consist of four floorplans, ranging in size from 1,152 to 1,956 sq. ft., and will feature open living spaces, large front porches, high quality finishes, and will be wired for Z-Wave technology. Pricing will range from mid-$300,000s to mid-$500,000s.
PHOENIX—Parallel Capital Partners has sold a nearly one-acre parcel within its 16-acre Arizona Center Project, a mixed-use center, located at 3rd and Van Buren Streets in downtown Phoenix, to North American Development Group. The new owners plan to develop Palm Court Tower, a $100 million, 30-story luxury residential tower featuring 350 luxury residences to be located at 440 E. Van Buren Street. Slated for completion in 2020, Palm Court Tower is being designed by Phoenix-based Will Bruder Architects & Forum Studio. Construction of the Tower is set to begin in late 2018. When complete, the luxury residential tower will be the second tallest residential building in downtown Phoenix. Rising 22 stories above the swimming pool terrace on the roof of the six-level parking garage, the residences will range from modest studios to three-bedroom units. Eight different floor plans will provide for innovative and functional contemporary living with a variety of unit sizes ranging from 500 square feet to over 1,300 square feet. The community will feature a garden entry, amenity level with swimming pool and fitness facilities, residential parking and services.