Middle Market Digest: This Week in Southwest

LOS ANGELES—As more 3Q16 reports are released from various sources, secondary markets are showing signs of continued steady growth. The Phoenix, Las Vegas and Southwest Riverside markets had strong quarters with decreasing vacancy rates and healthy absorption. Experts forecast this steady growth with continue through the next year. As a result, investment transactions in these markets are also increasing. See below for the stats and major transactions in the Southwest.

BY THE NUMBERS

PHOENIX—The Phoenix office market had strong third quarter, with 930,000 square feet of absorption. This marks the 13th consecutive quarter for positive net absorption in the city. Vacancy rates decreased as well throughout all classes of space has decreased to 16.3% with some submarkets. Rental rates are on the rise, increasing more than 5% in the past 12 months to $23.22 per square foot.

(Colliers International)

LOS ANGELES—Go Banking Rates has surveyed 61 of the 100 most populate cities in the US to name the best and worth cities for real estate investment. The firm found that Orlando, FL, Tampa, FL, and Denver, CO, are among the best investment markets, while Anchorage, AK, Pittsburg, and Chicago are the worst. Go Banking Rate analyzed the markets based on employment growth, population growth, increase in home values and years to pay off property.

(Go Banking Rate)

PHOENIX—According to a 3Q market report from Cushman & Wakefield, the Phoenix industrial market has a 9.3% vacancy rate, an overall decrease for the market from the same time last year, with only two of 17 submarkets turning out increases. Distribution space recorded the greatest net gain out of all product types, posting nearly 1.3 million square feet in positive net absorption for the quarter. This accounts for 56% of the total net absorption for Q3, and marks the seventh straight quarter in which distribution space has topped the charts.

(Cushman & Wakefield)

TEMECULA, CA—The retail market in Southwest Riverside County had a strong 3Q16. The vacancy rate fell to 7.5 and absorption was up with 277,000 square feet of absorption, while rental rates were flat at $1.44 per square foot. The market also has 250,000 square feet of retail properties under development. While this was a strong quarter, the market still hasn't returned to prior peak conditions.

(Westmar Commercial Real Estate)

LAS VEGAS—According to Xceligent and the Commercial Alliance Las Vegas, the office market in Southern Nevada showed steady progress during the third quarter of 2016. The market had an overall net absorption of 473,251 square feet in 3Q16. Office vacancy rates have decreased from 18% to 16.1%. Class-A office space has been holding steady, with a vacancy rate just under 20%,while class-B office space improved by 2.%, and class-C space has seen its vacancy rate fall by 0.7% in the last year. Rents are increasing, with the weighted average monthly rental rate now at $1.83 per square foot and increasing by $0.2 per square foot during each quarter of 2016.

(Xceligent)

NEWS & NOTABLES

NEWPORT BEACH, CA—Newmeyer & Dillion LLP has elected co-founding partner Tom Newmeyer as director at large to the 2017 Orange County Bar Association Board of Directors. His three-year term beginning January 2017 and will be installed during the OCBA Judges' Night & Annual Meeting in January along with the 2017 Officers and other Board members.

SAN DIEGO—OliverMcMillan has hired of senior real estate manager and industry veteran Michael O'Hanlon as the firm's new COO. In the role, he will be responsible for implementing the company's strategic plan, managing all aspects of the OliverMcMillan organization and furthering the company's growth. The firm also promoted Jeff Zeigler to senior managing director of Asset Management & Leasing and Eric Buchanan to join the executive committee and lead the firm's development activities as senior managing director of development.

IRVINE, CA—WNC chairman Will Cooper Sr. and CEO Will Cooper Jr. presented nine members of Congress from both the Republican and Democratic parties with the Defender of Housing award on behalf of the National Association of Home Builders' BUILD-PAC. The recipients include Representatives Ken Calvert (R-CA); Paul Cook (R-CA); Duncan Hunter (R-CA); Darrell Issa (R-CA); Ed Royce (R-CA), chairman of the House Foreign Affairs Committee and senior member of the Financial Services Committee; Linda Sanchez (D-CA); Norma Torres (D-CA); Maxine Waters (D-CA), ranking member of the Financial Services Committee; and Mimi Walters (R-CA).

