Middle Market Digest: This Week in Southwest

Fourth quarter reports continue to roll in, and they paint a healthy picture for the Southwest market. In Los Angeles, office investment sales price per square foot increase, although transaction volume fell dramatically. It was the only California market to see an increasing in pricing. In Phoenix, the multifamily market continued to improve. While numbers haven't returned to pre-recession highs, the market is experiencing a boost in construction activity and strong demand. Phoenix and Las Vegas were also listed among the top emerging industrial markets in the nation. Sales activity was also healthy. Here's a look at this week's trends, announcements and deals that you may have missed in Southern California, Utah, Arizona and Nevada.

BY THE NUMBERS

LOS ANGELES—A total of 56 office deals closed in Q417 in California amounted to $4.3 billion in sales volume, a 49% decrease year-over-year. Los Angeles was the only California market to see an increase in its average price per square foot, reaching $469 in Q4;  San Francisco came in second with $464 , followed by the Bay Area with $293 at #3, with San Diego ($252) and Sacramento ($184) closing the list. The largest deal of the quarter  was the $605 million purchase of the three-building Pacific Corporate Towers in El Segundo by Starwood Capital Group.

(SOURCE: MARCUS & MILLICHAP)

PHOENIX—The Phoenix multifamily market continues to be healthy. Rental rates in the fourth quarter of 2017 continued to increase, and there were a handful of new construction starts. New Construction was up 1.42% for the year with 6,400 units under construction in 2017, compared to 6,300 units under construction in 2016. Both years, however, fell short of 2015's 8,200 units under construction With vacancy rates remaining flat, rental rates are slowly growing year-over-year, however, they have not returned to pre-market highs yet.

(SOURCE: KIDDER MATTHEWS)

Phoenix and Las Vegas have been named as two of the top 10 emerging industrial markets in the US. The Las Vegas industrial market posted some of the strongest fundamentals in the country in 2017. Demand is driven by both regional distributors that are picking the region over other areas in Southern California and local businesses that are expanding because of the area's growing economy and population. Las Vegas' close proximity to California means that over 26 million people live within 250 miles of the market, over 22% of which are millennial.  The Phoenix industrial market continues to post exceptional growth because of its proximity to a growing population, a strong workforce base, an expanded and modernized highway system and more attractive rental rates compared to markets in Southern California. Nearly five million people live in the metro Phoenix area, the 12th highest in the U.S., and this number is expected to grow over 8% in the next five years according the U.S. Census Bureau.

(SOURCE: COLLIERS INTERNATIONAL)

DEALTRACKER

SAN DIEGO—LPC West has acquired two fully leased San Diego County industrial properties, totaling more than 175,000 square feet, in off-market transactions. The first, a 77,220-square-foot industrial distribution warehouse, is located at 5260 Anna Avenue in San Diego in the Morena District. LPC West procured the property from Bixby SPE Finance 1, LLC for $11.5 million. Since the time of sale, LPC West renovated the interior office space and the warehouse sprinkler system, along with adding a new exterior track roll-up door and loading dock. Bryce Aberg, Brant Aberg and Ryan Spradling of Cushman & Wakefield represented Bixby in the transaction, while LPC West represented itself. The second property, a 105,537-square-foot R&D/ industrial/ regional HQ building, is located in Eastlake Business Park at 860 Harold Avenue in Chula Vista. LPC West purchased the asset from Leviton Manufacturing for $10.9 million.

ANAHEIM, CA—BLOC Apartment Homes, an 84-unit community that is located on East Leatrice Lane in Anaheim, CA. The property sold with multiple offers for a sales price of $19.3 million. The buyer was a private investment group based in West Los Angeles. Alex Mogharebi and Otto Ozen of The Mogharebi Group represented the seller, a private investment group based in the San Fernando Valley, and the West Los Angeles based buyer. Built on a 2.63-acre site in 1961, the property is located at 104-146 East Leatrice Lane in Anaheim. The community is walking distance to Disneyland and the Anaheim Convention Center, 9 miles from Knott's

Berry Farm and 2.5 miles from the Anaheim Packing House District. Located less than a mile from Interstate-5 and less than 2 miles from the 91-Freeway, BLOC Apartment Homes is about 20-minutes from Irvine, and 35-minutes from Downtown Los Angeles.

