Despite all the bad news coming from Wall Street, commercial real estate deals are still getting done in the fourth quarter but they are taking a lot longer to happen and the selling price isn’t what it used to be.
Case in point: the Waterfront, a large beachfront apartment building in Redondo Beach that was sold Oct. 10 by real estate investor Bascom Group LLC of Irvine and equity partner Rockpoint Group LLC. The building, which was purchased by an unnamed, L.A.-based real estate investor, was put on the market way back on Feb. 25.
It was originally thought the 161-unit property at 211 Yacht Club Way could trade in the $400,000 to $500,000 range on a per-unit basis. It wound up selling for $49 million, or $304,000 per unit.
“There were significant challenges in the debt and equity markets that caused investors to readjust their pricing models, resulting in significant downward pressure on values,” said broker Ron Harris of Marcus & Millichap Real Estate Investment Services Inc. in an e-mail interview.
The building, constructed in 1969, is 95 percent leased and includes a 10,000-square-foot Chart House restaurant. The property is on a 55-year ground lease with Redondo Beach, a constraint that drove down the price.
Still, there were multiple offers and it’s a significant sale in a marketplace that has seen few large transactions because of the difficulty in obtaining financing. The unnamed buyer put down $16 million in cash and got a $33 million loan with Fannie Mae.
“Financing was actually not a problem in this case,” said Harris, who represented the seller. “There was Fannie debt out there and Freddie debt out there. Some of the competing buyers were REITs and would have closed all-cash.”
Harris said that he knew of no other large apartment property in the L.A. area directly on the beach. The property has 67 studios, 42 one-bedroom units and 52 loft units. In the last few years 131 units had been renovated along with the common areas.
Greg Harris of Marcus & Millichap also represented the seller. The two agents are not related. Mike Krantz from Southwest Investments represented the buyer.
Torrance Lease
Insurance brokerage Keenan & Associates has signed a 10-year lease restructuring at its Torrance headquarters valued at more than $30 million.
The restructured lease is for 95,000 square feet at 2355 and 2377 Crenshaw Blvd., two Class A buildings that comprise Park Del Amo Campus. The deal closed Oct. 6. Keenan had about a year left on its previous lease agreement.
Ted Simpson of Cushman & Wakefield Inc. said that Keenan looked at another building in the submarket called the South Bay Tower before deciding to stay at Park Del Amo.
“It was pure economics,” said Simpson, who represented the tenant in the deal with the landlord, a joint venture that includes Catellus, a unit of industrial real estate investment trust ProLogis. “The rental rate is probably 10 to 20 percent below market.”
Simpson said that Keenan had leverage because the central Torrance submarket doesn’t have close freeway access and draws few large tenants like Keenan, the largest private insurance brokerage in California.
“If Keenan were to vacate this building the owner would be faced with years of downtime,” Simpson said. “This is a once in every five years transaction in this market.”
The office property is not a typical asset for ProLogis, a Denver-based company that is the largest industrial REIT in the world. It acquired the property with its 2005 purchase of Catellus, a company formed to develop railroad real estate holdings. The Park Del Amo property is jointly owned by the family trust of longtime developer Guilford Glazer, who built the Del Amo Fashion Center in Torrance.
Bill Bloodgood of CB Richard Ellis Group Inc. represented Catellus and the tenant was also represented by Mark McGranahan of Cushman & Wakefield.
Staff reporter Daniel Miller can be reached at [email protected] or (323) 549-5225, ext. 263.
Ground Breaking
On Oct. 14 the city of Carson and the California Department of Toxic Substances Control held a groundbreaking ceremony for a large mixed-use development at a brownfield site in Carson.
The Project:
The Boulevard at South Bay, a 168-acre mixed-use project at 20400 Main St. in Carson. More than 1 million square feet of retail and restaurant space, a hotel and 1,300-plus residential units.
The Developers:
The Commercial Property Group of Newport Beach, a unit of Miami Beach-based LNR Property Corp., and Hopkins Real Estate Group, an Irvine-based real estate developer and owner.
The Site:
The massive parcel, which is next to the San Diego (405) Freeway between Avalon and Del Amo boulevards, has been vacant since 1965, when a landfill closed there.
The Timeline:
Engineering and consulting firm Tetra Tech Inc. is handling site remediation work. Construction is slated to begin in 2010 and the project should open in late 2011.
The Cost:
$850 million.
