Middle Market Digest: This Week in Southwest

LOS ANGELES—Last year ended with a bang on the West Coast, according to the final fourth quarter reports that have already begun to trickle in. It looks like 2017 is still keeping up the pace with some significant deals already completed in the first weeks of the year. Take a look at some of the deals that you may have missed from the past week.

BY THE NUMBERS

PHOENIX, AZ— The retail market in the Greater Phoenix area experienced positive net absorption in fourth quarter of 2016, with vacancy rates falling. Net absorption totaled approximately 545,000 square feet in the fourth quarter, bringing the year-end total to more than 1.5 million square feet. This net absorption outpaced 2015 and provided a year-end vacancy rate of 9.5%. Asking rental rates declined in the fourth quarter, but year-end rental rates were still 1.6% higher than a year ago. The Phoenix metro area needs a surge in absorption during 2017 to motivate any significant boost in rental rate growth.

(SOURCE: Colliers International)

PHOENIX, AZ—Large industrial users in need of modern space are entering the Phoenix market, which has an inventory of newly completed product. Although industrial leasing volumes declined from previous years, with some of the activity coming from build-to-suit projects, Phoenix's average industrial lease size continues to increase year-over-year, signaling a renewed interest from large, corporate users and a need for space. There are currently 55 industrial space requirements of at least 100,000 square feet throughout the metro market. Phoenix has a host of large spaces that can accommodate these tenants, including space that sat vacant during the economic downturn but is now starting to dwindle in select markets due to high demand. Of the more than 4.86 million square feet of new industrial product delivered in 2016, large users have preleased 61.1 percent of available buildings. Strong and steady leasing patterns indicate the need for even more new construction, and developers are responding – taking advantage of Phoenix's ample land and relatively low construction costs to introduce new product.

(SOURCE: JLL)

INLAND EMPIRE, CA— The Inland Empire industrial market improved in 2016. Net absorption ticked up to 20.4 million square feet in 2016, marking 17 straight quarters of positive absorption for a total of 80.8 million square feet. The East submarket added over 15.3 majority of  the positive absorption in the Inland Empire over the year. During the fourth quarter 1.2 million square feet of new product was delivered, giving the market a total of 17.9 million square feet of new construction for the year. Leasing activity was down in the fourth quarter due to limited supply, with the 4.7 million square feet that came off the market representing the slowest three months since the second quarter of 2013. The vacancy rate fell from 5.4% in 2015 to 4.6% during 2016. The average asking rental rate in the fourth quarter jumped to $0.53 per square foot on a triple net basis per month. These asking rates are up $0.02 from last quarter and up 15.2% year-over- year. Moving into 2017, positive absorption should continue, occupancy costs will continue to increase, and with ample new construction in the pipeline, it is likely to be another year of growth.

(SOURCE: KIDDER MATTHEWS)

RIVERSIDE, CA—The Inland Empire industrial market saw strong activity in the fourth quarter of 2016, even with a lack of inventory. Gross absorption for 2016 totaled 19.3 million square feet, continuing on the heels of the great absorption performances in 2015 of 15.3 million square feet and 2014 of 11.4 million square feet. Gross activity in the fourth quarter was just under 7.2 million square feet, with investment purchases and lease renewals accounting for 37.7% of the total. Overall gross activity will remain strong, however there is a lack of inventory as vacancy rates remain low. Absorption is expected to be moderate and steady in 2017.  Fourth quarter 2016's absorption figures were just under 4.5 million square feet, compared to 4.9 million square feet during the same period last year.

(SOURCE: LEE & ASSOCIATES)

NEW & NOTABLE

NEWPORT BEACH, CA—Lee & Associates has promoted Brian Barson to SVP and principal in the firm's Newport Beach office. Barson joined Lee & Associates – Newport Beach in January 2014 after more than 7 years in the Las Vegas market, has focused on retail investment sales and leasing in southern California, completing more than $55 million in transactions in his short tenure with the firm.

PHOENIX, AZ—Sheila Bale and Ryan O'Connor have joined Cushman & Wakefield's office healthcare division as managing director and senior director in the Phoenix Office.  Bale and O'Connor were most recently with Newmark Grubb Knight Frank, and together bring 22 years of experience in the healthcare real estate market. They will be joining Tom Weinhold, managing director of the Phoenix office, to form a team of skilled professionals under Cushman & Wakefield's Healthcare Real Estate Group platform. Samuel Gillespie also joined the team, from Newmark Grubb Knight Frank, to provide client support. In this role, Bale will specialize in the marketing, sales and leasing of office and medical space for the team, while O'Connor will focus on landlord and tenant representation of office properties, with an emphasis on healthcare providers.

