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—Investment activity in the Greater Phoenix market has slowed this year, compared to the start of 2017. Sales of office buildings slowed approximately 11% from fourth quarter 2017 to first quarter 2018. The most dramatic decline was experienced in the category of properties ranging from $10 million to $25 million. The median price for office buildings sold in the first quarter fell to $139 per square foot, following a yearlong 2017 median price of $151 per square foot. Sales of industrial buildings also cooled during first quarter, slowing by 17%. Cap rates dropped into the mid-6% range at the end of 2017 and inched higher to an average of 6.8% during first quarter 2018. In retail, sales of shopping centers dropped by 30% from fourth quarter 2017 to first quarter 2018. Investors are proving to be more selective when evaluating shopping centers, which is likely one of the reasons sales velocity has slowed. Despite a decline in volume, sales prices for retail properties rose during first quarter to a median price of $193 per square foot. This is a rise of more than 60 percent over the median price for all of 2017.
Medical office condo sales, on the other hand, increased during the first quarter. Peoria and Scottsdale accounted for nearly half of the medical office condo sales during first quarter. The median price was $176 per square foot in first quarter, which is a $2 per square foot drop from 2017. However, Sales of traditional, non-condo medical buildings dropped by 40% during first quarter, but activity has picked up in the early stages of second quarter. The median price of these properties fell to $136 per square foot during first quarter, down from $157 per square foot in 2017.
(SOURCE: COLLIERS INTERNATIONAL)
LOS ANGELES—The Los Angeles metro ranks number 10 of the 50 largest metros in the US for residential segregation. Residential segregation can be directly traced to past discriminatory housing practices, such as redlining, and although overall rates of residential segregation have fallen since 2009, some metros are seeing small increases in their residential segregation indexes. Residential segregation is associated with greater rent burdens and lower homeownership rates for minority households. Los Angeles has an overall segregation index of 0.53. The metro’s black segregation index is 0.67 while indexes for Hispanic and Asian households are 0.61 and 0.48, respectively. From 2009-2016, the overall segregation index in Los Angeles decreased from 0.56 to 0.53. In Los Angeles, neighborhoods in which 75% or more of the population are minorities have median incomes that are 20% below the median for the metro as a whole, while median rents in these neighborhoods are 13% below the metrowide median.
(SOURCE: APARTMENTLIST)
NEW & NOTABLE
LOS ANGELES—Akerman LLP has hired experienced transactional attorney Irán Hopkins as a partner and Daphna Davidovits and Claudia Fu as real estate associates. Formerly at Ervin Cohen & Jessup, Hopkins, Davidovits and Fu join Akerman’s Real Estate Practice Group and Cannabis Practice, the first legal team created by a national law firm to serve the legal cannabis sector.
SOLANA BEACH, CA—Brixton Capital, a private real estate investment firm, has hired Priya Huggett as general counsel. In this role, she will oversee various legal aspects of Brixton and its affiliates and provides oversight and a legal perspective for the acquisition, leasing and disposition of properties. Huggett has 20 years of broad-based experience in real estate, including acquisitions, dispositions, development, leasing, finance, and operations covering multifamily, retail, residential, hospitality and office assets. Before joining Brixton, Huggett held general counsel positions at both Sea Breeze Properties and Kelly Investment Group. Prior to moving into in-house counsel roles, Huggett worked for Procopio, Cory, Hargreaves & Savitch and Solmon, Ward, Seidenwurm & Smith in the firms’ real estate, corporate and finance practice groups.
El Segundo, CA—Brice W. Head has rejoined Marcus & Millichap as a SVP investments in the firm’s new office in El Segundo, California. Most recently, Head was a senior vice president with RE/MAX Commercial for 12 years.
DEALTRACKER
CITY OF INDUSTRY—Hong Kong-based Austin Pang Gloves Mfg Corp has purchased a newly constructed 72,271-square-foot building in CT Industry Center, located at 17343 Freedom Way in the City of Industry, for $13.4 million. SVP Jeffrey Hubbard of Lee & Associates Central LA represented Austin Pang Gloves, while Tony Phu of Colliers International and Stu Milligan of Cushman & Wakefield represented the seller, CT Realty.
IRVINE, CA—Spa chair manufacturer Lexor has signed a long-term lease for 187,696 square feet of space at 7400 Hazard Ave., comprising the majority of the 258,500-square-foot freestanding warehouse/distribution building owned by Clarion Partners. Rick Ellison, Randy Ellison and Kyle McGillen of Cushman & Wakefield’s Irvine office represented both the landlord and the tenant in the transaction. 7400 Hazard is an institutional-quality property situated on a rare, oversized 11.82-acre parcel. The property has an ideal industrial tenant location near the 405 and 22 Freeways providing immediate access to all of Southern California. It is situated between the Ports of L.A. and Long Beach (12 miles west), Long Beach Airport (9 miles north), and Orange County John Wayne Airport (9 miles south). The facility features 12,000 square feet of two-story office space, 21 dock high loading positions and 3 grade loading doors, an average 24-foot clear height, heavy power, 180-foot truck court, and a large yard/trailer storage area.
