Southern California Industrial Real Estate Blog

LOS ANGELES INDUSTRIAL PROPERTY SNAPSHOT – JANUARY 2010

LOS ANGELES INDUSTRIAL PROPERTY SNAPSHOT – JANUARY 2010

By Jodi Summers

2009 was an extremely disappointing year for the industrial marketplace, and 2010 is predicted to be as dissatisfying as well.

“Commercial real estate is going to hit to bottom as well,” notes Urban Land Institute researcher Charles DiRocco.

It has been reported that commercial real estate value declines will average more than 40 percent below previous highs of mid-2007. Locally, in Los Angeles County, from December 2007 – December 2009 the median price of for sale properties is down 59% and the median price of sold properties is down 99%. Meantime, volume is up by almost 1/3^rd, while concluded transactions are down 50%.

The ULI notes business environment for commercial real estate in 2010 will be as unsatisfactory as the recession of the early 1990s.

It has been predicted that many late-cycle buyers of 2005 through 2007 could find themselves struggling with foreclosures because of high sales prices, weakening occupancy and commercial mortgage-backed securities (CMBS) coming due.

**

http://saratogavoice.com/wordpress/2009/10/20/california-real-estate-forecast-for-2010/

http://nyrej.com/37067

http://www.realtor.org/research/economists_outlook/commentaries/forecast1209

http://pittsburgh.bizjournals.com/pittsburgh/stories/2009/12/07/daily30.html

https://www.terradatum.com/agentmetricsonline/report_chart_view.td

**

U2 CAN BUY COMMERCIAL PROPERTIES @ AUCTION

U2 CAN BUY COMMERCIAL PROPERTIES @ AUCTION

By Jodi Summers

Going, going, gone…with the commercial loan market in such a pathetic state, auctions are the fastest way for banks to unload undesired commercial property assets. If you’re interested in getting involved, there is a July 30 live auction by Sperry Van Ness/Guardian at the Hyatt Regency in Los Angeles includes more than $100 million in real-estate owned (REO), bank-ordered and developer close-out assets in six Western states. If you just want to know more about it read on…

“Sellers are coming to the realization that the price point they had in mind is not a reality. That’s where auctions are so useful in determining value — bringing people together through competitive bidding,“ observed National Auctioneer Association spokesman Chris Longly. “Our membership is seeing more energy and movement this year on the commercial real estate side.“

The National Association of Auctioneers estimates that $58.6 billion in real estate was sold in private live-auction bidding in the U.S. in 2008, up 38.5% from five years ago. Auctions in residential real estate have risen 47.7%, raw land (including agriculture) 36.8%. Commercial real estate is up 31.3%, to $15.5 billion in gross auction sales for 2008. Last year, banks were dealing with residential real estate issues, now, banks are confronting commercial property asset issues.

While the foreclosure moratorium was on in residential, banks were able to reassess their commercial assets. You’ll note that auction activity growing in the 2^nd half of 2009, with major online commercial auction events. In the second half of July, NAI Global offered 75 investment properties in 21 states valued at more than $250 million. The timed online auction will include 58 properties — including the historic State Theatre in South Bend, IN, which still bears bullet holes from the nearby shootout following John Dillinger’s final bank robbery on June 30, 1934 — and 14 other properties. In late July, Sperry Van Ness/Guardian held an auction at the Hyatt Regency in Los Angeles includes more than $100 million in real-estate owned (REO), bank-ordered and developer close-out assets in six Western states.

Among the high profile properties going up for sale is the historic Watergate Hotel made infamous during President Nixon’s wiretapping antics. (http://www.socalofficerealestateblog.com/?p=669). Other noteworthy pieces of real estate hitting the auction market include development sites in the metro Washington, DC area, retail sites in Highland Park, IL, and Spokane, WA, the historic theater redevelopment in South Bend, IN, and an infill site in Flint, MI; an upscale hotel/golf resort in Beecher, WI, and a fully entitled multifamily development tract in Navarre Beach, FL, plus lots of excess and partially developed inventory.

