Watt Cos., a Santa Monica-based developer, is bailing out an Irvine-based builder that ran into trouble with a 130-home development in Riverside County.
The equity injection of $4 million to $5 million by Watt, a commercial, industrial and residential developer, means that Granite Homes Inc. can now move forward with its Mosaic project in Menifee, an unincorporated community near Temecula.
Financing troubles forced Granite to stop construction about five months ago when home sales slowed amid the credit crunch. Western Riverside County had been among the fastest growing areas of the nation this decade.
The equity investment, which closed in late March, has allowed Granite to pay off the
$15 million balance of its land acquisition and development loan with Cleveland-based KeyBank, a unit of KeyCorp.
Watt Chief Executive Jim Maginn said the investment was a good deal for the developer, despite the weakness in the housing market. The company previously has been a passive investor in a few small deals with Granite.
"Watt has the building expertise, strong balance sheet and operational experience necessary to identify and underwrite deals of this nature," said Maginn in an e-mail. "We continue to look for such partnerships throughout California."
The partnership could be a harbinger of more bailouts as established developers look for deals with less established builders that need help completing residential subdivisions. The financing crunch stemming from the meltdown of the subprime mortgage market has made it extremely difficult for builders to finance any kind of residential development.
Construction at the 43-acre site started again three weeks ago, with changes coming to the second phase of 63 homes. The second phase is slated to include many units that will be downsized and sold at a lower price point to reflect changes in the marketplace.
The most modest homes will be about 800 square feet smaller than had been originally planned, coming in at around 1,400 square feet, with prices in the mid-$200,000s. The subdivision is expected to be completed in 30 months.
"We are very excited to partner with the Watt group yet again and it does give us an opportunity in what is a tough homebuilding market to be out and open a new community and build and sell homes," said BJ Delzer, co-owner of Granite.
The San Gabriel Valley has one of the tightest industrial markets in Los Angeles County. And despite the downturn in commercial real estate, industrial leases are still getting signed though landlords no longer appear to have the upper hand.
Food Makers Equipment, which reconditions and manufactures bakery equipment, moved into a 40,000-square-foot warehouse at 16019 Adelante St. in Irwindale. While the total value for the five-year lease was undisclosed, it started at 64 cents per square foot per month on a full-service gross basis.
Rick Sheckter of Grubb & Ellis Co., who represented the tenant, noted that rents have "flattened out," with the deal consistent with market rates.
"The pendulum is swinging back to the middle," Sheckter said.
The lease term began Feb. 1 and Food Makers has already upgraded the building, which houses a test kitchen and showroom in addition to a production area.
Ryan Campbell, of Grubb & Ellis, also represented Food Makers.
The Cole Associates represented landlords, Donald Cavalletto and Louis Cavalletto II, brothers who invest in Southern California real estate.
A team of Jones Lang LaSalle Inc. brokers has been tapped to handle leasing for the Atria West office complex in Westwood.
The Class A, 178,719-square-foot office complex at 10585, 10635 and 10669-10685 Santa Monica Blvd. was recently purchased for an undisclosed sum by Alaska Permanent Fund Corp., a fund financed by Alaskan state oil royalties.
The purchase from seller Legacy Partners Inc. was conducted by LaSalle Investment Management Inc., a subsidiary of Jones Lang LaSalle. Broker Lisa St. John will handle leasing along with Peter Best and Brian Niehaus.
The new owner takes over the ground lease of the property, which is owned by the Pardee Family Trust. The lease expires in 2085.
Staff reporter Daniel Miller can be reached at email@example.com or (323) 549-5225, ext. 263.
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