This Week's LA Deal Sheet
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By now you've heard there's a new commercial tenant advisory group in town called Exis. The international collaborative organization was launched by 16 successful tenant rep brokerage firms around the world, representing offices in 23 cities in North America, Europe, Asia and Australia.
Recently, we checked in with Hughes Marino CEO Jason Hughes, whose California-based firm is part of the new venture. Wife Shay Hughes, the firm's COO and co-owner, is on Exis' board. Jason says the impetus behind Exis includes massive consolidation over the years by larger brokerages, which has dramatically reduced the number of true tenant-rep-only firms. Exis also strikes a blow against the concept of dual agency. Jason feels so strongly that tenants need non-conflicted specialists that he authored California's SB 1171. The measure, which went into effect Jan. 1, extends existing law regarding broker disclosure of dual agency relationships in residential transactions to commercial real estate deals, as well. It took him two years and a lot of money, he notes. "I think there will finally be a backlash against brokers trying to be all things to all people."
As part of Exis, Hughes Marino already has been involved on either an inbound or outbound basis in five closed transactions, with 10-plus deals in the works. The firm was approached by Exis' East Coast partners last fall, after extensive investigation into SoCal's most successful tenant rep firms. Jason says as Hughes Marino has grown, the firm has found many of its clients have real estate needs elsewhere in the world. Exis member firms have a global presence while staying independently owned and operated, with their own messaging and service offerings. Long a dominant tenant rep brokerage in the San Diego office market, Hughes Marino formally opened an LA office in March in Irvine Co's Westwood Gateway project. The firm's now shopping for 6k to 8k SF in DTLA.
Barker Pacific Group entered into a JV with asset management firm LNG Management to buy the seven-story, 50k SF 225 East Colorado office building in Pasadena. Calling the historic building at East Colorado Boulevard and Marengo Avenue an "architectural gem," BPG CEO Michael Barker says the new ownership plans to embrace and respect its historic beauty while also catering to a modern workforce, including the installation of building-wide WiFi and fiber optic cabling, common area improvements, and a new central AC system. The building is 96% occupied; among the tenants are Analytics Media Group, Dilbeck Realtors and Smith Brothers Restaurant Corp. LNG Management was originally established to manage the investment activities of Internet marketing whiz Lawrence Ng, CEO and co-founder of Oversee.net.
Berkadia's Dean Zander, Vince Norris and Mark Ventre closed the $26.2M sale of J Grant, a newly completed, 50-unit mixed-use property in Downtown Pasadena. The project (119 S Los Robles), which includes a ground-floor commercial space, was purchased vacant by a private investor. The seller, a local Pasadena developer, built the property to luxury condo specs, intending to sell off the individual units. With the strength of the multifamily investment market, the desirable location and limited new supply, the buyer plans to operate the J Grant as luxury rental apartments. The property is just a few blocks from Old Pasadena and the Playhouse District, and minutes from the Gold Line as well as the 210, 110 and 134 freeways.
CBRE arranged the sale of a 12-acre vacant parcel in the Valencia Commerce Center in Santa Clarita to Logix Federal Credit Union. The buyer plans to build a new 170k SF HQ and relocate from Burbank, its home of 78 years—27 of them in its current facility. Jeff Woolf repped Logix on the land acquisition while Craig Peters and Doug Sonderegger repped seller LNR Gateway V LLC. According to CBRE, Logix grew from a small credit union serving Lockheed employees to an institution with more than 150,000 members and over $4B in assets, and needed a larger facility. The new HQ will house over 400 employees initially, with capacity for future expansion. Completion: 2018.
BR Workforce LLC of Westlake Village bought The Kelsey, a 41-unit apartment property in LA (1408 W Washington Blvd), from DIG Kelsey Residences LLC of Laguna Beach for $13.1M. Berkadia's Brent Sprenkle, who negotiated the sale, says the relatively low price per unit ($319.5k) despite the property's recent construction presented the buyer with a particularly attractive investment opportunity. The Kelsey was built in 2012 and boasts two levels of subterranean secured parking and a rec/entertainment room.
Acquisition Group Inc bought a single-tenant net leased building in Claremont (835 W Foothill Blvd) from HCLARE LLC for more than $12M. The property contains nearly 23k SF and is fully leased to Sprouts Farmers Market. According to NAI Capital's Fariba Kavian, who repped the seller, the City of Claremont is a high barrier to entry market with no available development sites. This, combined with the creditworthiness of the tenant, was reflected in the low cap rate. The buyer paid a $600k prepayment penalty to pay off the property's existing above-market loan on the property and obtain better financing. The property is a little over one mile west of the Claremont Colleges.
A 28-unit apartment building in West LA fetched $10.2M or $366k/unit in its first time on the market in more than 30 years. The property (1309 Amherst Ave) features gas fireplaces, walk-in closets and private balconies. Common area amenities include a bicycle storage area. According to Marcus & Millichap's Ron Harris, who repped the seller with Paul Darrow and Michael DiSimone, the property is suited for a comprehensive reno that will allow the new owner to significantly increase cash flow. The trio also procured the buyer.
Basking in the glow of his latest crowning achievement, Progressive Real Estate Partners' Frank Vora sold two single-tenant net-leased Burger King restaurants in the Inland Empire for more than $4.5M. A 3,705 SF BK in Baker (72465 Baker Blvd, adjacent to I-15 on the way to Las Vegas) was purchased for nearly $2.5M or $661/SF, while a 3,541 SF location in Highland (4150 E Highland Ave) traded for slightly more than $2M, representing one of the lowest cap rates (4.6%) for a single-tenant Burger King in the past several years. It's no whopper to say the two stores' operator boasts 90-plus locations, making it one of California's five largest BK franchisees.