DEALTRACKER

SANDY, UT—Marcus & Millichap has brokered the sale of Cobblegate Apartments, a 448,675-square-foot, 416-unit luxury apartment community in Sandy, Utah, for $93.9 million, or $225,000 per unit. The transaction is the largest multifamily property sale ever in Utah. Completed in 2016, the apartment community is located at 910 East 9000 South in Sandy. Dimple Dell Regional Park, the Jordan Commons Megaplex Theatres, and South Towne Center, a 1,300,000-square-foot shopping mall, are all nearby. Daniel Shin and Brock Zylstra represented the seller, a local developer in the deal.

IRVINE, CA—Owner-user Euroline Steel Windows & Doors purchased an 84,396- square-foot industrial building located at 22600 Savi Ranch Parkway in Yorba Linda, CA, for $11.2 million. The company will occupy the property at the end of the second quarter. SVP Dale Camera, Jason Helmick and associate Kenah Cooper of Lee & Associates Irvine, represented the buyer. Rick Ellison of Cushman & Wakefield represented the seller, Sam Makhanian.

IRVINE, CA—Community Preservation Partners has acquired the Miracle Terrace Apartments in Anaheim in a joint venture with nonprofit Jamboree Housing for $37.4 in a transaction syndicated by CPP's parent company, WNC & Associates. As part of the agreement, the Anaheim Housing Authority will help maintain rents at below-market levels for 124 of the apartments, with the remaining units being covered by new affordability restrictions that CPP has put in place. This deal will keep more than 200 senior citizens in their  homes.

SAN DIEGO, CA—Pathfinder Partners has acquired Tierra Bella, an 89-unit apartment community, located at 10620 Alexander Road in Las Vegas, Nevada, for $12.5 million from the real estate-owned department of a financial institution. The lender had foreclosed on a large portfolio of assets in 2009, including Tierra Bella and several additional properties in Las Vegas, and had recently begun the disposition of these properties. Tierra Bella was the second-to-last property to be sold. Built in 2003, Tierra Bella consists of 13 buildings with 16 one-bedroom, one-bath units, 50 two-bedroom, two-bath units and 32 three-bedroom, two-bath unit apartments. There are a shortage of three-bedroom units in the submarket. Interior amenities include full-size washers and dryers, private patio/balconies and vaulted ceilings. Units range from 772 to 1,204 square feet and average 1,061 square feet.
The Las Vegas office of ARA Newmark brokered the deal.

MISSION VIEJO, CA—John Saunders of The Saunders Property Co. has secured a $32 million loan to refinance the 305,000-square-foot self storage and RV parking facility that sits on an approximately 27 acre parcel of land. The 10-year term full recourse loan amortizes in 30 years, and was priced at 3.75% for the first three years, then floats over LIBOR for the last seven. The funds are intended to pay off existing debt and recapitalize the improvements made to the property. PSRS secured the loan on behalf of the borrower.

PHOENIX—MG Properties Group has acquired Scottsdale Horizon Apartments in Scottsdale, Arizona, for $51 million. Built in 1986, the apartments feature one and two-bedroom floorplans with full size washers and dryers, 9-foot ceilings and 22-foot vaulted ceiling in select units. 93% of the units have been renovated with upgraded appliances, cabinets, flooring, and granite countertops in the kitchens. Community amenities include two pools and spas, fitness center, outdoor lounge and barbeque areas. The property is in coveted North Scottsdale and provides convenient access to the 101 Freeway and EVP John P. Cunningham and SVP Charles Steele of JLL represented the seller in the deal. The acquisition was financed with a $33.2 million Fannie Mae loan arranged by Robert Prouty at Key Bank.

BUILDING BLOCKS

OCEANSIDE, CA—A joint development relationship of Pelican Properties and the City of Oceanside has selected Woodland Hills based Klorman Construction as the General Contractor to construct a 6-level 440 stall parking structure for the North Beach Promenade development in Oceanside. The parking structure will serve three mixed-use buildings that will wrap around it, and will feature one basement level and 5 above ground levels. The basement level is for the exclusive use of the residents and is separated from the upper floors with dedicated entrances and elevators to ensure residents and general public are never comingled.

