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January 13, 2011 
 
 
BIOTECH NEAR THE BAY

 

Agensys Inc broke ground this week on its 160k SF office/R&D/ manufacturing/lab facility at 1800 Stewart in Santa Monica. Studley corporate managing director Matt Brainard, who repped Agensys, tells us the completed development will be valued in excess of $95M.

 

Calling the deal a milestone in establishing the biotech business on the Westside, Matt anticipates it’ll draw more such users. Agensys, a subsidiary of Astellas Pharma, conducts R&D on therapeutic human monoclonal antibodies and antibody drug conjugates for the treatment of cancer. (Don't worry, doctors are just as confused by terms like triple net and BIM.) It was “far from your typical deal,” he says, in that it involved the purchase of a ground lease from The Lionstone Group and a development agreement with the City of Santa Monica, also the landowner. The term of the ground lease was extended to accommodate the new development.

The property’s occupied by two structures totaling about 127k SF. They're demolishing those, scraping the site, and increasing the lot’s building coverage. While developing anything in Santa Monica is a challenge, Studley had a team of specialized consultants and collectively, they were able to navigate through the City’s system and get through all the hurdles within one year. Designed by HLW, the Agensys project will be LEED certified and include a commissary, clean rooms and corporate offices, as well as a pocket park, sculpture garden, and café open to the public.

Lionstone planned to renovate the buildings as creative office space. It was repped by Industry Partners’ Jim Jacobsen and Scott Rigsby. Jim, whom we spoke to yesterday, notes they repped Lionstone in acquiring the ground lease from a company called NBS in 2007 for $10M, then embarked on a complete core-and-shell renovation as the Houston-based company’s local operating partner. They were a third of the way through the process when Jim and Scott began working with Studley and Agensys on the deal for the latter to take the entire four-acre site (including working with the City on the ground-lease extension). Jim says it was a complex transaction and took place “when the world was coming to a standstill.” But there was plenty of action inside—Jim says the buildings were used off and on by production companies, including Buffy the Vampire Slayer.


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AS THE WHEEL TURNS

 

In a transaction that needs no spin (it’s built in), Pacific Park, a two-acre amusement park on the Santa Monica Pier that includes the world’s first solar-powered Ferris wheel, was sold to Florida-based CNL Lifestyle Properties for $34M. (The park has provided many an aerial shot for TV, commercial and film productions, including American Idol, Jay Leno, and the NBA Finals.) The seller, Santa Monica Amusements, will continue to operate the park under a net-lease agreement. Pacific Park CEO Mary Ann Powell tells us the park was built in 1996 by a group of investors whose end game was to build the business and then sell it. She says gross revenues have grown substantially year after year, reaching a record $20M in 2010. Starting next year, the park might start some long-range planning with the hope of expanding its footprint, possibly by relocating some of the parking that’s currently on the pier.


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2011 OUTLOOK

 

The tone was positive (if not exactly gushing with enthusiasm) at the Voit CRE and economic forecast in Newport Beach on Tuesday. Founder Bob Voit (right, with Dan Vittone and Alan Pekarcik) noted last year was a disappointment for transactions up until Labor Day, and he’s optimistic about this year’s prospects. His self-label: “Determined survivor.” Noting office net absorption turned positive in 2010, Orange County managing director of brokerage services Kurt Strasmann says he’s not looking for a huge year in 2011 but a slow, steady rise in activity. Vacancies have continued to decrease. In certain segments of the industrial market, there’s actually a shortage of buildings. “Activity’s definitely picked up all across the board.”

 

Beacon Economics’ Chris Thornberg and Wells Fargo’s Scott Bottles provided clarity on the economic and lending fronts. Chris says it’s clear the economy is moving forward at a good pace—Q4 will probably come in at 3% to 3.5% growth, “perhaps even higher”— driven in part by consumers starting to spend at a normal pace and exports that have picked up speed. On the investment side, money is starting to come off the sidelines and move into commercial and other assets. Current growth trends will continue into 2011. But it’s not because we have truly put our problems behind us. Federal intervention—quantitative easing and extended tax cuts—simply pushed those problems off for two years. “There’s a long-term concern, and that is what happens in 2013.” (That assumes the world doesn't end in 2012, so we'll still call him optimistic.)

 

Scott, the western regional credit supervisor who works in one of Wells Fargo’s three real estate groups, says Q4 was a good quarter in which deal volume picked up. The group did $2B to $3B worth of assets in 2009 and last year will be closer to $10B. What’s changed, Scott says, is that in 2010, we started to have a fair number of maturity defaults. At some point, appraisals started catching up with valuations. “In 2009 I would tell people that appraisals were too high. In 2010, I think appraisals were too low.” There aren’t too many traditional sales in real estate today, he notes. Of the transactions he’s approving this year, almost all are distress deals involving either a short sale, a note sale, or a foreclosure.

 

What's on your deal radar? Do tell julie@bisnow.com.

 
 
 
 
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