A 264-unit multifamily complex in Valencia traded hands for $56.7 million this month.
Decron Properties Corp., an arm of real estate investment group Nagel Family Trust, bought the property known as the Madison at Town Center from Prado Town Center West LLC, a joint venture of Miami’s Lennar Homes Inc. and L.A.’s Regent Properties Inc., according to CoStar Group Inc.
It was a significant discount from the $91.5 million price Prado paid for the property in 2005.
The Madison was built in 2004 as a 341-unit apartment complex but was converted to condos the next year. Only 77 units sold by 2007 so Prado reconverted the others back to apartments.
Today, the 411,000-square-foot property, at 24505-24595 Town Center Drive, is fully leased. Units range from one to three bedrooms, with monthly rents of about $1,400 to $2,400.
David Nagel, Decron president, said that the condo-apartment mixture is typically unattractive to multifamily buyers since they can be difficult to manage. But the steeply discounted price and the high-quality building gave his company the confidence to take the risk.
“From our perspective, it works in our favor because it allowed us to purchase the units at a bargain and so far below replacement cost that when the market turns, it won’t take long for the units to appreciate to a level where we can make a profit,” Nagel said.
Decron plans eventually to convert the rest of the units to condos and sell them individually when the market improves.
The acquisition is the latest in a buying streak for Decron, which has purchased 1,500 units in the last 18 months. The company manages or owns 4,300 units and has a portfolio of an additional 3.5 million square feet of commercial space in California.
Laurie Lustig-Bower from CBRE Group Inc. represented the seller. Decron represented itself .
Speculative Development
A Seal Beach developer is finding promise in speculative retail projects around Los Angeles County.
Heslin Becker Properties recently completed the redevelopment of a Downey retail property that it sold this month, and is getting started on a fast-food and banking shopping center at a former gas station site in Inglewood.
The Downey property, at 8030 Imperial Highway, formerly was the site of a mixed-use office and industrial building that Heslin bought in 2010 as part of a five-property portfolio for $2.6 million, according to CoStar. The company demolished it to develop a 12,258-square-foot spec building last year. Walgreens signed a lease and moved in in the fall. Heslin sold the property this month for $8.1 million to private investment company Downey Property Investments LLC.
“The capital markets are such that investors are trying to get any yield they can, so the preferred product is (leased) single-tenant triple-net properties,” said Matt Heslin, Heslin Becker principal.
Late last year, Heslin Becker bought a 40,000-square-foot gas station property for $1.1 million in Inglewood. It plans to build a 10,000-square-foot shopping center and is searching for retailers.
Secondary Offering
Kilroy Realty Corp. closed a successful secondary public offering last week that raised $382 million.
The West L.A. real estate investment trust sold almost 9.5 million shares between Feb. 9 and 14. Underwriters exercised their option to purchase and sell an additional 1.2 million shares due to demand.
The shares were priced at $42 on Feb. 8, a 1.9 percent discount from its closing price the previous day.
Proceeds from the offering will be used for general corporate purposes, acquiring properties and repaying debt. Barclays Capital Inc., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Inc., and Wells Fargo Securities were the underwriters.
John Guinee III, managing director at Stifel Nicolaus in Baltimore, Md., said the offering was a smart move by the company, given the opportunities to buy in the booming Bay Area and greater Seattle office markets.
“The West Coast office markets … are some of the best markets in the country right now and investors are interested in REITs which have these focuses,” he said. “Kilroy’s share price had appreciated 10 percent in 2011 and another 10 percent in the first month and a half of 2012. They were attractively valued and a good opportunity to raise capital accretively.”
Shares closed at $43.22 on Feb. 15.
Staff reporter Jacquelyn Ryan can be reached at [email protected] or (323) 549-5225, ext. 228.
