Middle Market Digest: This Week in Southwest

LOS ANGELES—The latest third-quarter reports continue to show a health Southwest market. Downtown Los Angeles and Inland Empire both performed well in the quarter, and sales show low cap rates and increasing prices. See this roundup of Southwest deals for more on what is happening in the market.

BY THE NUMBERS

RIVERSIDE, CA—The Inland Empire's economic growth surged in the third quarter. The region's real Gross Metropolitan Product (GMP) grew by 2.2% in the third quarter, more than double the second quarter growth rate. The government sector made the biggest contributions to overall GMP growth in the Inland Empire and also accounted for half of all the metro job gains in the region in the latest quarter. The construction and professional and business services were the only to sectors to post losses for the quarter. The logistics industry, a stalwart of the region, remains a primary driver of local growth despite disruptions caused by the Hanjin shipping line bankruptcy. The trade, transportation, and utilities sector grew in both productivity and employment, making up 40% of the Inland Empire's GMP growth in the third quarter.

(Source: University of California, Riverside's School of Business Center for Economic Forecasting and Development)

LOS ANGELES—Downtown L.A.'s office vacancy rate has dropped below 17% for the first time in five years. Thanks in part to a major lease signed by Warner Music in the Arts District, the submarket's office vacancy rate dropped to 16.8%, a 5.1% year-over-year decrease; class-A rental rates climbed to $3.32 per square foot; an 8.5%year-over-year increase; and leasing activity hit 1.7 million square feet year to date.  The submarket also saw strong performance in other sectors. Retail vacancy rate dropped to 4.0%, a 24.5% year-over-year; however, rental rates decreased 4.2% year over year to $2.51 per square foot. Hospitality occupancy rates are up 4.7% year-over-year to 80% with average daily rates at $213.24, a year-over-year increase of 8.9% and average RevPAR up 14% year-over-year to $172.32. Residential occupancy is down 3.4% year-over-year to 91.5%, but rental rates are up 4.5% year-over-year to $2.81 per square foot and average rents are $2,584 per unit, an increase of 4.1% year-over-year.

(Source: DCBID)

NEW & NOTABLE

IRVINE, CA—Gary Campanaro joins Snyder Langston as CFO. He brings more than 30 years of experience to the firm, and has served in the Financial Services Group of CBRE, as CFO for the civil engineering firm The Keith Companies, and as CFO for restaurant companies with extensive multi-state real estate locations. He is succeeding Paul Pfeiffer, who served as CFO for 19 years with Snyder Langston and is now retiring.

IRVINE, CA—Attorney Frank W. Dworak has joined Allen Matkins' Corporate and Finance Department and Tax Practice Group where he will advise clients on joint ventures and other tax oriented entity structures, corporate mergers and acquisitions, partnerships, domestic and international tax planning, and tax controversy matters. Frank has worked on taxable and tax deferred mergers and acquisitions, partnership and LLC structuring and operating issues, like-kind exchanges, and international tax issues including withholding, transfer pricing, subpart F, treaty issues, and passive foreign investment companies.

LOS ANGELES—Mike Akerly has joined VP and regional manager at Polaris Pacific. In this new role, he will spearhead the company's efforts in Southern California, Arizona, and Hawaii and to support strategic growth while providing exemplary service to industry leading developer clients. He joined the firm from Halstead Property Development Marketing in New York, NY, where he served as project manager. A licensed attorney and real estate broker, Mr. Akerly also founded Akerly Real Estate LLC, a comprehensive real estate practice focused in the New York City market.

DEALTRACKER

PHOENIX, AZ—An affiliate of Cohen Asset Management has acquired a 452,271-square- foot industrial facility in West Phoenix from Breakthru Beverage Group for $33.5 million, which is one of the highest prices per square foot in the Phoenix market. Breakthru also occupies the property and will continue to occupy the property. The property features 30-foot-plus clear heights, an ESFR sprinkler system, and 50,000 square feet of office space. Colliers International's Don MacWiliam and his partner, Payson MacWilliam, negotiated the sale transaction.

LOS ANGELES—JRK Property Holdings has acquired a 168-unit apartment complex in Oxnard for $30.7 million. Located at 2444 Alvarado Street in Oxnard, the property has a mix of one-, two- and three-bedroom units ranging in size from 695 to 1,085 square feet in 15, two- and three-story buildings on a low-density 3.81-acre site. It is located within RiverPark. a 704-acre master planned community, that includes a complimentary mix of housing, schools, and 14 community parks and is walking distance of The Collection, a 600,000-square-foot outdoor lifestyle center. This is the buyer's second Southern California purchase in the last 18 months.

