Middle Market Digest: This Week in Southwest

LOS ANGELES—The year is off to a healthy start. The most active asset classes in 2016, multifamily and industrial, are continue to perform phenomenally this year. In the final quarter of 2016, industrial vacancy rates fell and new construction product was absorbed quickly. In January, the multifamily market in Southern California has 7.7% effective rent growth, an increase over the massive increases last year. Here, we go over the data and include the biggest deals, announcements and new construction projects of the week.

BY THE NUMBERS

LOS ANGELES—The North L.A. industrial market is showing no signs of a slow down. During the fourth quarter, the vacancy rate fell another 10 basis points, now hovering below 2%. With little construction, those projects that are in development are getting interest from tenants well before completion. As a result of the low vacancy rates, absorption numbers are slipping. The fourth quarter absorption was 217,000 square feet in the market, and leasing activity fell to just 592,000 square feet.

(SOURCE: Lee & Associates)

LOS ANGELES—Annual effective rent growth in Riverside was 7.7% in January, a 0.8 percentage point increase over December and a 0.9 percentage point increase over this time last year. The rent growth rates of Los Angeles and Orange County decreased 0.6 and 0.4 percentage points, respectively, with Oxnard showing the largest decline at 1.6 percentage points below its December rate. Average rents showed small change in most markets, with Los Angeles, Riverside and Oxnard increasing slightly and Anaheim decreasing by only $1. In Los Angeles, average rents are $2,255 with 95.9% occupancy; Anaheim average rents are $2,057 and occupancy rates are 96.1%; Riverside average rents are $1,486 with 95.8% vacancy; and Oxnard average rents are $1,933 with 95.8% occupancy.

(SOURCE: AXIOMetrics)

NEW & NOTABLE

RENO, NV— Tim Gunsten has joined Kidder Mathews' Reno office where he will specialize in office and industrial properties. Prior to joining Kidder Mathews, Gunsten was with Avison Young and before that, he was with Coldwell Banker Commercial.

LOS ANGELES—LaTerra Development has tapped Lynn Beckemeyer as senior managing director of construction and development, and Randall Reel as managing director of development. Beckemeyer and Reel each bring 20 years of experience to the firm.

IRVINE, CA—Kidder Matthews has acquired Costa Mesa-based Alden Management Group. Alden is a commercial property management firm with a large portfolio of office, industrial, and retail properties located throughout the greater Southern California market. Alden Management will be re-branded to Kidder Mathews in the coming weeks and the Alden staff will be relocating to Kidder Mathews' Irvine office, bringing Kidder Mathews' property management division to 178 people, and more than 45 million square feet of managed properties. Two weeks ago, Kidder publicly announced another expansion move by stating they will finalize a merger with L.A.-based Heger Industrial, a brokerage and property management firm, making Kidder Mathews the largest independently owned commercial real estate firm on the West Coast with 20 locations, including 12 in California.

DEALTRACKER

CORONA DEL MAR, CA—Philips Edison has, in separate transactions, sold five grocery-anchored shopping centers to Albanese Cormier Holdings, a commercial real estate investment company based in Beaumont, Texas. The retail properties, which were located in either secondary or tertiary markets, totaled 583,337 square feet. The properties that traded were Quincy Plaza in Ottumwa, Iowa; Kokomo Plaza in Kokomo, Indiana; Catawba Village in Newton, North Carolina; Lakeside Shopping Center in Anderson, South Carolina; and Louisa Plaza in Louisa, Kentucky. The price of the transaction was not disclosed. Hanley Investment Group's EVP Eric Wohl served as advisor in bringing the buyer and seller together in the sale.

ONTARIO, CA—Liberty Property Trust has completed a 410,006-square-foot lease transaction for an industrial building located at 10721 Jasmine Street in Fontana. DCG Fulfillment signed the 74-month lease. NGKF senior managing directors Ron Washle and Mark Kegans represented the owner and the tenant.

PHEONIX—Carter Validus Mission Critical REIT II purchased a Data Center from El Dorado Holdings for $16.4, or $371 per square foot. This mission-critical network intensive data center facility is 44,244 rentable square feet on a 4.2-acre parcel that includes a generous enclosed equipment yard and redundant power feeds. It is located in the heart of Metropolitan Phoenix with convenient access to Interstate 10, State Route 143, State Route 60 and Phoenix Sky Harbor International Airport. This asset has been 100% leased since 1997 to a national provider of wireless voice, messaging, and data services. The enterprise shell data center was built in 1977 and substantially remodeled in 1983, 2008, and 2011.