Stepp Commercial's Kimberly Roberts Stepp sold two fully occupied apartment properties in Santa Monica totaling just under $3.5M, at cap rates of 3.6% or less. A recently renovated property at 1405 Ocean Park Blvd, consisting of one-bedroom bungalow-style units with private patios, provided a turnkey opportunity for the buyer. The second property, 2614 Kansas Ave, represents a long-term, value-add opportunity to upgrade the building and bring rents up to market rates when units turn.
Next Tuesday LLC bought an eight-unit apartment property in Hollywood (6123 Eleanor Ave) from Eleanor Avenue Properties LLC for more than $2.6M or $331k/unit. Charles Dunn Co's Janet Neman repped the seller. Built in 1990, the two-story building was 75% occupied at closing.
A 17k SF industrial building in Maywood (4911 Slauson Ave and 4912 E 52nd Pl) traded for just over $1.9M. Heger Industrial's Trevor Gale and Jon Reno repped seller 4911 Slauson Avenue Partners LLC. Lee & Associates' Jeffrey Rinkov and Scott Kroman represented the buyer, Francis Membreno.
The County of Los Angeles renewed its space in the JM Eagle building, 5200 W Century Blvd near LAX. The five-year lease is valued in excess of $6M for 50k SF of office space. Owned by JM Eagle, a major manufacturer of PVC pipe and related plastics, the building has seen its occupancy rise by 10 pps in the past 12 months. According to Charles Dunn Co's Chris Runyen, who repped the owner along with Jason Cope and Amir Madadi, vacant office buildings in the LAX market are catching the eye of developers for potential hotel conversions, while creative and tech tenants view the market as a less costly alternative to El Segundo, Playa Vista and Silicon Beach. The tenant repped itself.
ACME Moving and Storage signed a 10-year lease on a 32k SF warehouse in Palm Desert (77550 Enfield Lane) to open its largest location in California. (No word on whether a certain coyote will store his anvils here.) The two-story facility is in the Country Club Business Park, down the street from the 320-unit Desert Oasis Apartment Homes. NAI Capital's Lynn Coker repped the landlord.
Mesa West Capital provided an affiliate of The EMMES Group of Cos $130M in first mortgage debt to recapitalize 1 Columbia Place, a 556k SF Class-A office complex in Downtown San Diego. Proceeds from the five-year, non-recourse loan will be used to refi the CMBS loan Emmes assumed when it acquired the 27-story office tower (formerly Columbia Center) in 2012, as well as leasing costs and renovation and repositioning of the property. According to Steve Fried, who led Mesa West's origination team, the building is about 80% leased with the majority of the vacancy on full upper floors. Eastdil Secured's R. Mark Williams and Jack Cheng arranged the financing.
Grandbridge Real Estate Capital closed three loans totaling $39.5M with Thrivent Financial for Lutherans, a life company correspondent. The largest loan ($17.5M) is secured by three industrial buildings in LA's Mid Cities and in the Conejo Valley. Two loans ($6M each) were placed on behalf of a private REIT; they're secured by a self-storage facility in the San Fernando Valley and a multi-tenant industrial building in the South Bay. Shelley Magoffin, Perry Colligan and Max Sauerman in Grandbridge's LA office originated the financings. Additionally, Shelly and Max arranged a $10.4M first mortgage loan on a refrigerated warehouse facility in Vernon on behalf of a TIC consisting of two entities. The facility, which includes blast freezer space, is leased to a global public refrigerated warehousing company.
Officials with Shenzhen Hazens Real Estate Group Co Ltd and Starwood Hotels & Resorts Worldwide gathered in China to celebrate their partnership to develop a W Hotel in DTLA'S Sports and Entertainment District. Described as the "crown jewel" of Hazens' two-phase, three-tower project along Figueroa, Flower and 11th streets and Olympic Boulevard, the 250-room 5-star W Los Angeles Downtown is slated to open in 2019 across from LA Live and Staples Center. The project will include 650 unbranded residential condos and 80k SF of high-end retail and restaurants. The W Hotel will replace the existing Luxe Hotel, increasing the number of rooms by over 42%. Construction on the first phase is expected to begin in 2017. With a focus on high-quality, mixed-use projects in gateway markets, Shenzhen Hazens Real Estate Group has invested more than $1B in LA, including the Sheraton Gateway LAX hotel, a new Starwood Hotel in San Gabriel, and its flagship investment in DTLA.
Orbis Real Estate Partners broke ground in Ontario on Orbis Business Center, which will consist of three freestanding Class-A industrial warehouse/distribution buildings totaling nearly 137k SF. Two of the buildings, the largest of which contains more than 90k SF, have been pre-sold for a total of $12.7M. According to Orbis managing partner Thomas Money, the western Inland Empire lacks a supply of industrial buildings less than 100k SF. The company acquired the six-acre site in April for $3.7M. Delivery is slated for Q1 '16.
Newmark Grubb Knight Frank recruited Lynn Kious as a senior managing director in its LA office, where she'll focus on tenant representation. A veteran with more than 25 years' experience in corporate and commercial real estate, she most recently served with Johnson Controls as VP and general manager of global real estate and workplace services-Americas. Previous stints include VP of global real estate for The Walt Disney Co and senior managing director for CBRE/Trammell Crow. Lynn began her career as a commercial and investment real estate broker in DTLA.
RNL hired Curtis Hung as a senior designer, responsible for directing design efforts for the architecture and urban design firm's LA office and expanding RNL’s commercial practice in California. He brings nearly two decades of domestic and international experience, particularly in China, on commercial, residential, multifamily, mixed-use, education, federal and healthcare projects.