PHOENIX—Paradise Vista, a 352-unit, garden-style apartment community in Glendale at 7102 N. 43rd Avenue, has traded hands for $17 million. CBRE's Brian Smuckler and Jeff Seaman represented the buyer, local investor Solano Vista, LLC, and the seller, Paradise Vista LLC, in the transaction. Constructed in 1974, Paradise Vista features studio and one-bedroom floor plans and value-add potential. The buyer has plans to reposition the property, which has various community amenities, such as a remodeled club house with a fitness center, a sport court, a playground, four swimming pools, a spa and multiple laundry facilities on-site. Paradise Vista is located on 43rd Avenue just north of Glendale Avenue, both major arterial streets that run through Glendale and Phoenix. Major employers in the area include Banner Thunderbird Medical Center, Blue Cross Blue Shield, Cigna Health Care and Arizona Public Services. The property is nearby the U.S. 60 and I-17 and several bus stops.

SAN DIEGO—CalAtlantic Homes, an Orange County, CA-based homebuilder, has acquired the Sweetwater Village Shopping Center located Spring Valley, CA for $5 million. CalAtlantic Homes plans to repurpose the 10.58-acre property into a 93-unit single family residential community. David Santistevan of Colliers International's San Diego Land Team represented CalAtlantic Homes and the seller, the Lambden Family Trust.

PHOENIX—BMO Tower at Central Arts Plaza, a 485,687-square-foot, 24-story Class A high-rise office building in Phoenix, has traded hands. The owners, a joint venture between California-based McCarthy Cook & Co. and New York-based Morgan Stanley Real Estate Investing, sold the property, along with an adjacent 1.94-acre parcel, for $80.7 million. Barry Gabel and Chris Marchildon with CBRE Capital Markets in Phoenix, and Todd Tydlaska and Sean Sullivan with CBRE Capital Markets, Los Angeles, represented the seller in the transaction. Bruce Francis and Dana Summers with CBRE Capital Markets' Debt & Structured Finance in Phoenix and Trent Snarr with CBRE Capital Markets' Debt & Structured Finance in San Jose, California, secured the financing for the buyer. The three-year, 75% LTC loan, with two extension options and two years of interest-only payments, was originated with a debt fund. Located at 1850 and 1884 N. Central Ave., BMO Tower at Central Arts Plaza is located on a prime, highly walkable location along Central Avenue in Phoenix's Central Arts District with immediate access to the Metro light rail, executive housing, multifamily housing, and an abundance of restaurants and entertainment venues. Major nearby arts attractions include the Phoenix Arts Museum, Heard Museum, Arizona Opera and Phoenix Theatre.

LOS ANGELES—A multifamily complex in West Covina, CA has sold for $18.8 million. CBRE's Priscilla Nee, Dean Zander, Stew Weston, John Montakab, and Eric Chen jointly represented the buyer, a partnership associated with Landmark Properties in Sherman Oaks. The community, located at 2000 W Pacific Avenue, is comprised of 80, single-story, two-bedroom units. The residences average 1,040 square feet in size and feature fireplaces and private patios. The property includes a courtyard, swimming pool, barbeque area, laundry facilities and secured entry. The 83,200-square foot building sits on 6.50 acres of land, providing a low density feel and great potential for expansion and redevelopment in the future.