LOS ANGELES—Bridge Development Partners has sold Bridge Point South Bay, a newly completed 512,490 SF distribution facility in the South Bay submarket of Los Angeles, to an anonymous buyer for an undisclosed amount. A Cushman & Wakefield team led by Jeff Chiate and Jeff Cole represented both Bridge Development and the Buyer in the transaction. Bridge purchased the 20.37-acre former Farmer Brother’s coffee processing facility in July 2016 for, what was at the time, among the highest acquisition prices per square foot ever in Los Angeles County. Farmer Brothers leased back the facility until December 2016 while they finalized their corporate relocation to Fort Worth, TX. Demolition began in early January 2017 and vertical construction began in June 2017. The 512,490 square foot, state-of-the-art industrial facility was completed in March 2018.
PHOENIX—University Villa at Ironwood, located at 2550 W. Ironwood Hill Drive in Tucson, has traded hands. March Investment LLC, an entity formed by Phoenix-based Clear Sky Capital, purchased the property from SFC Sterling Tucson Investors LLC, an entity formed by Stonesfair Financial Corp. of Burlingame, Calif., and Geary Tucson LLC, for $17.45 million. Executive managing directors David Fogler and Steven Nicoluzakis of Cushman & Wakefield represented the seller. University Villa at Ironwood is a 140-unit/484-bed, class-A student housing community located just west of the University of Arizona campus. The property offers two-, three- and four-bedroom floor plan options with an average unit size of over 1,287 square feet. Built in 2001, University of Villa at Ironwood unit interiors include washer/dryer and private patios/balconies. The property’s amenities include a computer lab and study lounge, fitness center, theater room, basketball court and sand volleyball court.
DENVER, CO—Western Wealth Capital, an entity of MDC Realty Advisors USA, has secured $33.5 million to acquire Autumn Creek Apartments, a 360-unit, multi-housing community in the Phoenix suburb of Chandler, Arizona. The HFF team worked on behalf of the borrower to secure the five-year, floating-rate loan through an international bank. The loan was used to acquire the property and includes a future-funding component to assist the borrower with their capital expenditure program. This transaction follows the recent announcement of financing HFF arranged on behalf of the partnership with the same lender for Greentree Place, a 256-unit apartment community less than 2.5 miles south of Autumn Creek Apartments. The HFF team representing the borrower included managing director Josh Simon and senior director Brad Miner.
LOS ANGELES—The Corporate Center Calabasas has traded to Westcord Commercial Real Estate Services and TR Funding for $11 million. This marks the second sale on the six-building campus this year. CBRE’s Michael Slater, Tom Dwyer and Mike Longo represented the seller, Majestic Asset Management, a locally based real estate company. Westcord Commercial Real Estate Services represented the buyer, a real investment firm based in Westlake Village. The Corporate Center Calabasas, which is located at 26565-26707 W. Agoura Road, is a project that consists of six class-A office buildings ranging from 21,000 to 70,000 square feet. The project is located within the 101-corridor, featuring surface and subterranean parking, a park-like setting and excellent freeway visibility and access.
PASADENA, CA— Coretrust Capital Partners LLC has acquired Corporate Center Pasadena, the largest office campus in Pasadena, through its investment fund, Coretrust Value Fund I, today. The four-building campus, located at 201, 225, 251 and 283 South Lake Avenue, resides on an expansive six-acre full city block and totals more than 640,000 square feet of commercial space. With over 600,000 square feet of office space, the property also benefits from over 40,000 square feet of tenant amenity retail, a 60,000-square-foot plaza and more than 2,000 parking stalls. Coretrust acquired the campus from an ownership group that controlled the property for over 30 years. Coretrust plans a transformative renovation of the property to create a one-of-a-kind collaborative campus in Pasadena. The company expects to invest over $90 million, which includes upgrading the buildings with state-of-the-art technologies, creating inviting public spaces including plazas, gardens and terraces, updating all lobbies, modernizing elevators and adding on-site tenant serving businesses.