LOS ANGELES—NAI Capital has hired Joseph Faulkner as executive managing director to oversee its Commerce office and lead efforts to build NAI Capital's presence in Downtown Los Angeles. Faulkner brings with him 30 years of experience in providing tenant representation and corporate advisory services. He joins the firm from CRESA, where he served as SVP and focused on tenant representation.

LADERA RANCH, CA—Money360 has hired Ken Gaitan, a commercial real estate finance veteran, as regional director of the company's Western region. In his new role, Gaitan will be responsible for enhancing the growth of the Western region's origination pipeline, maintaining and building relationships within the broker and borrower community, and growing and sustaining Money360's brand among key audiences. He brings 30 years of experience to the firm, and formally served in senior production/management roles for noteworthy institutional firms such as Bank of America, Merrill Lynch, CBRE and Newmark Grubb Knight Frank, as well as emerging companies such as Thorofare Capital, PennyMac CREF and Johnson Capital Express.

SAN DIEGO—CBRE has hired Marc Frederick as VP to focus on the sale of owner/user and investment properties in San Diego's downtown and uptown submarkets. Joining the firm from Colliers International, he brings 12 years of experience to the firm and has brokered more than 200 sale and lease transactions valued at more than $130 million.

SEATTLE—Kidder Matthews has named Bill Frame as president, responsible for all operations in its 17 offices in 5 states on the West Coast. The move is the result of the firm's 2 years of succession planning for a strong leadership team who will keep the firm independent for the long term vs. fold into a publicly held company, like many of its regional competitors have done in recent years. He brings 26 years of experience to the firm, and joins from Cushman & Wakefield, where he spent the last 26 years.

DEALTRACKER

LAS VEGAS—Tristar Capital and RFR Holding have sold Miracle Mile Shops at the Planet Hollywood Resort & Casino to Institutional Mall Investors LLC, a co-investment venture co-owned by Miller Capital Advisory Inc. and CalPERS. The property is a 501,522-square-foot retail destination mall with street-level retail on the Las Vegas Strip. The sales price was not disclosed. HFF represented the seller in the transaction.

LOS ANGELES—Grameracy Property Trust has acquired a 208,167 square foot industrial project in Santa Fe Springs for $27 million from Double Run. The property is fully leased to Votaw Precision Technologies. It has a prime infill location 20 minutes from the ports and access to both the 5 and 605 freeways. Jeff Chiate, Jeffrey Cole, Ed Hernandez and Mike Adey of Cushman & Wakefield's National Industrial Advisory Group represented the seller in the transaction.

ONTARIO, CA—A private investor has purchased a mixed-use property in Ontario, CA, for $23.95 million from Upper Indicator LLC and Vineyard Village Group LLC. The retail and service center is located at 2403 – 2455 S. Vineyard Avenue, and is occupied by a Pep Boys, Carl's Jr, a DaVita Dialysis Center, Flame Broiler, Subway, Tarbell Realty, Brandon's Diner and a Check 'n Go. CBRE's Alan Krueger represented the buyer in the transaction.

SALT LAKE CITY, UT—The Kissel Co. has purchased the Sweet Candy Building from Olafson for an undisclosed price. The property was built in 1911 and 1922, and was upgraded in 2015. It has 97,000 square feet of creative office space for tech tenants and is currently 100% occupied. CBRE's Marty Plunkett and Craig Thomas represented Olafson in the transaction.

SALT LAKE CITY—Extra Space Storage has completed $1.15 billion in unsecured bank financing through a senior unsecured credit facility consisting of a $500.0 million senior unsecured revolving credit facility, a $430.0 million senior unsecured five-year term loan and a $220.0 million senior unsecured seven-year term loan, of which $300 million of the unsecured five-year term loan was drawn on Oct. 14, 2016. The credit agreement provides the Company an option to increase capacity by an additional $350.0 million for a total of $1.5 billion. Pricing at closing will be an initial interest rate of LIBOR + 1.40% for the senior unsecured revolving credit facility, LIBOR + 1.35% for the senior unsecured five-year term loan and LIBOR + 1.70% for the senior unsecured seven-year term loan.