Even the government is getting into it. As you know, the state has been selling off their legacy assets - http://www.santamonicapropertyblog.com/?p=1188, and take a cursory glance @ what the U.S. government might be auctioning off in California, and we find industrial properties in Laguna Nigel, Morro Bay and Red Bluff.

“We’re probably seeing a 30 to 40% increase this year” in office, retail, industrial, multifamily and land auction inquiries, remarked Paul Rogers, senior vice president @ Inland Real Estate Auctions, Inc. “With bank activity in particular, we’re going to be busy for the rest of this year — and probably well into next year.”

This trend echoes the real estate slump of the 1990s and early 2000s, with commercial properties following residential foreclosure auctions after they have been mainstays in the downturn. Companies auctioning properties note that it is an opportunity to sell assets quickly, reduce holding costs, and secure true market value under unpredictable market conditions.

**

Sources:

http://www.costar.com/News/Article.aspx?id=F9243DEB83153259F95525F184C9EEE8&ref=100&iid=140&cid=383F14EEE265B182474DA2442BACBBBF

http://fasrp.sc.egov.usda.gov/fasrp/mainAction.do;jsessionid=804CCE54F02BBCC115D4B0BA22A910FF?pageAction=GetCounties&state=CA&stateName=California

http://www.philly.com/inquirer/world_us/20090720_Watergate_auction_drawing_interest.html

http://www.socalofficerealestateblog.com/?p=669

http://media.commercialappeal.com/mca/content/img/photos/2009/04/16/b17auction.jpeg

http://ethicalforeclosurefortunes.com/wp-content/themes/thesis/rotator/govt_auctions_sm.jpg

http://i.ehow.com/images/GlobalPhoto/Articles/5117276/237446-main_Full.jpg

http://www.unitedcountry.com/picturesx/10086-10099-1576957.jpg

http://www.ritholtz.com/blog/wp-content/uploads/2009/06/foreclosures-may-o9.png

http://www.mccallauctions.com/auctions/photos/1074/p12368596779029.jpg

INDUSTRIAL BUILDING REVENUES ARE DOWN, BUT NOT AS DOWN AS OFFICE BUILDINGS

By Jodi Summers

We all know the market is slow. Loans are hard to come by. Commercial foreclosures are becoming a trend…but industrial properties are in far better shape than other parts of the market.

According to the recent reports by Moody’s/REAL National All Property Type Aggregate Index, overall, selling prices for retail properties are off 13% from the October ’07 peak. Apartment and industrial prices remained flat during the quarter, although Western apartment prices gained by 2.7%. Sales volume for the market overall shows that both total dollar value and number of sales are down about 75% to 80% lower than the volume seen at this time last year.

http://www.globest.com/news/1421_1421/newyork/178955-1.html?type=pf

STRANGE TIMES MAKES FOR STRANGE REAL ESTATE TRANSACTIONS

STRANGE TIMES MAKES FOR STRANGE TRANSACTIONS

by Jodi Summers

 As you’re aware, the New York Times Co. recently sold its portion of its headquarters building at 620 Eighth Ave. to investment firm W.P. Carey & Co. and two affiliates in a $225-million sale-leaseback. In this custom-crafted transaction, W.P. Carey bought the 21 floors, totaling 750,000 square feet, which the Times Co. uses as headquarters space. The transaction does not include the six floors which the Times Co. leases to other tenants.

In another unique transaction, Global information technology firm Unisys Corp. disposed of a 356,000-square-foot suburban Philadelphia office property in a $19.5-million sale-leaseback transaction with Exeter Property Group and Strategic Realty Investments LLC.

Interesting to note that in this transaction, Unisys leased back only about half of the space at the Malvern, PA asset. Partial sale-leasebacks aren’t an entirely new phenomenon, but they appear to be on the rise, at a time when increased interest in sale-leasebacks in general are up.

“A lot of corporations have identified that using a sale-leaseback is a great way to take capital they have tied up in real estate and invest that in their business,” says Jones Lang LaSalle capital markets senior vice president Suzanne Martinez.