NEWPORT BEACH—CapRock Partners has acquired two assets totaling almost 250,000 square feet in the San Diego area. The acquisitions encompass an 88,334 square-foot industrial building in the sought-after I-15 Corridor in central San Diego, and a 158,784 square-foot, high-image industrial property in Vista. The recent transactions underscore CapRock Partners' continued expansion throughout California and the Western United States. The first acquisition, completed in mid-January, is located at 10054 Old Grove Road in central San Diego. Spanning 88,334 square feet within a high-image, master-planned business park, the industrial building has never before been available for lease. The asset features a premier location on the I-15 Corridor and counts WD-40, L3 Communications, Teledyne and Ballast Point among its corporate neighbors. CapRock secured the property from a corporate user through CBRE's Capital Markets Group, working with Anthony DeLorenzo, Matt Pourcho, Brent Wright and Doug Mack on the deal. CapRock has already commenced on a significant renovation plan including redesigning the building's main entrance for an enhanced sense of arrival, enhancing the landscaping and completing major office overhaul. With the diverse San Diego economy, CapRock's business plan is to modernize the facility so that it appeals to the widest array of potential users including e-commerce, defense and biotech to telecommunications, last-mile logistics, and semiconductor manufacturers.

INDIO, CA—Parkwood Apartments at Polo Grounds, a 125-unit community that is located on Avenue 48, has traded hands for $16.5 million, which equates to $132,000 per unit or $171 per square foot. The buyer was a private investment group based in San Diego. Alex Mogharebi and Otto Ozen of The Mogharebi Group represented the seller, a real estate development firm located in Orange County and the San Diego based buyer. Built on a 7.51-acre site in 2014, the property is located at 81777 Avenue 48 in Indio. Parkwood Apartments at Polo Grounds features lavishly outfitted units. The community features exquisite common area amenities including a private clubhouse, library, business center, FiOS Internet / TV, community room with kitchen, and cutting-edge fitness center. Its sprawling grounds include a sparkling swimming pool and relaxing spa, exotic landscaping, mountain vistas, covered dining area with barbeques, a private nature park with designated pet area, and a resident vegetable garden.

PACOIMA, CA—Loma Vista Apartments, a 60-unit community that is located on Van Nuys Boulevard in Pacoima, CA, has traded hands for $10.75 million. The buyer was a private investment group based in West Los Angeles. Alex Mogharebi and Otto Ozen of TMG represented the seller, a San Gabriel Valley based private investor, and the West Los Angeles based buyer.

SAN DIEGO—CBRE Capital Markets' Debt & Structured Finance team has arranged $56.9 million in financing for three apartment communities located in the Southeast and Mid-Atlantic region. Bill Chiles, Scott Peterson and Brian Cruz of CBRE's San Diego office secured the floating-rate loans on behalf of San Diego's Strata Equity Group for acquisition of the properties. The loans were funded by Freddie Mac through an expansion of an existing credit facility structured by CBRE.

BUILDING BLOCKS

SAN DIEGO, CA—HFF has secured $35 million in construction financing for the development of a dual-branded hotel comprising a 129-room Courtyard Marriott and a 96-room TownePlace Suites in the Los Angeles-area community of Agoura Hills, California. Working on behalf of the developer, Huntington Hotel Group, the HFF team placed the 60-month loan with Umpqua Bank. The dual-branded hotel will be developed on a vacant 5.5-acre site located at 29505 and 29515 Agoura Road in Agoura Hills, a Los Angeles County community approximately 30 miles northwest of downtown Los Angeles in the eastern Conejo Valley between the Simi Hills and the Santa Monica Mountains.  The Courtyard Marriott and TownePlace Suites will be near numerous leisure and corporate demand generators, including IBM; TouchCommerce; Zebra Technologies Corporation; Pepperdine University and Santa Monica Mountains National Recreation Area.  Once constructed, all 225 rooms will reside in one three-story, wood-framed building that will feature three separate lounge areas; a business library; fitness room; large patio with outdoor pool, barbeque area and fire pit; Courtyard lobby Bistro, which will be available to all guests and serve breakfast and dinner; complimentary breakfast area; and four meeting rooms. The HFF team representing the borrower included senior managing director Timothy Wright and real estate analyst Aaron Lapping.