LAS VEGAS—The Praedium Group has sold South Blvd, a luxury multifamily asset in Las Vegas, to Toronto-based Starlight Investments Ltd. for $53.6 million. The 320-unit, 29-story property is just 15 minutes from the Las Vegas Strip and benefits from its close proximity to the largest inventory of office properties in the Las Vegas metro. It features one-, two- and three-bedroom options that feature in-unit amenities such as granite countertops, full-size washer and dryer sets, dark wood cabinetry, stainless steel kitchen appliances and private entries. JLL EVP John Cunningham and SVP Charles Steele led the JLL team on the sale.

RANCHO CUCAMONGA, CA—Inland Empire Health has purchased Empire Lakes Corporate Center for $44.3 million from Utah State Retirement Fund. The 241,292-square-foot class-A office building is located at 9500 Cleveland Avenue in Rancho Cucamonga. IEHP also owns the neighboring property, an approximately 400,000-square-foot building situated at 10801 Sixth Street. In 2013, the buyer consolidated its operations from multiple locations into the single building, which it purchased the following year. The transaction provides for additional occupancy, parking and approximately 20 acres of land.

SHERMAN OAKS—Meridian Capital Group has arranged $18.5 million in financing to recapitalize a retail property in Sherman Oaks, CA, on behalf of repeat client the Festival Cos. The two-year loan, provided by a regional bank, features two years of low rate interest-only payments and a one-year extension option. Meridian managing director Seth Grossman and analyst Andy Strauss, who are both based in the company's Carlsbad, CA office, negotiated the deal.

BUILDING BLOCKS

MESA, AZ—Community Development Partners has broken ground on El Rancho II, a 47-unit project that will serve low-income households earning between 40-60% of the area median income, with a preference for families with children. The project features 26 two-bed, 11 three-bed, and 10 four-bed units, with sizes ranging from 942 to 1,988 square feet. It is partially financed by the sale of 9% Low Income Housing Tax Credits awarded by Arizona Department of Housing in 2015., with Alliant Capital serving as tax creditor.

GILBERT, AZ—MedProperties Group has announced plans to build its third property and first ground-up development in Arizona. Mercy Medical West, which will break ground in the first half of 2017, is a 40,000-square-foot, two-story medical office building located on the corner of Mercy Road and Rome Street across from Dignity's Mercy Gilbert Medical Center. It will include a surgical center and will be available to both single and multi-tenant users.

LOS ANGELES—As more 3Q16 reports are released from various sources, secondary markets are showing signs of continued steady growth. The Phoenix, Las Vegas and Southwest Riverside markets had strong quarters with decreasing vacancy rates and healthy absorption. Experts forecast this steady growth with continue through the next year. As a result, investment transactions in these markets are also increasing. See below for the stats and major transactions in the Southwest.

BY THE NUMBERS

PHOENIX—The Phoenix office market had strong third quarter, with 930,000 square feet of absorption. This marks the 13th consecutive quarter for positive net absorption in the city. Vacancy rates decreased as well throughout all classes of space has decreased to 16.3% with some submarkets. Rental rates are on the rise, increasing more than 5% in the past 12 months to $23.22 per square foot.

(Colliers International)

LOS ANGELES—Go Banking Rates has surveyed 61 of the 100 most populate cities in the US to name the best and worth cities for real estate investment. The firm found that Orlando, FL, Tampa, FL, and Denver, CO, are among the best investment markets, while Anchorage, AK, Pittsburg, and Chicago are the worst. Go Banking Rate analyzed the markets based on employment growth, population growth, increase in home values and years to pay off property.

(Go Banking Rate)

PHOENIX—According to a 3Q market report from Cushman & Wakefield, the Phoenix industrial market has a 9.3% vacancy rate, an overall decrease for the market from the same time last year, with only two of 17 submarkets turning out increases. Distribution space recorded the greatest net gain out of all product types, posting nearly 1.3 million square feet in positive net absorption for the quarter. This accounts for 56% of the total net absorption for Q3, and marks the seventh straight quarter in which distribution space has topped the charts.

(Cushman & Wakefield)

TEMECULA, CA—The retail market in Southwest Riverside County had a strong 3Q16. The vacancy rate fell to 7.5 and absorption was up with 277,000 square feet of absorption, while rental rates were flat at $1.44 per square foot. The market also has 250,000 square feet of retail properties under development. While this was a strong quarter, the market still hasn't returned to prior peak conditions.