 In many instances, flexibility is a key motivator behind companies pursuing partial sale-leasebacks, Martinez notes. In the case of Unisys, “doing a partial sale-leaseback in this instance allowed them to lower their operating expenses, and at the same time capitalize on the fact that that was great real estate in a good market.”

Motorola’s five-building, 1.1-million-square-foot Arlington Heights campus in suburban Chicago are being sold either as a portfolio or individually. As part of its right-sizing effort, Motorola will continue to occupy three buildings with long-term staggered lease terms.

 Given the inherent repositioning aspect of partial leaseback deals, traditional sale-leaseback investors are not typically attracted to these kinds of transactions, observes Martinez. Rather, value-add players are the more likely bidders, but they are attracted to having a stabilized rental income stream component while repositioning efforts for the remainder of the space are undertaken.

 Market experts foresee that sale-leasebacks will be an increasingly used corporate real estate strategy this year as companies look for ways to shave costs, raise capital and otherwise strengthen their balance sheets.

Expect to see sale leaseback transactions trickle down into small business. Bill Reynolds recently sold off a 6-tenant automotive facility in Gardena, keeping one space for his muffler supply business. “I did a seller-carryback,” he offers. “The ongoing cash flow is nice.”

New York City-based market research provider Real Capital Analytics notes in its February Capital Trends Monthly reports that owner/occupiers are likely to be parties to an increasing share of transactions this year, both as buyers and sellers. On the sell side, “the increase in deal making stems not only from dispositions of excess/vacant property, but also from sale-leasebacks,” RCA notes. “For some companies, sale-leaseback may be the preferred–or only–method for raising capital at present.”

http://www.globest.com/news/1365_1365/insider/177413-1.html

http://byfiles.storage.live.com/y1pBgEx1qEZ0E5wwsBWLlMC7jOCArmtti2zGadk6gHY6E3jOmlSgdbe9CHkDlnA_K9HNbYj7aY_JFQ

http://www.nytimes.com/2009/03/10/business/media/10paper.html?_r=1

http://www.globest.com/news/1362_1362/newyork/177327-1.html

http://www.loopnet.com/xnet/mainsite/news/news.aspx?DocID=6755&sourcecode=1lntd009

YEAH FOR INDUSTRIAL REAL ESTATE!

YEAH FOR INDUSTRIAL REAL ESTATE!

by Jodi Summers

Yeah, everybody is complaining about the market, but there are still industrial deals in the works.

The latest nod to the sector is that Brookfield Asset Management, a Toronto-based property manager, noted, “The illiquidity of the markets is presenting us with investment opportunities which,” the company said in a letter to shareholders, “should enable us to earn returns far higher than we would normally expect.”

Brookfield Asset Management owns office buildings, hydroelectric plants and timberland and sold over $1.0 billion in assets last year to raise cash as credit markets tightened.

Locally, closings lately have ranged from a $5 million first mortgage financing in Irvine for a 70,000-square-foot industrial property situated on a 5.16-acre lot in Irvine, according. Financing was arranged through seller, Goodyear, and based on a based on a 10-year term and a 30-year amortization schedule.

Above and beyond, a 484,000-square-foot lease brought occupancy to 100% at Kaiser Commerce Center, a ProLogis development of 5.9 million square feet in nine buildings in Fontana. Mike Del Santo, first vice president and market officer for ProLogis, notes that in the past 60 days, the Denver-based REIT has leased just under 1.2 million square feet of recently developed space to major logistics users in the region.

In another recent deal, 282,000 square feet in the Ontario submarket was leased to Columbus, OH-based Safelite AutoGlass. Safelite will occupy space at ProLogis Park Ontario Airport, in a newly constructed, 681,000-square-foot facility.

In a group of leases in Anaheim and Garden Grove in Orange County, six industrial tenants recently signed leases for 200,000 square feet of space at WCV Commercial Properties’ Tower Park complex and at Garden Grove Industrial Park. The leases accounted for approximately 40% of the 245,192-square-foot Tower Park complex and 50% of the 252,184-square-foot Garden Grove project.