LOS ANGELES—Last year ended with a bang on the West Coast, according to the final fourth quarter reports that have already begun to trickle in. It looks like 2017 is still keeping up the pace with some significant deals already completed in the first weeks of the year. Take a look at some of the deals that you may have missed from the past week.

BY THE NUMBERS

PHOENIX, AZ— The retail market in the Greater Phoenix area experienced positive net absorption in fourth quarter of 2016, with vacancy rates falling. Net absorption totaled approximately 545,000 square feet in the fourth quarter, bringing the year-end total to more than 1.5 million square feet. This net absorption outpaced 2015 and provided a year-end vacancy rate of 9.5%. Asking rental rates declined in the fourth quarter, but year-end rental rates were still 1.6% higher than a year ago. The Phoenix metro area needs a surge in absorption during 2017 to motivate any significant boost in rental rate growth.

(SOURCE: Colliers International)

PHOENIX, AZ—Large industrial users in need of modern space are entering the Phoenix market, which has an inventory of newly completed product. Although industrial leasing volumes declined from previous years, with some of the activity coming from build-to-suit projects, Phoenix's average industrial lease size continues to increase year-over-year, signaling a renewed interest from large, corporate users and a need for space. There are currently 55 industrial space requirements of at least 100,000 square feet throughout the metro market. Phoenix has a host of large spaces that can accommodate these tenants, including space that sat vacant during the economic downturn but is now starting to dwindle in select markets due to high demand. Of the more than 4.86 million square feet of new industrial product delivered in 2016, large users have preleased 61.1 percent of available buildings. Strong and steady leasing patterns indicate the need for even more new construction, and developers are responding – taking advantage of Phoenix's ample land and relatively low construction costs to introduce new product.

(SOURCE: JLL)

INLAND EMPIRE, CA— The Inland Empire industrial market improved in 2016. Net absorption ticked up to 20.4 million square feet in 2016, marking 17 straight quarters of positive absorption for a total of 80.8 million square feet. The East submarket added over 15.3 majority of  the positive absorption in the Inland Empire over the year. During the fourth quarter 1.2 million square feet of new product was delivered, giving the market a total of 17.9 million square feet of new construction for the year. Leasing activity was down in the fourth quarter due to limited supply, with the 4.7 million square feet that came off the market representing the slowest three months since the second quarter of 2013. The vacancy rate fell from 5.4% in 2015 to 4.6% during 2016. The average asking rental rate in the fourth quarter jumped to $0.53 per square foot on a triple net basis per month. These asking rates are up $0.02 from last quarter and up 15.2% year-over- year. Moving into 2017, positive absorption should continue, occupancy costs will continue to increase, and with ample new construction in the pipeline, it is likely to be another year of growth.

(SOURCE: KIDDER MATTHEWS)

RIVERSIDE, CA—The Inland Empire industrial market saw strong activity in the fourth quarter of 2016, even with a lack of inventory. Gross absorption for 2016 totaled 19.3 million square feet, continuing on the heels of the great absorption performances in 2015 of 15.3 million square feet and 2014 of 11.4 million square feet. Gross activity in the fourth quarter was just under 7.2 million square feet, with investment purchases and lease renewals accounting for 37.7% of the total. Overall gross activity will remain strong, however there is a lack of inventory as vacancy rates remain low. Absorption is expected to be moderate and steady in 2017.  Fourth quarter 2016's absorption figures were just under 4.5 million square feet, compared to 4.9 million square feet during the same period last year.

(SOURCE: LEE & ASSOCIATES)

NEW & NOTABLE

NEWPORT BEACH, CA—Lee & Associates has promoted Brian Barson to SVP and principal in the firm's Newport Beach office. Barson joined Lee & Associates – Newport Beach in January 2014 after more than 7 years in the Las Vegas market, has focused on retail investment sales and leasing in southern California, completing more than $55 million in transactions in his short tenure with the firm.

PHOENIX, AZ—Sheila Bale and Ryan O'Connor have joined Cushman & Wakefield's office healthcare division as managing director and senior director in the Phoenix Office.  Bale and O'Connor were most recently with Newmark Grubb Knight Frank, and together bring 22 years of experience in the healthcare real estate market. They will be joining Tom Weinhold, managing director of the Phoenix office, to form a team of skilled professionals under Cushman & Wakefield's Healthcare Real Estate Group platform. Samuel Gillespie also joined the team, from Newmark Grubb Knight Frank, to provide client support. In this role, Bale will specialize in the marketing, sales and leasing of office and medical space for the team, while O'Connor will focus on landlord and tenant representation of office properties, with an emphasis on healthcare providers.