(Westmar Commercial Real Estate)

LAS VEGAS—According to Xceligent and the Commercial Alliance Las Vegas, the office market in Southern Nevada showed steady progress during the third quarter of 2016. The market had an overall net absorption of 473,251 square feet in 3Q16. Office vacancy rates have decreased from 18% to 16.1%. Class-A office space has been holding steady, with a vacancy rate just under 20%,while class-B office space improved by 2.%, and class-C space has seen its vacancy rate fall by 0.7% in the last year. Rents are increasing, with the weighted average monthly rental rate now at $1.83 per square foot and increasing by $0.2 per square foot during each quarter of 2016.

(Xceligent)

NEWS & NOTABLES

NEWPORT BEACH, CA—Newmeyer & Dillion LLP has elected co-founding partner Tom Newmeyer as director at large to the 2017 Orange County Bar Association Board of Directors. His three-year term beginning January 2017 and will be installed during the OCBA Judges' Night & Annual Meeting in January along with the 2017 Officers and other Board members.

SAN DIEGO—OliverMcMillan has hired of senior real estate manager and industry veteran Michael O'Hanlon as the firm's new COO. In the role, he will be responsible for implementing the company's strategic plan, managing all aspects of the OliverMcMillan organization and furthering the company's growth. The firm also promoted Jeff Zeigler to senior managing director of Asset Management & Leasing and Eric Buchanan to join the executive committee and lead the firm's development activities as senior managing director of development.

IRVINE, CA—WNC chairman Will Cooper Sr. and CEO Will Cooper Jr. presented nine members of Congress from both the Republican and Democratic parties with the Defender of Housing award on behalf of the National Association of Home Builders' BUILD-PAC. The recipients include Representatives Ken Calvert (R-CA); Paul Cook (R-CA); Duncan Hunter (R-CA); Darrell Issa (R-CA); Ed Royce (R-CA), chairman of the House Foreign Affairs Committee and senior member of the Financial Services Committee; Linda Sanchez (D-CA); Norma Torres (D-CA); Maxine Waters (D-CA), ranking member of the Financial Services Committee; and Mimi Walters (R-CA).

LOS ANGELES—NAI Capital has hired Joseph Faulkner as executive managing director to oversee its Commerce office and lead efforts to build NAI Capital's presence in Downtown Los Angeles. Faulkner brings with him 30 years of experience in providing tenant representation and corporate advisory services. He joins the firm from CRESA, where he served as SVP and focused on tenant representation.

LADERA RANCH, CA—Money360 has hired Ken Gaitan, a commercial real estate finance veteran, as regional director of the company's Western region. In his new role, Gaitan will be responsible for enhancing the growth of the Western region's origination pipeline, maintaining and building relationships within the broker and borrower community, and growing and sustaining Money360's brand among key audiences. He brings 30 years of experience to the firm, and formally served in senior production/management roles for noteworthy institutional firms such as Bank of America , Merrill Lynch , CBRE and Newmark Grubb Knight Frank , as well as emerging companies such as Thorofare Capital , PennyMac CREF and Johnson Capital Express .

SAN DIEGO—CBRE has hired Marc Frederick as VP to focus on the sale of owner/user and investment properties in San Diego's downtown and uptown submarkets. Joining the firm from Colliers International, he brings 12 years of experience to the firm and has brokered more than 200 sale and lease transactions valued at more than $130 million.

SEATTLE—Kidder Matthews has named Bill Frame as president, responsible for all operations in its 17 offices in 5 states on the West Coast. The move is the result of the firm's 2 years of succession planning for a strong leadership team who will keep the firm independent for the long term vs. fold into a publicly held company, like many of its regional competitors have done in recent years. He brings 26 years of experience to the firm, and joins from Cushman & Wakefield, where he spent the last 26 years.

DEALTRACKER

LAS VEGAS—Tristar Capital and RFR Holding have sold Miracle Mile Shops at the Planet Hollywood Resort & Casino to Institutional Mall Investors LLC, a co-investment venture co-owned by Miller Capital Advisory Inc. and CalPERS. The property is a 501,522-square-foot retail destination mall with street-level retail on the Las Vegas Strip. The sales price was not disclosed. HFF represented the seller in the transaction.

