Middle Market Digest: This Week in Southwest

LOS ANGELES—The markets are primed for a strong fourth quarter. Several markets in the Southwest, including Los Angeles, Orange County, San Diego, had strong third quarter showings, along with Phoenix, which had a strong quarter in some sectors and slower performance in others. Most third quarter reports have been published, and there is a strong outlook for the end of the year. Additionally, the election this week passed major development and infrastructure measures, including the Build Better LA affordable housing development in Los Angeles. The effect of these measures on the real estate market is yet to be seen, but GlobeSt.com will continue to post updates with new expert information.

BY THE NUMBERS

LOS ANGELES—Since the 3Q12, rent in the Southern California market has grown steadily, with a 7% increase in the last 12 months alone. The rent growth is focused in Silicon Beach markets, including the Westside, Culver City, Santa Monica, Playa Vista, Marina del Rey and Venice as well as Hollywood. Much of this is because there is a broader unaffordability trend, where renters are able to afford rents at $4,000-$5,000 in rent per month but have no equity for $1,000 per square foot for home.

(Source: NGKF)

PHOENIX—The retail market in the Greater Phoenix retail market experienced a cooling effect over the summer months of third quarter with net absorption slowing and vacancy rising for the first time since 2014. However, experts anticipate a strong finish for 2016 as fourth quarter retail picks up pace. Vacancy of Metro Phoenix retail space rose from 9.4% to 9.6% during third quarter, but the vacancy rate is down 20 basis points year over year. Net absorption remained positive in the third quarter, but had declined to just 77,000 square feet compared to 320,000 square feet in the second quarter.

(Source: Collier's International)

NEWS & NOTABLES

SAN DIEGO—Randy Beckwith has joined Carrier Johnson + CULTURE as project manager. He has 20 years of experience in an array of project types and a special expertise in the healthcare sector. In this new role, Beckwith will apply his eye for distinctive, functional design to the firm's healthcare portfolio.

LOS ANGELES—Tyler Johnson has joined Thorofare Capital as associate director of credit. He will work in the firm's risk management group where he will be responsible for the loan review process from initial underwriting through closing for Thorofare's middle market loan origination platform. Johnson joins the firm from the commercial mortgage-lending group at AIG, where he served as senior associate, where he was involved in more than  $3 billion of new loan originations. In this new role, he will help add additional institutional underwriting capacity to Thorofare as we expand our business lines and successfully raise large amounts of investment capital.

LOS ANGELES—Marc Spellman has joined CBRE has SVP in the firm's advisory and transaction management group. He will be based on Los Angeles North office where they will focus on the leasing and sales of office property. He joins the firm from Lee & Associates Los Angeles North office, of which he was one of the founding member and specialized in the leasing and sales of office buildings for both occupiers and owners. In this new well, Spellman will continue to specialize in the leasing and sales of office buildings, representing both occupiers and owners, and his clients have included Kilroy Realty Corp., GE Finance, Voit Cos., Arden Realty and the County of Los Angeles.

DEALTRACKER

SAN DIEGO—Swift Real Estate Partners purchased the San Diego HP Campus, located at 16399 West Bernardo Drive in the Rancho Bernardo submarket of San Diego, from an HP Inc. The HP San Diego Campus includes seven office/R&D buildings and one class-A office building, all totaling 782,211 square feet on 67.5 acres. The purchase price was not disclosed. The property is 79% leased. It was built in 1970 and is one of few institutional-quality properties of its size in San Diego. As a result, the deal attracted significant interest from institutional investors. Investment advisors Louay Alsadek, Alex Somerville and Hunter Rowe of CBRE along with market expert Brad Black of CBRE represented the seller, while Swift Real Estate Partners represented itself.

SAN DIEGO—An investor has secured a $16.65 million loan to acquire the San Diego Business Park, a 11-building office/warehouse/flex business park, totaling approximately 208,500 square feet. The investor purchased the property with $32 million. The transaction was structured with a 5+5 term on a 25-year amortization with 3-years of interest-only and flexible prepayment options, and was secured through a national bank. James DuMars, SVP and managing director of NorthMarq Capital's Phoenix-based regional office secured the funding on behalf of the borrower.

LOS ANGELES—Rexford Industrial has acquired a multi-tenant industrial property for $13 million, located at 301-445 N. Figueroa Street, located in Wilmington submarket of the South Bay. Rexford purchased the asset with cash on hand. The property is a 133,925 square feet on 4.15 acres and is currently 63% occupied, mostly on a month-to-month basis. The fourteen dock-high units, located adjacent to the Port of Los Angeles, are expected to command premium rents after undergoing functional and cosmetic upgrades.