ONTARIO, CA—Empire Towers I-IV, a four-building, 400,976-square-foot office campus in Ontario, CA, has traded hands for $78.5 million. Located at 3633 and 4141 Inland Empire Blvd., and 3800 and 4200 Concours, the class-A property includes one nine-story building and three three-story buildings situated on 19.43 acres. NGKF Capital Markets' president of West Coast capital markets Kevin Shannon, executive managing director, Ken White, managing director Michael Moore, and senior managing director Brunson Howard, represented the seller, a joint venture between CIP Real Estate and Guggenheim Partners. The buyer, Inland Empire-based MGR Services was self-represented. David Milestone and Brett Green of NGKF Capital Markets secured the financing on behalf of MGR Services. The property is 88% leased to a diverse, multi-tenant rent roll including Liberty Mutual, Wells Fargo, City National Bank, Merrill Lynch, and Allstate.

SAN DIEGO—Mike Dobbins, SVP of NorthMarq Capital's San Diego-based regional office, arranged the $38 million refinance of a 374,645-square-foot retail property located in Chula Vista, California. The transaction was structured with a 15-year term on a 25-year amortization schedule. NorthMarq arranged financing for the borrower through its correspondent relationship with a life insurance company.

MOORPARK, CA—Continental Partners' director Zalmi Klyne has successfully secured $19.2 million in owner-user financing for a 256,000 square-foot industrial property in the Ventura County market on behalf of the property owner. The sponsor requested a high loan-to-cost, long-term fixed rate product to finance the acquisition of an industrial facility for its new headquarters in Moorpark. Continental Partners approached a number of lenders that would originate a competitive loan based on the borrower's requirements and ultimately secured a $13.7 million first trust deed from an international portfolio lender. The firm also utilized a small business green program, allowing the sponsor access to an additional $5.5 million in the form of a second trust deed.

VITORVILLE, CA—Sperry Commercial Global Affiliates has completed the $27.4 million sale of a two-property, fully occupied apartment portfolio totaling 320 units in Victorville. The properties, which are located approximately 2.5 miles apart, are both garden-style assets built in 1988 and renovated in 2014. In total, they include 41 two-story buildings and are situated on just under 17 acres of land. David Baird, National Director Institutional Investments with Sperry Commercial Global Affiliates, represented the seller, Dublin, Calif.-based Thomas Tomanek & Assoc., as well as the buyer, Denver, CO-based Sagebrush Capital Holdings. The closing cap rate was 6.5%. Offering quick access to the 15 freeway, the portfolio includes The Colony Apartments, a 200-unit community located at 14450 El Evado Road; and Golden Sands Apartments, a 120-unit community located at 15930 Nisqualli Road. The mix of units at The Colony is made up of two-bedroom and three-bedroom units, while the Golden Sands Apartments consists of a mix of one-bedroom and two-bedroom units. Both properties offer two pools, a basketball court, on-site management and maintenance, barbeque areas, and a playground.

BUILDING BLOCKS

PHOENIX—The $20 million redevelopment of Sky Harbor Towers office complex is nearing completion of its first phase. A joint venture between The Muller Company and Harbert Management Corporation is behind the 13.6-acre, two-building office campus project, which is located at the intersection of Interstate 10 and State Route 143 is anticipated for move in this spring. The redevelopment of 4605 and 4615 E. Elwood St. will deliver 215,000 square feet of state-of-the-art, amenity-rich office space to the Sky Harbor submarket of Greater Phoenix. The property features renovated lobbies, ample parking and a new pedestrian-friendly courtyard with shaded outdoor meeting areas situated around a central fountain. The second phase will modernize the fitness center, and the on-site café for casual inside/outside dining.
IRVINE, CA—Sanderson J. Ray Development has broken ground on The Westerly, a new Class-A luxury apartment development located on the southwest corner of Main St. and Jamboree Rd. in Irvine, California. The development marks Sanderson J. Ray's first large-scale luxury apartment complex. The Westerly is located on a 5-acre high profile parcel in the Irvine Business Complex. The completed project will include 388 modern luxury apartment units with a roof top deck lounge and access to private community pools. Some of the features include a rooftop sunning pool, outdoor lounges, and a private residents lounge with full bar. The gated building features a tree-lined entry featuring upscale landscaping and countless styled retreats.

LOS ANGELES—Meta Housing Corporation has broken ground on two affordable apartment communities in Los Angeles. The projects are 127th Street Apartments, an 85-unit apartment community for homeless or chronically homeless individuals, and El Segundo Boulevard Apartments, a 75-unit apartment community for veterans and their families. Financing for the projects was provided by Chase, Boston Financial Investment Management, the California Community Reinvestment Corporation (CCRC), Housing and Community Development (HCD), Department of Mental Health/California Housing Finance Agency (DMH and CalHFA), Los Angeles Housing & Community Investment Department (HCIDLA), Housing Authority of the City of Los Angeles (HACLA), and the Department of Health Services (DHS). The two apartment communities are being developed side by side between El Segundo Boulevard and 127th Street.