LOS ANGELES—Grameracy Property Trust has acquired a 208,167 square foot industrial project in Santa Fe Springs for $27 million from Double Run. The property is fully leased to Votaw Precision Technologies. It has a prime infill location 20 minutes from the ports and access to both the 5 and 605 freeways. Jeff Chiate, Jeffrey Cole, Ed Hernandez and Mike Adey of Cushman & Wakefield's National Industrial Advisory Group represented the seller in the transaction.

ONTARIO, CA—A private investor has purchased a mixed-use property in Ontario, CA, for $23.95 million from Upper Indicator LLC and Vineyard Village Group LLC. The retail and service center is located at 2403 – 2455 S. Vineyard Avenue, and is occupied by a Pep Boys, Carl's Jr, a DaVita Dialysis Center, Flame Broiler, Subway, Tarbell Realty, Brandon's Diner and a Check 'n Go. CBRE's Alan Krueger represented the buyer in the transaction.

SALT LAKE CITY, UT—The Kissel Co. has purchased the Sweet Candy Building from Olafson for an undisclosed price. The property was built in 1911 and 1922, and was upgraded in 2015. It has 97,000 square feet of creative office space for tech tenants and is currently 100% occupied. CBRE's Marty Plunkett and Craig Thomas represented Olafson in the transaction.

SALT LAKE CITY—Extra Space Storage has completed $1.15 billion in unsecured bank financing through a senior unsecured credit facility consisting of a $500.0 million senior unsecured revolving credit facility, a $430.0 million senior unsecured five-year term loan and a $220.0 million senior unsecured seven-year term loan, of which $300 million of the unsecured five-year term loan was drawn on Oct. 14, 2016. The credit agreement provides the Company an option to increase capacity by an additional $350.0 million for a total of $1.5 billion. Pricing at closing will be an initial interest rate of LIBOR + 1.40% for the senior unsecured revolving credit facility, LIBOR + 1.35% for the senior unsecured five-year term loan and LIBOR + 1.70% for the senior unsecured seven-year term loan.

LAS VEGAS—The Praedium Group has sold South Blvd, a luxury multifamily asset in Las Vegas, to Toronto-based Starlight Investments Ltd. for $53.6 million. The 320-unit, 29-story property is just 15 minutes from the Las Vegas Strip and benefits from its close proximity to the largest inventory of office properties in the Las Vegas metro. It features one-, two- and three-bedroom options that feature in-unit amenities such as granite countertops, full-size washer and dryer sets, dark wood cabinetry, stainless steel kitchen appliances and private entries. JLL EVP John Cunningham and SVP Charles Steele led the JLL team on the sale.

RANCHO CUCAMONGA, CA—Inland Empire Health has purchased Empire Lakes Corporate Center for $44.3 million from Utah State Retirement Fund. The 241,292-square-foot class-A office building is located at 9500 Cleveland Avenue in Rancho Cucamonga. IEHP also owns the neighboring property, an approximately 400,000-square-foot building situated at 10801 Sixth Street. In 2013, the buyer consolidated its operations from multiple locations into the single building, which it purchased the following year. The transaction provides for additional occupancy, parking and approximately 20 acres of land.

SHERMAN OAKS—Meridian Capital Group has arranged $18.5 million in financing to recapitalize a retail property in Sherman Oaks, CA, on behalf of repeat client the Festival Cos. The two-year loan, provided by a regional bank, features two years of low rate interest-only payments and a one-year extension option. Meridian managing director Seth Grossman and analyst Andy Strauss, who are both based in the company's Carlsbad, CA office, negotiated the deal.

BUILDING BLOCKS

MESA, AZ—Community Development Partners has broken ground on El Rancho II, a 47-unit project that will serve low-income households earning between 40-60% of the area median income, with a preference for families with children. The project features 26 two-bed, 11 three-bed, and 10 four-bed units, with sizes ranging from 942 to 1,988 square feet. It is partially financed by the sale of 9% Low Income Housing Tax Credits awarded by Arizona Department of Housing in 2015., with Alliant Capital serving as tax creditor.

GILBERT, AZ—MedProperties Group has announced plans to build its third property and first ground-up development in Arizona. Mercy Medical West, which will break ground in the first half of 2017, is a 40,000-square-foot, two-story medical office building located on the corner of Mercy Road and Rome Street across from Dignity's Mercy Gilbert Medical Center. It will include a surgical center and will be available to both single and multi-tenant users.