And in one of the largest leases in the county this year, noodle maker IHOI Inc. leased a 155,805-square-foot industrial building at 14524 Myford Rd. in the Torrance area.

On the sales side, China-based Winco DWL Industries Co.’s acquisition of a 44,172-square-foot industrial property in Cerritos, will house the firm’s West Coast distribution operations. Winco is a manufacturer and importer of kitchenware and tableware to restaurants and chefs worldwide.

http://www.cityfeet.com/News/NewsArticle.aspx?Id=31995

http://www.forbes.com/2009/02/13/brookfield-asset-real-estate-equity-0213_property_30.html?partner=alerts

$40M FOR ONE OF THE LARGEST MULTI-USE TENANT CAMPUSES IN SOCAL

$40M FOR ONE OF THE LARGEST MULTI-USE TENANT CAMPUSES IN SOCAL

Koll/PER, a partnership of the Newport Beach-based Koll Co. and the Public Employee Retirement System of Idaho, has acquired the 313,367-sf College Business Park from the Newport Beach-based Wohl Investment Co. for $39.9 million. The property consists of 17 single-story industrial, office and flex buildings in a 24.55-acre business park that straddles the county line between Los Angeles and San Bernardino counties in Upland, CA.

College Business Park is situated at the northeast intersection of Foothill Boulevard and Monte Vista Avenue. The county line traverses through the property along Monte Vista.

According to Armando Enriquez, acquisitions manager for Koll Co., the investment firm was attracted to the property by its “exceptional location in a strong market area, great visibility, outstanding curb appeal and functional site layout.”

The concrete tilt-up buildings at College Business Park range from 13,369 to 22,426 sf, with tenant sizes ranging from 600 sf to 14,000 sf. The project comprises more than 200 suites, with 13 of its buildings offering small-unit warehouse and flex space with varying percentages of office-build-out. The other four buildings include 100% build-out. With 1,067 total parking stalls, the project has a parking ratio of 3.4 spaces per 1,000 sf of building space.

Enriquez notes that the property is one of the largest multi-tenant business campuses in Southern California, providing the flexibility of offering 100% office build-out and flex and industrial space in one project. This variety of product appeals to a diverse set of tenant types and the diversification “helps limit risk exposure to any one tenant type,” Enriquez says.

Lack of available large land parcels coupled with high land prices, creates barriers of entry that may minimize, if not prevent, future development of comparable properties nearby.

OFFICE BUILDING TITAN GOSSIP UPDATE

Robert Maguire III, developer of many of the skyscrapers in downtown Los Angeles, has abandoned his last-ditch effort to buy the company that he founded and has been forced out as chief executive and chairman, according to people familiar with the matter.

The board of Maguire Properties Inc., under pressure from hedge-fund investors, voted Saturday to replace Mr. Maguire as CEO with Nelson Rising, a former Maguire executive who later ran another real-estate company, Catellus Development Corp., people said.

Read it all @

http://online.wsj.com/article/SB121096909950099407.html?mod=CommercialRealEstateMain_1

The~~ first article…

OFFICE BUILDING TITAN GOSSIP

We were reading the commerical real estate articles in the Wall St. Journal when we came across this interesting tidbit:

“Robert Maguire III, who built much of the Los Angeles downtown skyline, including the 72-story U.S. Bank Tower, is in danger of losing control of Maguire Properties, which he serves as chairman. A number of hedge funds have taken a sizable position in the real estate investment trust and have been threatening to put a new slate of officers up for election if the company is not sold or if the board does not take dramatic steps to forge a turnaround.”

read the whole article @

http://online.wsj.com/article/SB120959154985857475.html?mod=CommercialRealEstateMain_1

Industrial Property Sales Update

 “We’re seeing no significant changes in vacancy rates or rent growth, so the fundamentals in commercial real estate still seem to be respectable,” notes NAR Chief Economist Lawrence Yun. “Under normal circumstances, near-full occupancy coupled with positive rent growth would be of strong interest to investors, but we’re not seeing that. The credit crunch has filtered into the commercial real estate market.”

