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
TUSCON—Sales of multifamily developments in Tucson spiked during first
quarter of 2018, marking the strongest first quarter performance in more than a decade. This was the most remarkable shift in the city’s multifamily marketplace during 2018, as other factors remained steady. The number of multifamily properties sold during the first quarter of 2018 was more than double the total of fourth quarter 2017 sales and up 21% from first quarter 2017 levels. The median price for properties sold in first quarter fell 12% from the median 2017 price. The market essentially gave back the 12% gained from 2016 to 2017. The bulk of transactions fell in the $1 million to $5 million-price range. Transactions in this price range tend to be interest rate sensitive. Cap rates inched higher during first quarter, following the trend in the 10- year treasury bond. The average cap rate in these first quarter sales was approximately 6%, or 30 basis points higher than the 2017 average. Vacancy ticked up slightly during the first three months of the year but is flat year over year. Vacancy rose 20 basis points during first quarter, reaching 6.5%. Vacancy in Tucson has floated between 6.3 and 6.8% since the start of 2016. Asking rents have risen 6.1% year over year, ending the first quarter at $735 per month. This marks the 11th consecutive quarter of rent increases for the market. Some of the strongest gains have been recorded in the class-C segment as vacancy tightened and limited the affordable options in the market. Above-average gains have been posted in the northwest portion of the metro area. For example, asking rents in the Catalina Foothills submarket have spiked 10 percent to $804 per month, while the Northwest Tucson area has recorded an 8.2% annual gain to $838 per month.
(SOURCE: COLLIERS INTERNATIONAL)
NEW & NOTABLE
LOS ANGELES—JLL Capital Markets has hired Anson Snyder as VP. Snyder brings over 22 years of commercial real estate experience where he is focused on providing financing solutions for debt and equity for multifamily and healthcare properties. Anson has a specialization in construction, affordable housing, in-fill development, and complex structured transactions. He is a direct lender to Fannie Mae, Freddie Mac, and HUD/FHA. Snyder comes to JLL from a global asset management firm, originating agency and insurance loans. Previously, he worked in the real estate group for a leading bank providing construction, revolving lines of credit, and syndicated credits for office, industrial, retail, apartments, and single family.
IRVINE, CA—Cox, Castle & Nicholson has hired Sean Matsler as a land use partner. Matsler brings 15 years of experience securing entitlements for myriad real estate clients to bolster the firm’s robust land use practice, a group that earned the 2018 National Tier 1 Law Firm of the Year for Land Use and Zoning Law in the 2018 U.S. News & World Report and Best Lawyers “Best Law Firms” rankings. Matsler’s practice focuses on securing entitlements for residential, commercial, industrial and institutional real estate development projects. He advises clients on some of the country’s most challenging real estate regulations such as the California Environmental Quality Act (CEQA), California Coastal Act and local planning and zoning regulations. Recent and ongoing projects under Matsler’s strategic legal guidance include four large residential and mixed-use projects in Newport Beach; the revitalization of Dana Point Harbor; an 80-unit residential project in Yorba Linda; a 250-unit infill multifamily development in Santa Ana; a 100-unit senior housing project in North Tustin and a 3 million-square-foot industrial, retail and office complex in Eastvale.
DEALTRACKER PHOENIX—Oxygen Hospitality Group has acquired The Ivy Palm Resort & Spa in Palm Springs, California. The four-building, two-story, 100-room independent, boutique hotel is the first acquisition of Arizona-based Oxygen Hospitality, a real estate investment and management company looking to grow a portfolio of branded and independent hotels in the Sun Belt and other U.S. destinations. Following minor property renovations with extensive asset management restructuring, Oxygen Hospitality will implement a second phase redevelopment plan to transform the property into a hip, tech-forward boutique hotel that complements Palm Springs. The Ivy Palm Resort & Spa, located at 2000 N. Palm Canyon Drive, is situated conveniently at the north end of the city’s downtown. The hotel will help fulfill the strong demand for exceptional accommodations for travelers visiting the Southern California desert oasis.
MESA, AZ—MoreSpace Mesa, a self-storage facility located in Mesa, Arizona, has traded hands for $7.3 million. Marcus and Millichap’s Michael A. Mele and Luke Elliott in Tampa and Devin Beasley in Phoenix negotiated the deal. Located at 4550 East Southern Avenue in Mesa, Arizona, the 57,475-NRSF facility has excellent curbside appeal near the Southern Avenue/Greenfield Road intersection with a paramount balance of residential and retail surroundings. The 722-unit asset most recently expanded in December 2017 to match the rapid population increase of the Phoenix-Mesa-Scottsdale, Arizona Metropolitan Statistical Area. The facility has additional room for further expansion with the continued population growth in Mesa.