LOS ANGELES—Swift Real Estate Partners has acquired a three-building, technology-focused office campus in El Segundo, CA. Todd Tydlaska, Sean Sullivan and Mike Longo of CBRE represented the seller, GI Partners on behalf of an investment vehicle. Mike Walker, Brad Zampa and Megan Woodring of CBRE procured the financing for Swift from a balance sheet lender investing on behalf of an international life company. The 549,222 square-foot campus is located at 2200, 2222, 2230 East Imperial Highway and currently 100% leased to AT&T (DirecTV) and Raytheon. The asset was originally developed in 1976 and sits along Imperial Highway, adjacent to the 105 Freeway and fronting Los Angeles International Airport. The buildings are part of DirecTV’s global headquarters and in addition to other uses serve critical engineering functions for its popular streaming platform, DirecTV Now. GI Partners acquired the campus in 2013 and successfully renewed and expanded the anchor tenants. In anticipation of more than 100,000 square feet of pending vacancy in 2019, the project’s first ever, Swift is planning to complete a significant renovation of the campus, including the central plaza with shared areas for collaboration and a full lobby revamp at the 2200 building.
PHOENIX—The Boardwalk at Andersen Springs, located at the southeast corner of Dobson and Ray Roads in Chandler, has traded hands between West Valley Properties and Westwood Financial for $26 million. Ryan Schubert and Michael Hackett of Cushman & Wakefield Phoenix represented the seller. The Boardwalk at Andersen Springs is anchored by the original Sprouts Farmers Market, which opened in 2005 and currently undergoing a $1 million renovation. The 89,804-square-foot neighborhood center and is currently 97% occupied by a variety of tenants, including Pita Jungle, State Farm, Pet Planet and Desert Financial Credit Union.
PHOENIX—Institutional Property Advisors’ Steve Gebing and Cliff David have closed six multifamily property transactions totaling $300 million and 1,557 units between April 12 and May 4 in the Phoenix metropolitan statistical area. The properties sold include: The Boulevard, 294 units, Phoenix, $48.2 million; The Met at Fashion Center, 303 units, Chandler, $64.8 million; Escape, 244 units, Phoenix, $58.35 million; Vue Park West, 260 units, Peoria, $43.55 million; Alta Steelyard Lofts, 301 units, Chandler, $69.25 million; Riverview Place, 155 units, Mesa, $14.5 million.
SOLANA BEACH, CA—Meridian Capital Group has arranged $105 million in financing to refinance an office building in Los Angeles, CA, on behalf of an affiliate of J.H. Snyder Company. The 10-year loan, provided by a life insurance company, features a fixed rate below 4% and full-term interest-only payments. Meridian senior managing director, Seth Grossman, and VP, Steve Edelstein and Jackie Tran negotiated this transaction. Located at 5757 Wilshire Boulevard, the SAG-AFTRA Plaza in Los Angeles, CA caters to a variety of international entertainment, media, cultural, and communication-oriented industries, including its largest tenant and namesake, the Screen Actors Guild-American Federation of Television and Radio Artists. The 11-story, 548,000 square foot office property also features 28,000 square feet of street-front restaurant and retail space and is one of the most prominent buildings along Miracle Mile, a stretch of Wilshire Boulevard that is home to the La Brea Tar Pits pavilion, the Los Angeles County Museum of Art, The Petersen Automotive Museum, A+D Museum, among others, creating “Museum Row” on the Miracle Mile. Additionally, the Academy Museum of Motion Pictures, which is slated to open in 2019 as the world’s premier institution dedicated to the art and science of movies, will be located just a few blocks away from the property. An affiliate of J.H. Snyder Company, which is headquartered in the building, has owned 5757 Wilshire Boulevard for more than 40 years.
PHOENIX—San Diego-based Parallel Capital Partners has acquired full interest in Two Arizona Center, one of two class-A commercial office towers within the Arizona Center, downtown Phoenix’s original metropolitan entertainment destination. The 20-story property was acquired from Angelo, Gordon and Co. in an off-market transaction for an undisclosed price. The more than 450,000 square foot tower is 100% leased to utility giant, Arizona Public Service Company (APS), Arizona’s largest and longest serving electric company. Both Angelo Gordon and Parallel represented themselves in the transaction. Situated on a one-acre parcel at 400 N. 5th St. within the 16-acre Arizona Center project, located at 3rd and Van Buren Streets – the tower was originally constructed in 1989 and is located in the heart of Phoenix’s growing central business district. APS has invested over $46 million in recent years to modernize and upgrade the building. In a joint venture Parallel Capital Partners and Angelo, Gordon & Co. paid $126 million in late 2015 for the Arizona Center complex with entitlements for an additional 3.9 million square feet of improvements. A comprehensive renovation of the Arizona Center began in 2017, and Marriott recently revealed plans for the addition of a 200-room AC Hotel. Last month, Parallel announced it had sold a parcel within the Arizona Center, which will soon house Palm Court Tower, a $100 million, 30-story luxury residential tower.