LOS ANGELES—Trumark Homes has sold out of SL70, a new residential development on Glendale Boulevard. The project has 70 newly built standalone homes that are meeting the demand for housing in the core infill location. The buyer pool ranged from first time homeowners to downsizing baby boomers. Each home features design-centric living, three floors of living space with rooftop terraces on most homes. There are two- and three-bedroom floor plans with up to 1,800 square feet of living space, two car garages and no HOA dues. Each home is crafted with contemporary recessed lighting, oversized windows, premium kitchen appliances and Quartz countertops. The development is situated near various Silver Lake/Echo Park entertainment, shopping, dining and recreational locations and is a short drive from major employment centers in Downtown LA, Burbank and Studio City.

PHOENIX—The owner of Seville Professional Center, an approximately 92,000-square-foot multi-tenant office building in Scottsdale, Arizona, has secured a $14.8 million loan to refinance the property. The loan was structured with a 12-month term, interest-only, and two, 12-month extension options, and was funded through a bridge lender. James DuMars, senior vice president/managing director of NorthMarq Capital's Phoenix-based regional office, and Dennis Williams, senior vice president/managing director of NorthMarq Capital's San Francisco-based regional office arranged the financing on behalf of the borrower.

LOS ANGELES—Revere Capital has funded a $21 million for Behavioral Property Partners, a New York-based investor. Behavioral Property will use the funds to acquire four existing substance abuse treatment centers in Southern California and a 35-acre property in Santa Barbara with numerous existing structures on it that will be converted to a residential treatment center. The portfolio has a total of the combined assets will have a total of 86 licensed beds. The borrower will do business in California as Beacon Recovery Partners.

BUILDING BLOCKS

SAN DIEGO—BNB Builders started renovation on the County of San Diego Housing and Community Development Services administrative offices, located at 3989 Ruffin Road in San Diego. The project is one of three recent San Diego County CM at-Risk contracts awarded to BNBuilders' San Diego office, and the firm received notice to proceed on this project in July 2016. The new 30,000-square-foot space will include highly efficient MEP systems and controls, Solatubes for enhanced natural light, LED light fixtures, new exterior glazing and sunshades, new flooring, and new furniture for the County employees. The renovations will provide infrastructure improvements, and will yield water and energy efficiencies resulting in a highly sustainable, Zero Net Energy capable building. Completion is scheduled for May 2017.

LOS ANGELES—The markets are primed for a strong fourth quarter. Several markets in the Southwest, including Los Angeles, Orange County, San Diego, had strong third quarter showings, along with Phoenix, which had a strong quarter in some sectors and slower performance in others. Most third quarter reports have been published, and there is a strong outlook for the end of the year. Additionally, the election this week passed major development and infrastructure measures, including the Build Better LA affordable housing development in Los Angeles. The effect of these measures on the real estate market is yet to be seen, but GlobeSt.com will continue to post updates with new expert information.

BY THE NUMBERS

LOS ANGELES—Since the 3Q12, rent in the Southern California market has grown steadily, with a 7% increase in the last 12 months alone. The rent growth is focused in Silicon Beach markets, including the Westside, Culver City, Santa Monica, Playa Vista, Marina del Rey and Venice as well as Hollywood. Much of this is because there is a broader unaffordability trend, where renters are able to afford rents at $4,000-$5,000 in rent per month but have no equity for $1,000 per square foot for home.

(Source: NGKF)

PHOENIX—The retail market in the Greater Phoenix retail market experienced a cooling effect over the summer months of third quarter with net absorption slowing and vacancy rising for the first time since 2014. However, experts anticipate a strong finish for 2016 as fourth quarter retail picks up pace. Vacancy of Metro Phoenix retail space rose from 9.4% to 9.6% during third quarter, but the vacancy rate is down 20 basis points year over year. Net absorption remained positive in the third quarter, but had declined to just 77,000 square feet compared to 320,000 square feet in the second quarter.

(Source: Collier's International)

NEWS & NOTABLES

SAN DIEGO—Randy Beckwith has joined Carrier Johnson + CULTURE as project manager. He has 20 years of experience in an array of project types and a special expertise in the healthcare sector. In this new role, Beckwith will apply his eye for distinctive, functional design to the firm's healthcare portfolio.

LOS ANGELES—Tyler Johnson has joined Thorofare Capital as associate director of credit. He will work in the firm's risk management group where he will be responsible for the loan review process from initial underwriting through closing for Thorofare's middle market loan origination platform. Johnson joins the firm from the commercial mortgage-lending group at AIG, where he served as senior associate, where he was involved in more than  $3 billion of new loan originations. In this new role, he will help add additional institutional underwriting capacity to Thorofare as we expand our business lines and successfully raise large amounts of investment capital.