TORRANCE, CA—The Klabin Company/CORFAC International has negotiated a lease on behalf of Crown Associates Realty for its industrial building at 19119 S. Reyes Avenue in Rancho Dominguez. The Klabin Company’s SVP Matthew Stringfellow, SIOR, along with his colleagues Courtney Bell and Tyler Rollema, represented Crown Associates Realty, Inc. in the seven-year lease transaction for 116,100 square feet of space and valued at more than $10 million. Casey Mungo of Daum Commercial represented the tenant, Maxam Tire North America, a leading international tire manufacturer. Maxam Tire North America Inc. will use the fully refurbished industrial space as a key distribution warehouse to support its growing dealer network throughout the U.S., specifically for its OTR and industrial tire lines. The company is a subsidiary of Maxam Tire International of Birmingham, U.K. and has been active in the U.S. market since 2012.
SAN DIEGO—A partnership between Tower 16 Capital Partners and Henley USA purchased a 228-unit class-B property, which was acquired off-market from the seller. This project represents the first of several acquisitions planned for this year in the Las Vegas market. Tower 16 plans an extensive renovation of the property formerly known as Winsome West Apartments, including rebranding the property to Altura on Duneville. Tower 16’s business model is to purchase under-performing properties in high-demand markets and modernize them with a more contemporary look, updated amenities and professional management. Built in 1987, the property features 25 buildings with one- and two-bedroom units. Planned capital improvements include a completely refurbished clubhouse, a 24-hour fitness center, new laundry equipment and enhanced common spaces, including the lobby and pool. Apartment interiors will also be upgraded with contemporary finishes and the latest in residential technology. The partnership also will bring in an institutional quality property management team to improve operations and services for renters.
LOS ANGELES—The Ratkovich Co. has signed a series of new leases at The Alhambra, a reimagined 40-acre mixed-use urban community located in the City of Alhambra. The new activity includes three expansions by USC Keck School of Medicine, one new lease with the County of Los Angeles Health Services, and two new lease commencements with the County of Los Angeles Parks and Recreation, and Health Services and Public Health, for a total of approximately 221,100 square feet. Other new leases include Pearson Vue, a global leader in computer-based testing, and California Institute of Advanced Management (CIAM), a nonprofit graduate university, for a total of approximately 10,390 square feet.
LAS VEGAS—Montecito Pointe, a 336-unit luxury apartment community in northwest Las Vegas, has traded hands for $59.25 million. Managing Directors John P. Cunningham and Charles Steele of JLL handled the sale on behalf of the seller, Irvine, California-based The Bascom Group, LLC. The buyer was RK Properties, a real estate investment firm based in Long Beach, California. Montecito Pointe was completed in 2007 and provided the buyer with the opportunity to add further value by completing a renovation program initiated by the seller. The community has a pool and fitness center, as well as a children’s play area and pet exercise park. The average unit size is 981 square feet and the property sits on more than 13.6 acres of land at 9745 Grand Teton Dr. in a area, which currently has very limited new multifamily construction.
LOS ANGELES—CIM has signed a long-term lease with Serendipity Labs Coworking for 23,000 square feet at CityNational2Cal, its 1.37 million square foot office building with 44,000 square feet of retail space in the Bunker Hill District of downtown Los Angeles. Serendipity Labs Coworking will occupy the entire 18th floor and also offer an innovation center and outdoor event space on the plaza level of the 52-story Class-A building located at 350 S. Grand Avenue. The property is in close proximity to many popular destinations such as the Music Center with the Walt Disney Concert Hall, The Broad, the Museum of Contemporary Art, and Grand Park.
YUMA, AZ—Big Curve Center, a 128,129-square-foot mixed-use retail and medical-anchored community center in Yuma, Arizona, has traded hands for $25.8 million with new acquisition financing available at 4.8%, interest only. Ryan Sarbinoff, VP and regional manager of Marcus & Millichap’s Phoenix office is the firm’s broker of record in Arizona. Since its opening in 1981, Big Curve Center has been improved and enhanced. Situated 1.5 miles from Yuma International Airport and Marine Corps Air Station Yuma (MCAS Yuma), the property has approximately 2,250 feet of frontage along Business Loop Interstate 8. There are more than 58,600 households with an average annual household income of approximately $57,700 within a 30-minute drive. Major employers in Yuma include MCAS Yuma, U.S. Army Yuma Proving Ground, the Yuma Regional Medical Center, and the Yuma School District.
PHOENIX—Regency Park, a 104-unit garden-style apartment community located in the North Central Phoenix submarket at 6333 N. 12th Street, has traded hands for $13.5 million. Portland-based Regency Park Associates acquired the value-add property with new financing and plans to reposition the property. Brian Smuckler, Jeff Seaman and Derek Smigiel with CBRE Phoenix represented both the buyer and the seller in the transaction. The seller is an affiliate of 3rd Ave Investments, LLC, a Phoenix-based real estate investment and management firm that specializes in the acquisition and repositioning of Arizona multifamily assets. Since inception, 3rd Ave Investments has purchased 2,333 units valued in excess of $226 million. Built in 1971, the property is situated on approximately 3.74 acres and features majority two-bedroom, two-bathroom floorplans averaging 925 square feet. Interior features include ceramic tile or faux wood-plank tile flooring, full-size electric appliances, vaulted ceilings in upstairs units and spacious walk-in closets. Other amenities include a resort-style swimming pool, pedestrian gated entry, covered parking, barbeques, laundry facility, fitness center and clubhouse. Rents in the North Central Phoenix submarket averaged $1.07 in the first quarter of 2018, increasing 4% from the same quarter in 2017. The average submarket vacancy has decreases by 40 basis points during the same period, significantly greater than the metro Phoenix average.