Industrial activity remains strong in port and distribution hubs, with relative weakness around many manufacturing centers. International trade continues to play a pivotal role in industrial real estate.

Vacancy rates in the industrial sector will probably average 9.6 percent in the fourth quarter of 2008, up from 9.4 percent in the same period last year. Annual rent growth is projected at 3.3 percent by the fourth quarter, down from 3.6 percent at the end of 2007.

The areas with the lowest industrial vacancies include Los Angeles; San Francisco; Tucson, Ariz.; Salt Lake City; Orange County, Calif.; and Portland, Ore., all with vacancy rates of 6.1 percent or less. Los Angeles is expected to remain a landlord’s market for the next four to five years.

Net absorption of industrial space in 58 markets tracked is likely to total 134.7 million square feet in 2008, up from 120.2 million last year. Industrial transaction volume in 2007 was a record $46.0 billion, compared with $38.9 billion in 2006.

http://www.realtor.org/press_room/news_releases/2008/fundamentals+holding+in+commercial+real+estate

THE ANAHEIM CANYON BUSINESS CENTER WILL EXIST WHERE BOEING ANAHEIM HAS BEEN

THE ANAHEIM CANYON BUSINESS CENTER WILL EXIST WHERE BOEING ANAHEIM HAS BEEN

   Phase I of a 102-acre redevelopment site is underway in Anaheim…where Boeing still stands. The plan calls for the renovation of 450,000 sf of existing buildings and 1.2 million sf of modern, LEED-certified office, warehouse and retail facilities.

The deal was struck between ING Clarion Partners, and Panattoni Development and Boeing for the acquisition and redevelopment of the 102-acre site.  Panattoni recently closed on the first 61 acres of the property and has the remaining acreage under contract.

 “That first chunk includes buildings that we can and have anticipated renovating, but our actions ultimately will be driven by demand factors,” notes Mike McCann of ING. “We are currently talking with folks interested in leasing renovated space but we also are evaluating a plan to tear down that space and build new industrial in these early phases.”

 The site is located on East La Palma Avenue just north of the Riverside (SR-91) Freeway between both the Orange (SR-57) Freeway and the Costa Mesa (SR-55) Freeway. The property is situated at the center of a 2,300 acre zone designated by the city as the “Anaheim Canyon Business Center,” which is scheduled for major redevelopment.

  The expectation is that the industrial that ING and Panattoni will develop 20,000- to 40,000-sf for-sale product, “but if the market stays healthy (and rents continue to grow), in two years time renting the space may work as well,” observes McCann.

 The property current holds 14 office and factory buildings containing 1.5 million sf. Boeing has leased back most of that space and is tentatively scheduled to give back the first chunk of it–about 15 acres–for renovation or redevelopment this summer.

 The cost of the acquisition and the value of the lease back were not immediately available. McCann declined comment, citing a confidentiality agreement, and Boeing has not yet disclosed the information in any SEC filings.

 Generally speaking, McCann says the cost of the land was such that it could be profitably used for industrial or office in part because the allowed density for either is .5 sf of building area for every 1 sf of land area. As well, he says the cost to lease industrial warehouse space in the area has risen 50% over the last two years and now stands in the mid $0.60s NNN for larger box space and more for smaller chunks. “North Orange County is a very healthy industrial market,” he says.

  Despite there being a schedule for Boeing vacating the property, it can delay any of those plans and can even call off the sale of the remainder of the property. But based on the company’s plans to consolidate operations in Huntington Beach, McCann says he expects Boeing to eventually follow through on both counts.

 “There was tremendous competition for this site in the development community,” says Panattoni principal Stephen Batcheller. “Our partnership with ING Clarion was instrumental in fulfilling Boeing’s desire for an expedited transaction….”
 

 Info courtesy of Brian K. Miller
GlobeSt.com Commercial Real Estate News and Property Resource
 http://www.globest.com/news/1069_1069/orangecounty/167330-1.html?type=pf