May 13, 2014 | ISSUE 364

Western Real Estate Business E-Newsletter
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Developer Breaks Ground on Union Village Apartment Complex in Los Angeles 
Union Village will contain 118 residential units and 7,600 square feet of ground-floor retail space.
LOS ANGELES -- Construction is under way on Union Village, a new $50 million luxury apartment community in Pasadena. The Class A community will be located on a 1.2-acre site at the intersection of Union Street and El Molino Ave. in the city's Playhouse District. 
 
The two-building project will contain 118 residential units and 7,600 square feet of ground-floor retail space. Residential rents will range from $1,900 to $3,500 a month. Union Village is scheduled for completion in January 2016. 
 
The development is a joint venture between Mack Urban and Mill Creek Development Co. Cigna Investment Management is also acting as an equity partner. This is the second project between Cigna and Mack Urban. 
 
Mack Urban will manage the development, along with Kenneth McCormick of Mill Creek Development Co., the site's previous owner. RTKL Associates will design Union Village. 
 
"This was an opportunity for our institutional partner to invest in a shovel-ready, upscale apartment project in a market with high barriers to entry and an exceptionally low vacancy rate of 3.6 percent," says Matthew Burton, Mack Urban's chief investment officer.

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Wright Runstad & Co. to Redevelop Rainier Square in Seattle 
Rainier Square will include 750,000 square feet of office space and about 240 apartment units, plus a four-star hotel and 30,000 square feet of ground-floor retail space.
 
SEATTLE -- Wright Runstad & Co. will redevelop Rainier Square, a 140,000-square-foot retail property that is part of the University of Washington's Metropolitan Tract in downtown Seattle. The 1.2 million-square-foot, mixed-use development is located at 1333 5th Ave., just off Interstate 5 and a few blocks from the waterfront. 
 
Construction is scheduled to commence in the second half of 2015. Once completed in late 2017, Rainier Square will contain a 50-plus-story tower with 750,000 square feet of office space and about 240 apartment units. It will also feature a 15-story, four-star hotel, as well as 30,000 square feet of ground-floor restaurants and retail shops. 
 
The total project is estimated to cost more than $500 million, according to reports. The University of Washington managed the developer selection process and chose locally Wright Runstad & Co. with approval from the university's Board of Regents. Architecture and design firm NBBJ will design the new Rainier Square. 

"We are absolutely thrilled to be awarded this opportunity," says Greg Johnson, Wright Runstad & Co.'s president. "The 66,000-square-foot site is the single best location in the city for this landmark project we are proposing. It is simply great real estate any way you look at it." 
 
The Metropolitan Tract of the University of Washington encompasses more than 11 acres, or more than four city blocks. It previously housed the University of Washington before the school moved to its current location along Mason Road in 1895. The Tract also includes Rainier Tower, the Fairmont Olympic Hotel and the IBM Building. 
 
Wright Runstad is also developing the Spring District, a 36-acre, transit-oriented, mixed-use urban development in Bellevue; and a 296,500-square-foot office building at 1200 North, just north of the Pacific Tower in Seattle. It is also overseeing the restoration of the University of Washington's Husky Stadium, a 93-year-old college football venue.

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Cohen Asset Management Buys 
Phoenix Industrial Portfolio for $29M
FlipChip International occupies the 52,027-square-foot building
at 3701 E. University in Phoenix.
PHOENIX -- Cohen Asset Management has acquired a three-property industrial portfolio in Phoenix for $29 million. The portfolio includes three fully triple-net leased, single-tenant, high-tech assets that total 174,644 square feet. 
 
Microsemi occupies the 73,729-square-foot building at 3601 E. University, while FlipChip International occupies the adjacent 52,027-square-foot building at 3701 E. University in Phoenix. The buildings are located within the Southbank Business Park. MedPlast resides in the 48,908-square-foot building at 405 W. Geneva Drive inside the Broadway Industrial Park in Tempe. 
 
All three buildings have been institutionally maintained and managed. They were built between 1996 and 1998. 
 
Will Strong, Mike Haenel and Andy Markham of Cassidy Turley represented both the buyer and the seller, Alliance Commercial Partners, in this transaction. 
 
"All three properties are highly functional, leased long term to quality tenants and are strategically located," says Strong. "The high-tech nature of the properties offers exceptional features that include heavy power, abundant parking and the ability for tenants to grow within them. In addition, these assets have a Class A image, are close to an abundance of retail amenities and benefit from an extensive labor pool."

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UFI Renews at Southern California Logistics Centre in Victorville
UFI plans to expand its manufacturing and assembly lines to increase production at the Southern California Logistics Centre.
VICTORVILLE, CALIF. -- United Furniture Industries (UFI) has renewed its lease for 505,192 square feet at the Southern California Logistics Centre (SCLC) in Victorville. The 2,500-acre industrial and commercial complex is located off Phantom Street near the airport. 
 
The exclusive U.S. manufacturer of Simmons furniture upholstery signed on for another three years. UFI plans to expand its manufacturing and assembly lines to increase production. It will also hire 50 more employees. UFI has been a tenant of SCLC since 2012. 
 