IRVINE, CA—Faris Lee Investments has completed the $10.15 million sale of a newly constructed single-tenant, 54,942-square-foot retail building fully occupied by Hobby Lobby. The triple-net leased asset is located within the Destination 0-Eight Power Center in Palmdale, Calif., and is co-anchored by Walmart Supercenter, Sam’s Club and Kohl’s. Senior Managing Director Jeff Conover and Managing Director Christopher DePierro of Faris Lee Investments represented the Southern California-based seller, HFC/PRP Palmdale, LLC that was also the developer for a portion of the Destination 0-Eight Power Center. In addition, Conover and DePierro represented the Southern California based buyer, Valuerock Investments Partners LLC. The transaction closed at a cap rate of 6.22%.
HOLLYWOOD, CA— Artisan Realty Advisors has acquired a 40,000-square-foot retail property in the trendy Cahuenga Corridor of Hollywood for $61 million. Lee & Associates principal Cory Stehr, who represented the sellers, Cahuenga Lofts LLC and Ivar Group LLC, in the transaction. The property, called Space 15 Twenty, is located at 1520, 1534, 1538 and 1542 N. Cahuenga Blvd. and 1535 Ivar Ave. It consists of two buildings with an open space area and a surface parking lot on a 71,000-square-foot parcel of land. The property is currently leased to six retailers including anchor Urban Outfitters, Umami Burger, Free People apparel boutique and skate shop Pharmacy Boardshop. Constructed of brick, glass and stucco, it was built in the mid-1920s and renovated in 2006-2007. The buyer, is a Santa Monica, CA-based, privately-held real estate investment company specializing in core plus, value add and opportunistic office and mixed-use investments. It is currently renovating the 478,000-square-foot Lantana Media Campus in Santa Monica, among several current projects.
PHOENIX— Galleria Palms, a 424-unit, garden-style multifamily community with value-add potential in Tempe, Arizona, has traded hands for $75.1 million. Tyler Anderson, Sean Cunningham, Asher Gunter and Matt Pesch with CBRE Multifamily Institutional Properties in Phoenix represented the seller, an institutional investor on behalf of a separate fund client. The buyer was a joint venture between TruAmerica Multifamily and funds managed by Oaktree Capital Management, L.P. Located at 1600 W. La Jolla Drive in Tempe, Galleria Palms boasts a highly visible location adjacent to U.S. 60 and I-10 in the dynamic Tempe submarket, which continues to experience unprecedented job growth. The property has a timeless low-density site plan, common area amenities including two swimming pools, a volleyball court, an indoor basketball court, barbeque areas and a children’s playground. Individual residences have nine-foot ceilings, well-appointed kitchens, full-size washer/dryers, walk-in closets and private balconies/patios.
BUILDING BLOCKS
NEWPORT BEACH, CA—The 130-room Lido House, an Autograph Collection Hotel in Newport Beach, has officially opened its doors. R.D. Olson built the property, which is located near the city’s marina, beach and retail offerings. The hotel is just a few steps away from Lido Marina Village. In addition to featuring the only rooftop bar in Newport Beach, it includes 15,000-square-feet of meeting and event space, saltwater pool with cabanas, spa, full-service restaurant and more. The Cape Cod, nautical style makes it the ultimate coastal destination for visitors and locals alike.
PHOENIX—The Premiere at Dana Park has opened in Mesa. PCS Development developed the $42 million project and selected P.B. Bell, a leader in multifamily management, as the property management firm. Located on Val Vista Drive, just off US-60, The Premiere at Dana Park offers 198 luxury apartment homes to the Mesa area. The inspiration for the common areas is a based on some of the most desirable commercial and outdoor spaces in the nation. The community hosts a plethora of amenities including a full clubhouse and common area automation, luxurious heated pool and spa with an outdoor entertainment cabana featuring gas barbecue grills and fireplace, 24-hour indoor with Crossfit studio, a playground with community park access, putting green, coffee bar, car charging station, automated self-service mail kiosks, and more. The community’s one-, two- and three-bedroom floorplans range from 459 to 1,251 square feet and feature many innovative eco-conscious, tech-forward amenities. These include Energy Star appliances, low-flow plumbing fixtures, LED lighting, dual-pane Energy Star windows, roller blinds, and solid surface countertops.