June 19, 2014 | ISSUE 375

Western Real Estate Business E-Newsletter
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Zephyr Buys City Block in Downtown 
San Diego to Build Mixed-Use Project
The full city block will soon feature two, 32-story towers that contain retail and residential components.

SAN DIEGO -- Zephyr Partners has acquired a 60,000-square-foot site on Broadway between 7th and 8th avenues in downtown San Diego for $21.1 million. This was one of the last available full blocks of space remaining in downtown San Diego. 

 

Zephyr plans to use the site to build a $250 million, mixed-use retail and residential community that contains two, 32-story towers. The development is designed to extend downtown's core, revitalizing the land between the Gaslamp Quarter and Financial District. It will be the first mixed-use, high-rise project since the recession, notes Zephyr. 

 

"We are excited to further the renaissance of San Diego's downtown core, and transform a once-neglected property into a vibrant and appealing community," says Brad Termini, Zephyr's co-CEO. 

 

The property currently contains underutilized retail, parking and office space that will be demolished. The original eight-property portfolio was built in the 1950s and had fallen into disrepair over the past 30 years. 

 

"This transaction offered a rare opportunity to acquire property in urban San Diego," says Termini. "After studying the layout of other major urban areas such as Los Angeles, San Francisco and Seattle, we think this project will accelerate the transformation of downtown San Diego as it continues to evolve into a more walkable and accessible neighborhood." 

 

Zephyr also recently acquired the Banker's Hill condo project at nearby 2850 6th Ave. The company plans to build 60 high-end luxury condominiums on the site, which should be completed in 2015. 

 

George Smith Partners arranged $12.7 million in pre-development financing for the Broadway project. The interest-only loan carries a large interest reserve. It is priced at 6.5 percent for two years with a one-year extension.


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Parcland Crossing Apartment Complex
in Chandler Sells for $65M


Parcland is situated near two Intel campuses, in addition to the offices of Bank of America, Wells Fargo, Chandler Regional Medical Center, eBay/PayPal, Verizon, Microchip, Freescale Semiconductor, Orbital Sciences, EDMC and Avnet.

CHANDLER, ARIZ. -- PrivatePortfolio Group LLC has purchased the 383-unit Parcland Crossing apartment complex in Chandler for $65 million. The community is located at 800 W. Willis Road, just south of the 202 Freeway. 

 

Parcland is situated within a five-mile radius of two Intel campuses, in addition to the offices of Bank of America, Wells Fargo, Chandler Regional Medical Center, eBay/PayPal, Verizon, Microchip, Freescale Semiconductor, Orbital Sciences, EDMC and Avnet. 

 

The community was built in 2013. It was 93 percent leased at the time of sale. 

 

CBRE's Tyler Anderson, Sean Cunningham, Asher Gunter and Matt Pesch represented the seller, Alma School Apartments LLC, in this transaction. The LLC is a joint venture between Mark-Taylor Inc. and Kitchell Development Co. 

 

"Parcland Crossing is an extremely well-located asset," says Cunningham. "Population growth for the one-mile radius around Parcland Crossing has averaged 5.5 percent in the past three years and is projected to increase by almost 9 percent in the next five years. The exploding population in the area has led to pent-up demand for housing and resulted in an incredibly brisk pace of lease-up activity."


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JLL's Income Property Trust Buys 

Rancho Temecula Town Center for $60M

Rancho Temecula Town Center's anchor tenants include Sprouts Farmers Market, LA Fitness, Rite Aid and BevMo!

TEMECULA, CALIF.  -- Jones Lang LaSalle Income Property Trust has acquired Rancho Temecula Town Center, a 165,000-square-foot, grocery-anchored neighborhood shopping center in Temecula, for about $60 million. The center is located at 39540 Winchester Road.

 

The property is 93 percent leased to 26 tenants. Its four anchor tenants include Sprouts Farmers Market, LA Fitness, Rite Aid and BevMo!. These tenants generate 54 percent of the center's revenue. They have a weighted average lease term of nearly nine years.

 

The acquisition was financed at about 50 percent loan-to-value with a fixed interest rate loan of 4 percent for 12 years. 

 

Jones Lang LaSalle Income Property Trust is an institutionally managed, non-listed, daily valued perpetual life REIT. This is the REIT's third grocery-anchored shopping center acquisition in the past nine months. It recently acquired Oak Grove Plaza near Dallas and Grand Lakes Market Place near Houston in Texas.

 

"This investment provides increased portfolio diversification with geographic exposure to the West Coast and industry exposure to the expanding specialty grocer market," says Allan Swaringen, the REIT's president and CEO.  "[We are] continuing our focus on income-producing properties that also have attractive long-term growth potential."