In addition to UFI, Solar City Corp. has recently leased space at SCLC. Pacific Aviation Group also inked a renewal and expansion at the center. 
 
Joe Brady of The Bradco Companies represented UFI. CBRE's Jay Dick represented the landlord, Stirling Capital Investments.

"Our Victorville facility meets demand across the entire Western United States where our marketshare is growing rapidly," says Jim Dye, UFI's general manager. "We are extremely pleased with the regional labor market in Victorville and plan to hire an additional 50 employees over the next few months to handle our expanded assembly lines."

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Velocis Buys Office Building
in Boulder's Flatiron Business Park
The 96,000-square-foot building is fully leased to financial service and technology-related tenants.
BOULDER, COLO. -- Velocis Advisors has acquired an office building in Boulder's Flatiron Business Park for an undisclosed sum. The firm purchased the building on behalf of its client, a Dallas-based family office. 
 
The 96,000-square-foot building is located at 5775 Flatiron Parkway. It is fully leased to financial service and technology-related tenants. 
 
"We were drawn to the asset's strong tenancy and how well it fit our client's income-oriented investment needs," says Paul Smith, a principal at Velocis. "With its strong credit tenants and high occupancy rate, we anticipate the building will provide our client dividend-like returns for many years."

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Holiday Inn Express Hotel & Suites
in Santa Cruz Sells for $16.5M
The 100-room Holiday Inn Express Hotel & Suites in Santa Cruz is located near the ocean and the University of California at Santa Cruz.
SANTA CRUZ, CALIF. -- A 100-room Holiday Inn Express Hotel & Suites in Santa Cruz has sold to a joint venture between Trigild and Blu Hotel Investors for $16.5 million. The hotel is located at 1410 Ocean St. Trigild will manage the property. 
 
The joint venture also purchased the 121-room Santa Ana Hampton Inn & Suites last year. 
 
"We are thrilled to announce this latest acquisition, which meets our overall criteria of investing in high-barrier-to-entry markets with premium brands," says Judy Hoffman, Trigild's president. "With close proximity to the ocean and University of California at Santa Cruz, we see a tremendous upside. In fact, the hotel has been nearly sold out every night since we closed escrow."

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April's Job Growth is Good News for Commercial Property Leasing Market 

WASHINGTON, D.C. -- The U.S. economy appears to be gaining traction, boosting the outlook for the commercial property leasing market in the coming quarters, says Robert Bach, director of research for the Americas at real estate brokerage firm Newmark Grubb Knight Frank. 
 
Emerging from their winter hibernation, employers added 288,000 net new payroll jobs in April, according to the Bureau of Labor Statistics (BLS), easily beating economists' expectations of 220,000 jobs. The severe cold and heavy snow blamed for the meager U.S. GDP growth of 0.1 percent in the first quarter of 2014 is now a distant memory. 
 
The BLS also revised the February and March data higher by a combined 36,000 jobs, putting the labor market within reach of a new peak that would erase all recessionary job losses, according to Bach. 
 
That new peak could occur as early as the next payroll employment report due to be released by the Bureau of Labor Statistics in early June. The job gains in April were widespread. 
 
Among the highlights: 
 
* The three primary office-using sectors - information, finance, and professional and business services - added a combined 78,000 jobs, beating the six-month average of 52,700. 
 
"If the labor market can sustain this level of performance during the next few months, the increased hiring will begin to show up in office absorption data," Bach says. 
 
* Sectors related to demand for industrial space - manufacturing, transportation and warehousing and wholesale trade - added 39,000 jobs, indicating strong occupier demand for warehouses and distribution centers in particular. 
 
* Leisure and hospitality added 28,000 jobs in April, signaling continued strong performance in the lodging industry. 
 
* Retailers added 34,500 jobs, building on March's rebound from the weather-related losses earlier in the year. 
 
* Construction added 32,000 jobs, including 4,100 in construction of nonresidential buildings and 4,000 in nonresidential specialty trade contractors, a leading indicator of new commercial properties coming on line. 
 
* Education and health services added 40,000 jobs, including 18,700 in healthcare, with gains spread across all subsectors (including physician offices, hospitals and residential care facilities), a sign that providers are expanding to serve newly insured customers. 
 
* Government added 15,000 jobs, mostly in local government education. 
 
Average hourly earnings and average hours worked for all employees were unchanged in March, "a disappointing footnote to an otherwise upbeat report," Bach says. 
 
The unemployment rate, which is calculated from a different survey, dropped from 6.7 percent in March to 6.3 percent in April, the lowest level in five-and-a-half years. 
 
"Unfortunately, the drop is partly due to the exit of 806,000 workers from the labor force, which pushed the labor force participation rate down to 62.8 percent, tying a 36-year low," Bach explains. "A robust labor market normally would attract new entrants, increasing the participation rate."
 
-- Matt Valley

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Nellie Day, Editor
Western Real Estate Business 
France Media Inc.
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