DEALTRACKER

SANDY, UT—Marcus & Millichap has brokered the sale of Cobblegate Apartments, a 448,675-square-foot, 416-unit luxury apartment community in Sandy, Utah, for $93.9 million, or $225,000 per unit. The transaction is the largest multifamily property sale ever in Utah. Completed in 2016, the apartment community is located at 910 East 9000 South in Sandy. Dimple Dell Regional Park, the Jordan Commons Megaplex Theatres, and South Towne Center, a 1,300,000-square-foot shopping mall, are all nearby. Daniel Shin and Brock Zylstra represented the seller, a local developer in the deal.

IRVINE, CA—Owner-user Euroline Steel Windows & Doors purchased an 84,396- square-foot industrial building located at 22600 Savi Ranch Parkway in Yorba Linda, CA, for $11.2 million. The company will occupy the property at the end of the second quarter. SVP Dale Camera, Jason Helmick and associate Kenah Cooper of Lee & Associates Irvine, represented the buyer. Rick Ellison of Cushman & Wakefield represented the seller, Sam Makhanian.

IRVINE, CA—Community Preservation Partners has acquired the Miracle Terrace Apartments in Anaheim in a joint venture with nonprofit Jamboree Housing for $37.4 in a transaction syndicated by CPP's parent company, WNC & Associates. As part of the agreement, the Anaheim Housing Authority will help maintain rents at below-market levels for 124 of the apartments, with the remaining units being covered by new affordability restrictions that CPP has put in place. This deal will keep more than 200 senior citizens in their  homes.

SAN DIEGO, CA—Pathfinder Partners has acquired Tierra Bella, an 89-unit apartment community, located at 10620 Alexander Road in Las Vegas, Nevada, for $12.5 million from the real estate-owned department of a financial institution. The lender had foreclosed on a large portfolio of assets in 2009, including Tierra Bella and several additional properties in Las Vegas, and had recently begun the disposition of these properties. Tierra Bella was the second-to-last property to be sold. Built in 2003, Tierra Bella consists of 13 buildings with 16 one-bedroom, one-bath units, 50 two-bedroom, two-bath units and 32 three-bedroom, two-bath unit apartments. There are a shortage of three-bedroom units in the submarket. Interior amenities include full-size washers and dryers, private patio/balconies and vaulted ceilings. Units range from 772 to 1,204 square feet and average 1,061 square feet.
The Las Vegas office of ARA Newmark brokered the deal.

MISSION VIEJO, CA—John Saunders of The Saunders Property Co. has secured a $32 million loan to refinance the 305,000-square-foot self storage and RV parking facility that sits on an approximately 27 acre parcel of land. The 10-year term full recourse loan amortizes in 30 years, and was priced at 3.75% for the first three years, then floats over LIBOR for the last seven. The funds are intended to pay off existing debt and recapitalize the improvements made to the property. PSRS secured the loan on behalf of the borrower.

PHOENIX—MG Properties Group has acquired Scottsdale Horizon Apartments in Scottsdale, Arizona, for $51 million. Built in 1986, the apartments feature one and two-bedroom floorplans with full size washers and dryers, 9-foot ceilings and 22-foot vaulted ceiling in select units. 93% of the units have been renovated with upgraded appliances, cabinets, flooring, and granite countertops in the kitchens. Community amenities include two pools and spas, fitness center, outdoor lounge and barbeque areas. The property is in coveted North Scottsdale and provides convenient access to the 101 Freeway and EVP John P. Cunningham and SVP Charles Steele of JLL represented the seller in the deal. The acquisition was financed with a $33.2 million Fannie Mae loan arranged by Robert Prouty at Key Bank.

BUILDING BLOCKS

OCEANSIDE, CA—A joint development relationship of Pelican Properties and the City of Oceanside has selected Woodland Hills based Klorman Construction as the General Contractor to construct a 6-level 440 stall parking structure for the North Beach Promenade development in Oceanside. The parking structure will serve three mixed-use buildings that will wrap around it, and will feature one basement level and 5 above ground levels. The basement level is for the exclusive use of the residents and is separated from the upper floors with dedicated entrances and elevators to ensure residents and general public are never comingled.