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Block 300 Office Building in Portland Receives $60.8M Bridge Loan

Block 300 was 50 percent leased when the funds were committed. It is now 75 percent leased.

PORTLAND, ORE. -- Block 300, a 362,000-square-foot office building in Portland, has received a $60.8 million bridge loan. The Class A building is located at 333 South West 1st Ave. in the downtown area. 

 

The building was 50 percent leased when the funds were committed. It is now 75 percent leased. 

 

Dan Rosenberg of Cohen Financial secured the financing for Kaufman Jacobs. GE Capital Real Estate provided the financing. 

 

"The bridge financing allows us to recapitalize the property and puts us in a strong position to execute improvements and to re-tenant the property," says Robert Saunders, Kaufman Jacobs' CFO.


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Joint Venture Buys One Dartmouth Place Apartments in Denver for $30.6M
The joint venture plans to invest $2.6 million to upgrade the Class C apartment community.

DENVER -- Angelo, Gordon & Co. has sold One Dartmouth Place Apartments to a joint venture between Oak Coast Properties and Redhill Realty Investors for $30.6 million. The 418-unit community is located at 11100 E. Dartmouth Ave. The joint venture plans to invest $2.6 million to upgrade the Class C community. 

 

These improvements are intended to augment the $3.6 million worth of unfinished enhancements that commenced in a few units and common areas prior to the sale.

 

"Denver boasts strong growth in fundamentals and has generated 37,000 new jobs in the last year alone," says Matthew Heslin, Oak Coast's chief executive and co-founder. "Apartment rents are soaring and there is much opportunity to drive value through community improvements."   


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Portland's Boathouse Apartment Project

Receives $23.4M Construction Loan 

Paradigm Properties is scheduled to break ground on the project this summer.

PORTLAND, ORE. -- The Boathouse, a 133-unit apartment project in Portland, has received a $23.4 million construction loan. The community will be located on SW Boundary, east of Macadam, in Johns Landing along the Willamette River. 

 

Paradigm Properties is scheduled to break ground on the project this summer. The loan was provided by HomeStreet Bank Commercial Real Estate.  

 

"These will be the first new apartment units delivered to the John's Landing neighborhood in quite some time," says Dan Ross, commercial real estate relationship manager for HomeStreet Bank. "There is an increasing need for urban multifamily housing. The vacancy rate is anticipated to remain below 4.5 percent in the downtown Portland submarket, underscoring the need for attractive projects such as The Boathouse. We are excited to be working with Paradigm Properties on this venture."


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How The War For Talent Impacts
Commercial Real Estate Industry

Click above to view a larger image (Source:
U.S. Department of Commerce, Cushman & Wakefield)

 

LOS ANGELES -- One of the largest challenges facing the business world in the upcoming decades will be recruiting the right talent to help organizations compete and innovate, while at the same time providing the necessary amenities to retain the best and the brightest, according to a recently released report by Cushman & Wakefield. The report is titled "Human Capital: The War for Talent and Its Effect on Real Estate."  

 

In The Conference Board's 2014 annual survey, The CEO Challenge, human capital ranked as the most critical challenge facing today's global CEOs, before customer relationships and innovation. According to the "Human Capital" report, 35 to 55 percent of an organization's costs go to recruiting, training and compensating employees, whereas real estate costs typically range from 5 to 15 percent. 

 

Meanwhile, the growth of the working-age population in the United States is slowing significantly, experiencing a 58 percent drop between 2011 and 2012, according to the U.S. Census Bureau. As the Baby Boomer generation retires, the economy is on the verge of a prolonged period where the supply of labor will not match the level of demand. 

 

The millennial generation will eventually fill this gap, accounting for 51 percent of the workforce by 2020, but until it becomes the dominant working-age population, recruiting skilled workers will be an expensive and challenging process. At the same time, demographic shifts across the country have produced substantial population growth within major U.S. cities. 

 

U.S. Census data shows that between July 2010 and July 2011, city centers grew faster than suburbs in 27 of the nation's 51 largest metropolitan areas. As such, recruiting talent requires real estate occupiers to locate in markets that offer urban-style living and working environments. 

 

According to "Human Capital," buildings and markets served by public transportation provide workers better access to the office without having to provide their own transportation. In an April study released by The Rockefeller Foundation and Transportation for America, 54 percent of millennial respondents said they would consider moving to another city if it had better access to public transportation. Of the respondents, 66 percent listed high-quality transportation as a top factor in deciding where to live. 

 

According to "Human Capital," nearby residential and retail also provide an overall employee experience that is attractive to talent entering the workforce.   

 

Click here to read the rest of Scott Reid's story.


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