LOS ANGELES—The year is off to a healthy start. The most active asset classes in 2016, multifamily and industrial, are continue to perform phenomenally this year. In the final quarter of 2016, industrial vacancy rates fell and new construction product was absorbed quickly. In January, the multifamily market in Southern California has 7.7% effective rent growth, an increase over the massive increases last year. Here, we go over the data and include the biggest deals, announcements and new construction projects of the week.

BY THE NUMBERS

LOS ANGELES—The North L.A. industrial market is showing no signs of a slow down. During the fourth quarter, the vacancy rate fell another 10 basis points, now hovering below 2%. With little construction, those projects that are in development are getting interest from tenants well before completion. As a result of the low vacancy rates, absorption numbers are slipping. The fourth quarter absorption was 217,000 square feet in the market, and leasing activity fell to just 592,000 square feet.

(SOURCE: Lee & Associates)

LOS ANGELES—Annual effective rent growth in Riverside was 7.7% in January, a 0.8 percentage point increase over December and a 0.9 percentage point increase over this time last year. The rent growth rates of Los Angeles and Orange County decreased 0.6 and 0.4 percentage points, respectively, with Oxnard showing the largest decline at 1.6 percentage points below its December rate. Average rents showed small change in most markets, with Los Angeles, Riverside and Oxnard increasing slightly and Anaheim decreasing by only $1. In Los Angeles, average rents are $2,255 with 95.9% occupancy; Anaheim average rents are $2,057 and occupancy rates are 96.1%; Riverside average rents are $1,486 with 95.8% vacancy; and Oxnard average rents are $1,933 with 95.8% occupancy.

(SOURCE: AXIOMetrics)

NEW & NOTABLE

RENO, NV— Tim Gunsten has joined Kidder Mathews' Reno office where he will specialize in office and industrial properties. Prior to joining Kidder Mathews, Gunsten was with Avison Young and before that, he was with Coldwell Banker Commercial.

LOS ANGELES—LaTerra Development has tapped Lynn Beckemeyer as senior managing director of construction and development, and Randall Reel as managing director of development. Beckemeyer and Reel each bring 20 years of experience to the firm.

IRVINE, CA—Kidder Matthews has acquired Costa Mesa-based Alden Management Group. Alden is a commercial property management firm with a large portfolio of office, industrial, and retail properties located throughout the greater Southern California market. Alden Management will be re-branded to Kidder Mathews in the coming weeks and the Alden staff will be relocating to Kidder Mathews' Irvine office, bringing Kidder Mathews' property management division to 178 people, and more than 45 million square feet of managed properties. Two weeks ago, Kidder publicly announced another expansion move by stating they will finalize a merger with L.A.-based Heger Industrial, a brokerage and property management firm, making Kidder Mathews the largest independently owned commercial real estate firm on the West Coast with 20 locations, including 12 in California.

DEALTRACKER

CORONA DEL MAR, CA—Philips Edison has, in separate transactions, sold five grocery-anchored shopping centers to Albanese Cormier Holdings, a commercial real estate investment company based in Beaumont, Texas. The retail properties, which were located in either secondary or tertiary markets, totaled 583,337 square feet. The properties that traded were Quincy Plaza in Ottumwa, Iowa; Kokomo Plaza in Kokomo, Indiana; Catawba Village in Newton, North Carolina; Lakeside Shopping Center in Anderson, South Carolina; and Louisa Plaza in Louisa, Kentucky. The price of the transaction was not disclosed. Hanley Investment Group's EVP Eric Wohl served as advisor in bringing the buyer and seller together in the sale.

ONTARIO, CA—Liberty Property Trust has completed a 410,006-square-foot lease transaction for an industrial building located at 10721 Jasmine Street in Fontana. DCG Fulfillment signed the 74-month lease. NGKF senior managing directors Ron Washle and Mark Kegans represented the owner and the tenant.

PHEONIX—Carter Validus Mission Critical REIT II purchased a Data Center from El Dorado Holdings for $16.4, or $371 per square foot. This mission-critical network intensive data center facility is 44,244 rentable square feet on a 4.2-acre parcel that includes a generous enclosed equipment yard and redundant power feeds. It is located in the heart of Metropolitan Phoenix with convenient access to Interstate 10, State Route 143, State Route 60 and Phoenix Sky Harbor International Airport. This asset has been 100% leased since 1997 to a national provider of wireless voice, messaging, and data services. The enterprise shell data center was built in 1977 and substantially remodeled in 1983, 2008, and 2011.

