Pool Strengths for Assets' Full Potential

IRVINE, CA-Take a property owner whose expertise is misaligned with the asset it owns—and who is based across the country from said asset—and you could have a recipe for a disposition. But this doesn't have to be, Dennis Vaccaro, senior managing director for Faris Lee Investments, tells GlobeSt.com. A joint-venture partnership with a local firm whose expertise lies in properties of that type may be a smarter way to go.

Vaccaro was part of the team at Faris Lee that recently handled just such a joint-venture partnership for the fully leased Commons at Aliso Viejo Town Center in Aliso Viejo, as GlobeSt.com reported last week. The transaction was complex, but eventually solved the problem for new owner ARC, who had inherited the property when acquiring CapLease, the original owner, last year.

"The issue was that ARC—and CapLease, whom ARC purchased—is a single-tenant, net lease REIT," says Vaccaro. "In this situation, the Commons is a multi-tenant property. They chose to do a JV versus a sale, even though the property was originally put on the market for sale."

Often, as in this case, there is upside potential in a property if it were to be repositioned at some point. But repositioning a multi-tenant property from across the country was a challenge for this successful single-tenant REIT. Partnering with ValueRock Realty Partners Inc., a locally based firm with extensive expertise in positioning multi-tenant retail properties in Orange County, was a shrewd move for ARC.

"Because of the A+ nature of the real estate that we're talking about, and the fact that it has two of its leases expiring next year and a refinancing coming next year as well, this made sense," says Vaccaro. "There was a lot going on for the property in the near term, and because of that, we felt it was wise to bring in an Orange County-based developer/manager who has a proven track record of multiple redevelopments in Orange County including in Lake Forest and Mission Viejo."

Primarily, Faris Lee is a brokerage firm representing buyers and sellers, "but in some instances JV partnerships become what the parties want to do for various reasons," says Vaccaro. "In this case, the REIT was not in a position to complete what was needed—which may or may not be a redevelopment. It may be a tenant expansion or a re-tenanting. They needed something like ValueRock, who does these things every day, to look at it in order to maximize value for the asset. All parties involved are very excited about the fundamentals of the underlying real estate.