LOS ANGELES—Marc Spellman has joined CBRE has SVP in the firm's advisory and transaction management group. He will be based on Los Angeles North office where they will focus on the leasing and sales of office property. He joins the firm from Lee & Associates Los Angeles North office, of which he was one of the founding member and specialized in the leasing and sales of office buildings for both occupiers and owners. In this new well, Spellman will continue to specialize in the leasing and sales of office buildings, representing both occupiers and owners, and his clients have included Kilroy Realty Corp., GE Finance, Voit Cos., Arden Realty and the County of Los Angeles.

DEALTRACKER

SAN DIEGO—Swift Real Estate Partners purchased the San Diego HP Campus, located at 16399 West Bernardo Drive in the Rancho Bernardo submarket of San Diego, from an HP Inc. The HP San Diego Campus includes seven office/R&D buildings and one class-A office building, all totaling 782,211 square feet on 67.5 acres. The purchase price was not disclosed. The property is 79% leased. It was built in 1970 and is one of few institutional-quality properties of its size in San Diego. As a result, the deal attracted significant interest from institutional investors. Investment advisors Louay Alsadek, Alex Somerville and Hunter Rowe of CBRE along with market expert Brad Black of CBRE represented the seller, while Swift Real Estate Partners represented itself.

SAN DIEGO—An investor has secured a $16.65 million loan to acquire the San Diego Business Park, a 11-building office/warehouse/flex business park, totaling approximately 208,500 square feet. The investor purchased the property with $32 million. The transaction was structured with a 5+5 term on a 25-year amortization with 3-years of interest-only and flexible prepayment options, and was secured through a national bank. James DuMars, SVP and managing director of NorthMarq Capital's Phoenix-based regional office secured the funding on behalf of the borrower.

LOS ANGELES—Rexford Industrial has acquired a multi-tenant industrial property for $13 million, located at 301-445 N. Figueroa Street, located in Wilmington submarket of the South Bay. Rexford purchased the asset with cash on hand. The property is a 133,925 square feet on 4.15 acres and is currently 63% occupied, mostly on a month-to-month basis. The fourteen dock-high units, located adjacent to the Port of Los Angeles, are expected to command premium rents after undergoing functional and cosmetic upgrades.

LOS ANGELES—Trumark Homes has sold out of SL70, a new residential development on Glendale Boulevard. The project has 70 newly built standalone homes that are meeting the demand for housing in the core infill location. The buyer pool ranged from first time homeowners to downsizing baby boomers. Each home features design-centric living, three floors of living space with rooftop terraces on most homes. There are two- and three-bedroom floor plans with up to 1,800 square feet of living space, two car garages and no HOA dues. Each home is crafted with contemporary recessed lighting, oversized windows, premium kitchen appliances and Quartz countertops. The development is situated near various Silver Lake/Echo Park entertainment, shopping, dining and recreational locations and is a short drive from major employment centers in Downtown LA, Burbank and Studio City.

PHOENIX—The owner of Seville Professional Center, an approximately 92,000-square-foot multi-tenant office building in Scottsdale, Arizona, has secured a $14.8 million loan to refinance the property. The loan was structured with a 12-month term, interest-only, and two, 12-month extension options, and was funded through a bridge lender. James DuMars, senior vice president/managing director of NorthMarq Capital's Phoenix-based regional office, and Dennis Williams, senior vice president/managing director of NorthMarq Capital's San Francisco-based regional office arranged the financing on behalf of the borrower.

LOS ANGELES—Revere Capital has funded a $21 million for Behavioral Property Partners, a New York-based investor. Behavioral Property will use the funds to acquire four existing substance abuse treatment centers in Southern California and a 35-acre property in Santa Barbara with numerous existing structures on it that will be converted to a residential treatment center. The portfolio has a total of the combined assets will have a total of 86 licensed beds. The borrower will do business in California as Beacon Recovery Partners.

BUILDING BLOCKS

SAN DIEGO—BNB Builders started renovation on the County of San Diego Housing and Community Development Services administrative offices, located at 3989 Ruffin Road in San Diego. The project is one of three recent San Diego County CM at-Risk contracts awarded to BNBuilders' San Diego office, and the firm received notice to proceed on this project in July 2016. The new 30,000-square-foot space will include highly efficient MEP systems and controls, Solatubes for enhanced natural light, LED light fixtures, new exterior glazing and sunshades, new flooring, and new furniture for the County employees. The renovations will provide infrastructure improvements, and will yield water and energy efficiencies resulting in a highly sustainable, Zero Net Energy capable building. Completion is scheduled for May 2017.