ONTARIO, CA—Empire Towers I-IV, a four-building, 400,976-square-foot office campus in Ontario, CA, has traded hands for $78.5 million. Located at 3633 and 4141 Inland Empire Blvd., and 3800 and 4200 Concours, the class-A property includes one nine-story building and three three-story buildings situated on 19.43 acres. NGKF Capital Markets' president of West Coast capital markets Kevin Shannon, executive managing director, Ken White, managing director Michael Moore, and senior managing director Brunson Howard, represented the seller, a joint venture between CIP Real Estate and Guggenheim Partners. The buyer, Inland Empire-based MGR Services was self-represented. David Milestone and Brett Green of NGKF Capital Markets secured the financing on behalf of MGR Services. The property is 88% leased to a diverse, multi-tenant rent roll including Liberty Mutual, Wells Fargo, City National Bank, Merrill Lynch, and Allstate.

SAN DIEGO—Mike Dobbins, SVP of NorthMarq Capital's San Diego-based regional office, arranged the $38 million refinance of a 374,645-square-foot retail property located in Chula Vista, California. The transaction was structured with a 15-year term on a 25-year amortization schedule. NorthMarq arranged financing for the borrower through its correspondent relationship with a life insurance company.

MOORPARK, CA—Continental Partners' director Zalmi Klyne has successfully secured $19.2 million in owner-user financing for a 256,000 square-foot industrial property in the Ventura County market on behalf of the property owner. The sponsor requested a high loan-to-cost, long-term fixed rate product to finance the acquisition of an industrial facility for its new headquarters in Moorpark. Continental Partners approached a number of lenders that would originate a competitive loan based on the borrower's requirements and ultimately secured a $13.7 million first trust deed from an international portfolio lender. The firm also utilized a small business green program, allowing the sponsor access to an additional $5.5 million in the form of a second trust deed.

VITORVILLE, CA—Sperry Commercial Global Affiliates has completed the $27.4 million sale of a two-property, fully occupied apartment portfolio totaling 320 units in Victorville. The properties, which are located approximately 2.5 miles apart, are both garden-style assets built in 1988 and renovated in 2014. In total, they include 41 two-story buildings and are situated on just under 17 acres of land. David Baird, National Director Institutional Investments with Sperry Commercial Global Affiliates, represented the seller, Dublin, Calif.-based Thomas Tomanek & Assoc., as well as the buyer, Denver, CO-based Sagebrush Capital Holdings. The closing cap rate was 6.5%. Offering quick access to the 15 freeway, the portfolio includes The Colony Apartments, a 200-unit community located at 14450 El Evado Road; and Golden Sands Apartments, a 120-unit community located at 15930 Nisqualli Road. The mix of units at The Colony is made up of two-bedroom and three-bedroom units, while the Golden Sands Apartments consists of a mix of one-bedroom and two-bedroom units. Both properties offer two pools, a basketball court, on-site management and maintenance, barbeque areas, and a playground.

BUILDING BLOCKS

PHOENIX—The $20 million redevelopment of Sky Harbor Towers office complex is nearing completion of its first phase. A joint venture between The Muller Company and Harbert Management Corporation is behind the 13.6-acre, two-building office campus project, which is located at the intersection of Interstate 10 and State Route 143 is anticipated for move in this spring. The redevelopment of 4605 and 4615 E. Elwood St. will deliver 215,000 square feet of state-of-the-art, amenity-rich office space to the Sky Harbor submarket of Greater Phoenix. The property features renovated lobbies, ample parking and a new pedestrian-friendly courtyard with shaded outdoor meeting areas situated around a central fountain. The second phase will modernize the fitness center, and the on-site café for casual inside/outside dining.
IRVINE, CA—Sanderson J. Ray Development has broken ground on The Westerly, a new Class-A luxury apartment development located on the southwest corner of Main St. and Jamboree Rd. in Irvine, California. The development marks Sanderson J. Ray's first large-scale luxury apartment complex. The Westerly is located on a 5-acre high profile parcel in the Irvine Business Complex. The completed project will include 388 modern luxury apartment units with a roof top deck lounge and access to private community pools. Some of the features include a rooftop sunning pool, outdoor lounges, and a private residents lounge with full bar. The gated building features a tree-lined entry featuring upscale landscaping and countless styled retreats.

LOS ANGELES—Meta Housing Corporation has broken ground on two affordable apartment communities in Los Angeles. The projects are 127th Street Apartments, an 85-unit apartment community for homeless or chronically homeless individuals, and El Segundo Boulevard Apartments, a 75-unit apartment community for veterans and their families. Financing for the projects was provided by Chase, Boston Financial Investment Management, the California Community Reinvestment Corporation (CCRC), Housing and Community Development (HCD), Department of Mental Health/California Housing Finance Agency (DMH and CalHFA), Los Angeles Housing & Community Investment Department (HCIDLA), Housing Authority of the City of Los Angeles (HACLA), and the Department of Health Services (DHS). The two apartment communities are being developed side by side between El Segundo Boulevard and 127th Street.