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January 12, 2011 
 
 
MULTIFAMILY DEALMAKERS

 
You don’t get to be one of the country’s top multifamily brokers by quitting while you're ahead. No sooner did CBRE’s team Lustig-Bower complete downtown LA’s largest apartment sale last year—the $62.5M, 204-unit Canvas LA—than it was out conducting an open house yesterday for a Beverly Hills apartment portfolio, where we spoke with the team’s founder, EVP Laurie Lustig-Bower.
 
EVP Laurie Lustig-Bower
Laurie was part of a Southwest multifamily investment team that represented Canvas LA seller Alliance Residential Co. She tells us she “definitely saw a trend” in 2010 of increasing velocity—interest rates were dropping and sales “seemed to pick up momentum.” Besides Canvas LA (bought by LaSalle Investment Management on behalf of its core commingled fund), Laurie’s team sold a 52-unit property in Studio City for $6.8M; one in Sun Valley for $8.4M; a three-building portfolio in Covina and Bellflower for $8.3M, as well as a 200-unit luxury development site in Glendale. In the latter part of Q4, rates started to increase, but by then these deals were closing and financing was locked in. She’s pricing the buildings she’s taking to market now using the higher rates that are available today. Six months ago, she would’ve priced them more aggressively.
Canvas LA, at 138 N. Beaudry Ave, was built in 2008 and garnered heavy interest because of its institutional quality. (The Southwest team that repped Alliance also included Tyler Anderson and Sean Cunningham of CBRE’s Phoenix office, and Lustig-Bower team member Adrienne Barr of the Beverly Hills office.) Laurie notes the potential buyers believe downtown LA is poised for strong rental growth (not just because the economy is on its way to recovery but because a lot of the supply has been absorbed) and were willing to settle for a cap rate around 4.5%. In summer ’08, seven or eight condo buildings converted to apartments at the same time, which “sabotaged the rents in downtown LA.” While it was marketing the property, the team analyzed rents and saw a trendline showing they hit bottom around spring 2010 and began to climb in the summer, which continued on at the time of sale.
Adrienne and Kadie Presley (both seated), Nancy Badzey, and Grant Takahashi
Besides Laurie, the team includes Adrienne and Kadie Presley (both seated), Nancy Badzey, and Grant Takahashi. The Beverly Hills portfolio they’re marketing now consists of 97 units in three properties built in the 1960s by the grandfather of the sellers. This is the first time they’ve come on the market, and Laurie expects interest to be high because two of the buildings are on Crescent Drive near the Golden Triangle. She says the market “had some euphoria” when interest rates hit their lowest levels, because buyers borrowing cheap money could pay higher prices, tempting owners to sell. Higher rates might affect the size of the seller pool in Q1 ’11, but Laurie says it’s too early to know because rates are still up only 75 to 100 bps from where they were at 2010’s low point. She expects an increase in buyers looking for properties due to optimism in the market and the feeling that rents finally have hit bottom.

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PEGASUS, MEET PEGASUS
 
Pegasus Investments EVP David Chasin
When David Chasin, EVP at Pegasus Investments, sold a single-tenant, net-leased deal up in the Bay Area, it warranted a double take: the Kragen Auto Parts store was a build-to-suit by the unrelated Pegasus Development. But winged horses isn't the only thing that makes this deal stand out; rather it's the fact there were only two years left on the tenant’s initial 15-year lease, plus renewal options. Of the 25 single-tenant deals Pegasus (the investment firm) sold last year, not one had fewer than 10 years remaining. By definition, single-tenant, triple-net deals aren’t management-intensive, which is why the investors—David says the industry calls them “coupon clippers”—want leases with at least 10 years remaining. With just two years left, it would be tough to get a loan, so the trust needed an all-cash buyer.
Equitas, led by senior managing partner Aaron Swerdlow, is a sophisticated buyer with experience in ground-up retail development as well as repositioning and lease negotiation. David says the buyer’s going to hold the property for the next couple years and believes the tenant will stick around, “but there’s no guarantee.” He adds the deal worked out great for Equitas, which was able to acquire the property at a 10% to 15% discount. Still, “there’s nothing like having a signed lease.” David, his father, Ken, and Aaron Aszkenazy repped the buyer, Equitas Investments of Hermosa Beach. The seller, a charitable trust, was repped by David Sowels of Fairfield-based Western Cities Realty.

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PM REALTY GROWTH
 
PM Realty Group EVP and Western division managing director Jim Proehl
PM Realty Group EVP and Western division managing director Jim Proehl wasn’t kidding when he told us the company’s expanding its SoCal transaction group. The firm recently hired Ken Arimitsu, David Girty, John Murray, and Marty Stradtman as VPs of brokerage services. Jim (whom we snapped at a NAIOP event last fall), tells us they were looking for a platform that offered flexibility and the ability to tap other PMRG services in property management, analytical services, or construction management to “go in and sell a bundle of services to their clients and prospective clients.” And he was looking to bring in senior guys with good track records and relationships. Their focus will be on office and industrial sales and leasing, though Ken does a lot of hospitality business, including golf course sales.
 
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