BUILDING BLOCKS
LOS ANGELES—A venture led by NR IV has begun construction on the second phase of Water’s Edge in Playa Vista, CA, a state-of-the-art, 190,000-square-foot office building that will complete development of the 6.5-acre site. Other partners in the venture include GIC, Singapore’s sovereign wealth fund, and Newport Beach, CA-based Marshall Property & Development. The new $80 million building will be known as WE3 and is being built on the eastern edge of the Water’s Edge campus, on what was formerly a surface parking lot and soccer field. Characterized by its “floating” perforated skin surrounding a glass curtain wall, WE3 will feature large floor plates up to 40,000 square feet, 15’ ceiling heights, floor-to-ceiling windows, private balconies, and outdoor public meeting spaces, including a sky garden. The building will feature the latest variable refrigerant flow technology for heating and cooling. New subterranean, grade and above-grade parking will add 661 parking stalls, improving the parking ratio for the entire campus from 2.9 to 3.7 per 1,000 square feet of building area. Construction of WE3 is expected to be completed in the 2nd quarter of 2020. Thereafter, Water’s Edge will feature approximately 450,000 square feet of class-A office space in a highly sought-after and supply-constrained market.
NEWPORT BEACH, CA—CapRock Partners has acquired approximately 23 acres to build a 425,000-square-foot-industrial business park in Norco, California. The property, strategically positioned in the Inland Empire West submarket, bolsters CapRock’s development pipeline and will serve an overflowing demand for commercial delivery to Orange County and the proximate Norco and Corona communities. The latest acquisition by CapRock Partners is consistent with the firm’s last-mile logistics strategy, delivering three regional properties comprised of eight industrial buildings for a total of nearly 900,000 square feet. The properties include: Temescal Valley Commerce Center in Corona, which will deliver 140,000 square feet in Summer 2018 in a single building; Serrano Business Park in Jurupa Valley, which will deliver 327,000 square feet in Q1 2019 in three buildings; Norco Business Park in Norco, which will deliver 425,000 square feet in Q2 2019 in four buildings. The complementary properties will offer different building sizes and regional transportation focuses, and will cater to tenants from San Gabriel Valley, Orange County and the Inland Empire.
PHOENIX—Fenix Development will build 265,000 square feet of class-A office and 44,000 square feet of high-end restaurant and retail space slated for Phase I of the 1.9 million square-foot The Watermark | Tempe mixed-use development, on spec. Fenix Development is scheduled to deliver Phase I of the project in summer 2019. Two levels of subterranean parking and the site’s utilities are already in place. Once completed, the 15-story office building will feature eight levels of premium office space above a seven-level podium-style parking structure. An eighth-floor Sky Lobby elevated 90 feet above grade level will be outfitted with a Sky Terrace, Sky Balcony and high-end tenant amenities, including a 40-person conference center, lounge, game room and fitness center with a cycle studio and showers. With floor-to-ceiling wrap around glass, all floors will boast unobstructed views of Tempe Town Lake, Marina Heights and surrounding mountains. The building will also include 18,250 square feet of ground-level restaurant and retail space surrounding a family-friendly splash pad feature. A second building that is also set to deliver summer 2019, will have an additional 25,565 square feet of street-level restaurant and retail space and a seven-level parking garage. An elevated Sky Walk will connect the two buildings, offering easy accessibility from the adjacent parking structure to the eighth floor Sky Lobby. Phase I will also include 360 luxury apartment units by Trinsic Residential. CBRE’s Brad Anderson, Michael Strittmatter and Lauren Anderson are exclusively marketing the office space for lease on behalf of Fenix Development. Cushman & Wakefield’s Brent Mallonee and Golden St. John are exclusively marketing the retail and restaurant space.
NEWPORT BEACH, CA—H. Hendy Associates has started construction of a new Southern California office and fabrication facility for Southland Industries, one of the country’s largest mechanical, electrical and plumbing (MEP) systems firms. Located at 12131 Western Avenue, the Garden Grove, California facility will enhance Southland’s connected solutions across the entire building life cycle, including engineering, construction, maintenance and energy services. With the goal of maximizing the way in which space is used within Southland’s facility, the Hendy Science and Technology Studio worked closely with Southland to identify pain points and develop a floorplan that would not only alleviate those concerns, but also create an environment that would support company growth. Southland’s 160,000-square-foot fabrication facility will include space for newer and larger equipment, an updated layout that creates synergy among processes and teams and a research and development facility that will advance the company’s mission of supplying next-generation products and equipment configurations. To celebrate Southland’s commitment to its people, Hendy will incorporate employee-centric elements into the space, including a break room, centrally located restrooms, showers and a “fun zone” featuring arcade games and lounge space.