Value-adds have been one of best plays in SoCal during the recovery, as cash-advantaged investors buy properties that need attention, and then ride the wave of tenants looking for better space as the economy improves. That's a lot harder to do now, Stillwater Investment Group president John Drachman tells us.

It's becoming increasingly rare to find value-add opportunities in the market as the local economy has improved, causing occupancy rates and rental rates to increase throughout SoCal, John (here with his nephews at an Angels game this summer) says. Even so, such deals are still possible: Newport Beach-based Stillwater, along with Greenlaw Partners and CrossHarbor Capital Partners, recently acquired The Lakes at West Covina, a 176k SF two-building office campus, which the new owners plan to upgrade.

Besides fewer available properties, there are now more investors looking for them. "There's also a large amount of capital seeking value-add opportunities," John adds. "There are still great potential opportunities, but you have to be strategic in focusing on where you can still buy significantly below replacement costs in submarkets showing signs of strength."

In the case of the The Lakes at West Covina, which the partners bought for $34.8M, the property represented a chance to buy in the San Gabriel Valley at about a 40% discount to the price paid for the property in 2007. The seller was represented by Bob Safai, Matt Case and Brad Schlaak of Madison Partners. The buyers represented themselves, and John says they will continue to look to beat the odds and find this kind of deal in SoCal.