SAN DIEGO—CalAtlantic Homes has acquired a 170-acre master planned community site located in Del Sur at Carmel Valley Road and Dove Canyon Road in San Diego for $24.5 million from the Mountain Glen Family. CalAtlantic Homes is an Irvine-based homebuilder with an office in San Diego. Heritage Bluffs is comprised of 171 single-family home lots as a part of the Del Sur Master Plan. The property features panoramic views with close proximity to community shopping, new school facilities, and major transportation corridors.

SAN DIEGO—An unnamed investor has secured a $13.4 million loan to acquire a 91,154-square-foot industrial building in National City. In addition to acquiring the property, the bridge loan will be used to fund renovations, pay tenant improvements and to stabilize the property. Landmark secured the funds on behalf of the borrower. The property was vacant upon acquisition, and Landmark had to structure a loan with the optionality to fund with or without a tenant in tow. Under the tenant in tow scenario, the sponsor wanted maximum proceeds in order to reduce the equity requirement. Ultimately the lease was signed pre-funding and the lender provided 90% loan-to-cost. This greatly reduced the sponsor's JV equity requirement and allowed the sponsor to capture a greater share of the value created by securing a tenant pre-closing. The terms of the loan were not disclosed.

SAN DIEGO—Stos Partners has acquired a 91,541 square foot industrial distribution property located on 6.12 acres at 901 Bay Marina Dive, National City for $12.3 million from Bluelinx Corp. The property was built in 1972 and features 3,000 square feet of office space, grade-level and dock-high loading, a 20-foot clear height, and is serviced by the Burlington Northern Santa Fe railway.

SAN DIEGO—An investor operating as 8990 Miramar Landing LP has acquired Miramar Landing, a 131,360 square-foot retail entertainment center and the Clayton Building, a 39,170 square-foot, three-story atrium office building, from Miramar Commercial Center for $23.6 million. The seller owned the 10-acre property for 27 years. Miramar Landing is 100% occupied by a tenant mix that includes Nickel City Fun Center, Royal India, Scandinavian Designs, Seaside Buffet, and At Ease Games, and the Clayton Building is 87% occupied. Brandon Keith, Randy LaChance and Ryan Bracker of Voit's San Diego office represented both the buyer and the seller in the transaction.

LOS ANGELES—Berkadia has closed three apartment transactions in Los Angeles totaling $29.8 million. The properties include the Royal Carlton, a 40-unit apartment community, which sold for $7.8 million; Westlake Olympic Hotel and Residences, a 172-unit apartment complex, which sold for $12 million; and Alexandria Tower Apartments, a 6-story 60-unit apartment building located in Koreatown, which sold at a $9.9 million at a 4.1% cap rate. The firm also sold two additional properties: Harmony at Surprise, a multifamily property in Surprise, Arizona, that sold for $40.6 million, and Sonterra Apartments and Toscana Villas, two multifamily properties in Las Vegas, were sold for a combined $40.3 million.

BUILDING BLOCKS

CHULA VISTA, CA—Sharp Chula Vista Medical Center broke ground on a $244 million, 197,000-square-foot hospital tower in South San Diego County. The new tower will bring 138 private patient rooms, six large operating rooms and a rooftop café to the market. The development was originally anticipated to cost $239 million, but increased by $5 million because of an approval to build a hybrid procedure room. The project is Sharp HealthCare's largest single investment to date and is being funded through philanthropic donations to Sharp HealthCare Foundation, bonds, cash reserves and the Medi-Cal Hospital Fee Program. It is scheduled to deliver in 2019.

PARADISE VALLEY, AZ—Westroc Hospitality and Woodbine Development are building Mountain Shadows, a $100 million boutique resort in Paradise Valley, AZ. It features 40,000 square feet of meeting and event space, 12,500 square feet of indoor space and 25,000 square feet of scenic outdoor space, and will accommodate events for up to 500 people. Meeting spaces will include two modern ballrooms, three meeting rooms, two fully appointed boardrooms and five scenic outdoor spaces. The 10,000 square foot putting green is a unique space for receptions and events, while the centerpiece of the resort will be the 4,000 square foot Camelback Overlook event deck with a built-in bar. It opens in early 2017.

LOS ANGELES—The latest third-quarter reports continue to show a health Southwest market. Downtown Los Angeles and Inland Empire both performed well in the quarter, and sales show low cap rates and increasing prices. See this roundup of Southwest deals for more on what is happening in the market.

BY THE NUMBERS

RIVERSIDE, CA—The Inland Empire's economic growth surged in the third quarter. The region's real Gross Metropolitan Product (GMP) grew by 2.2% in the third quarter, more than double the second quarter growth rate. The government sector made the biggest contributions to overall GMP growth in the Inland Empire and also accounted for half of all the metro job gains in the region in the latest quarter. The construction and professional and business services were the only to sectors to post losses for the quarter. The logistics industry, a stalwart of the region, remains a primary driver of local growth despite disruptions caused by the Hanjin shipping line bankruptcy. The trade, transportation, and utilities sector grew in both productivity and employment, making up 40% of the Inland Empire's GMP growth in the third quarter.

(Source: University of California, Riverside's School of Business Center for Economic Forecasting and Development)

LOS ANGELES—Downtown L.A.'s office vacancy rate has dropped below 17% for the first time in five years. Thanks in part to a major lease signed by Warner Music in the Arts District, the submarket's office vacancy rate dropped to 16.8%, a 5.1% year-over-year decrease; class-A rental rates climbed to $3.32 per square foot; an 8.5%year-over-year increase; and leasing activity hit 1.7 million square feet year to date.  The submarket also saw strong performance in other sectors. Retail vacancy rate dropped to 4.0%, a 24.5% year-over-year; however, rental rates decreased 4.2% year over year to $2.51 per square foot. Hospitality occupancy rates are up 4.7% year-over-year to 80% with average daily rates at $213.24, a year-over-year increase of 8.9% and average RevPAR up 14% year-over-year to $172.32. Residential occupancy is down 3.4% year-over-year to 91.5%, but rental rates are up 4.5% year-over-year to $2.81 per square foot and average rents are $2,584 per unit, an increase of 4.1% year-over-year.

(Source: DCBID)

NEW & NOTABLE

IRVINE, CA—Gary Campanaro joins Snyder Langston as CFO. He brings more than 30 years of experience to the firm, and has served in the Financial Services Group of CBRE, as CFO for the civil engineering firm The Keith Companies, and as CFO for restaurant companies with extensive multi-state real estate locations. He is succeeding Paul Pfeiffer, who served as CFO for 19 years with Snyder Langston and is now retiring.

IRVINE, CA—Attorney Frank W. Dworak has joined Allen Matkins' Corporate and Finance Department and Tax Practice Group where he will advise clients on joint ventures and other tax oriented entity structures, corporate mergers and acquisitions, partnerships, domestic and international tax planning, and tax controversy matters. Frank has worked on taxable and tax deferred mergers and acquisitions, partnership and LLC structuring and operating issues, like-kind exchanges, and international tax issues including withholding, transfer pricing, subpart F, treaty issues, and passive foreign investment companies.

LOS ANGELES—Mike Akerly has joined VP and regional manager at Polaris Pacific. In this new role, he will spearhead the company's efforts in Southern California, Arizona, and Hawaii and to support strategic growth while providing exemplary service to industry leading developer clients. He joined the firm from Halstead Property Development Marketing in New York, NY, where he served as project manager. A licensed attorney and real estate broker, Mr. Akerly also founded Akerly Real Estate LLC, a comprehensive real estate practice focused in the New York City market.

DEALTRACKER

PHOENIX, AZ—An affiliate of Cohen Asset Management has acquired a 452,271-square- foot industrial facility in West Phoenix from Breakthru Beverage Group for $33.5 million, which is one of the highest prices per square foot in the Phoenix market. Breakthru also occupies the property and will continue to occupy the property. The property features 30-foot-plus clear heights, an ESFR sprinkler system, and 50,000 square feet of office space. Colliers International's Don MacWiliam and his partner, Payson MacWilliam, negotiated the sale transaction.

LOS ANGELES—JRK Property Holdings has acquired a 168-unit apartment complex in Oxnard for $30.7 million. Located at 2444 Alvarado Street in Oxnard, the property has a mix of one-, two- and three-bedroom units ranging in size from 695 to 1,085 square feet in 15, two- and three-story buildings on a low-density 3.81-acre site. It is located within RiverPark. a 704-acre master planned community, that includes a complimentary mix of housing, schools, and 14 community parks and is walking distance of The Collection, a 600,000-square-foot outdoor lifestyle center. This is the buyer's second Southern California purchase in the last 18 months.

SAN DIEGO—CalAtlantic Homes has acquired a 170-acre master planned community site located in Del Sur at Carmel Valley Road and Dove Canyon Road in San Diego for $24.5 million from the Mountain Glen Family. CalAtlantic Homes is an Irvine-based homebuilder with an office in San Diego. Heritage Bluffs is comprised of 171 single-family home lots as a part of the Del Sur Master Plan. The property features panoramic views with close proximity to community shopping, new school facilities, and major transportation corridors.

SAN DIEGO—An unnamed investor has secured a $13.4 million loan to acquire a 91,154-square-foot industrial building in National City. In addition to acquiring the property, the bridge loan will be used to fund renovations, pay tenant improvements and to stabilize the property. Landmark secured the funds on behalf of the borrower. The property was vacant upon acquisition, and Landmark had to structure a loan with the optionality to fund with or without a tenant in tow. Under the tenant in tow scenario, the sponsor wanted maximum proceeds in order to reduce the equity requirement. Ultimately the lease was signed pre-funding and the lender provided 90% loan-to-cost. This greatly reduced the sponsor's JV equity requirement and allowed the sponsor to capture a greater share of the value created by securing a tenant pre-closing. The terms of the loan were not disclosed.

SAN DIEGO—Stos Partners has acquired a 91,541 square foot industrial distribution property located on 6.12 acres at 901 Bay Marina Dive, National City for $12.3 million from Bluelinx Corp. The property was built in 1972 and features 3,000 square feet of office space, grade-level and dock-high loading, a 20-foot clear height, and is serviced by the Burlington Northern Santa Fe railway.

SAN DIEGO—An investor operating as 8990 Miramar Landing LP has acquired Miramar Landing, a 131,360 square-foot retail entertainment center and the Clayton Building, a 39,170 square-foot, three-story atrium office building, from Miramar Commercial Center for $23.6 million. The seller owned the 10-acre property for 27 years. Miramar Landing is 100% occupied by a tenant mix that includes Nickel City Fun Center, Royal India, Scandinavian Designs, Seaside Buffet, and At Ease Games, and the Clayton Building is 87% occupied. Brandon Keith, Randy LaChance and Ryan Bracker of Voit's San Diego office represented both the buyer and the seller in the transaction.

LOS ANGELES—Berkadia has closed three apartment transactions in Los Angeles totaling $29.8 million. The properties include the Royal Carlton, a 40-unit apartment community, which sold for $7.8 million; Westlake Olympic Hotel and Residences, a 172-unit apartment complex, which sold for $12 million; and Alexandria Tower Apartments, a 6-story 60-unit apartment building located in Koreatown, which sold at a $9.9 million at a 4.1% cap rate. The firm also sold two additional properties: Harmony at Surprise, a multifamily property in Surprise, Arizona, that sold for $40.6 million, and Sonterra Apartments and Toscana Villas, two multifamily properties in Las Vegas, were sold for a combined $40.3 million.

BUILDING BLOCKS

CHULA VISTA, CA—Sharp Chula Vista Medical Center broke ground on a $244 million, 197,000-square-foot hospital tower in South San Diego County. The new tower will bring 138 private patient rooms, six large operating rooms and a rooftop café to the market. The development was originally anticipated to cost $239 million, but increased by $5 million because of an approval to build a hybrid procedure room. The project is Sharp HealthCare's largest single investment to date and is being funded through philanthropic donations to Sharp HealthCare Foundation, bonds, cash reserves and the Medi-Cal Hospital Fee Program. It is scheduled to deliver in 2019.

PARADISE VALLEY, AZ—Westroc Hospitality and Woodbine Development are building Mountain Shadows, a $100 million boutique resort in Paradise Valley, AZ. It features 40,000 square feet of meeting and event space, 12,500 square feet of indoor space and 25,000 square feet of scenic outdoor space, and will accommodate events for up to 500 people. Meeting spaces will include two modern ballrooms, three meeting rooms, two fully appointed boardrooms and five scenic outdoor spaces. The 10,000 square foot putting green is a unique space for receptions and events, while the centerpiece of the resort will be the 4,000 square foot Camelback Overlook event deck with a built-in bar. It opens in early 2017.