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Friday, Sep 29, 2023

Developers Bet on Long Beach

During the pandemic, the South Bay has emerged as one of the most enticing markets for developers and investors.
In 2021, 333 multifamily properties sold in the market, up from 198 the year before, according to data from CBRE Group Inc.

Also in 2021, 26 office buildings traded hands, up from 21 the year before.
Industrial sales, meanwhile, have held relatively steady but the properties are seeing a lot of interest.

The vacancy rate in the first quarter was a mere 0.6%, down from 2.2% the year prior, according to data from Jones Lang LaSalle Inc. Asking rents during the first quarter, meanwhile, were $1.62 on a triple net basis, up 57 cents in a year.
Experts say the city’s location near the ports, beach, L.A. and Orange County have always been a driver of interest. But who is interested is shifting.

“In Long Beach recently I’ve represented some tenants going into the market in new locations and some expansions. Due to where Long Beach is with the ports, a lot of port-related industries have always been there but we’re also seeing newer companies occupying space there,” Quint Carroll, a first vice president at CBRE, said.
Carroll said that in addition to new companies in the area, he was also seeing an increase in people wanting to live in the area.

Congressional Place sold for $41 million, pegged for redevelopment.

Chris Benton, a senior managing director at Newmark Group Inc., agreed that the multifamily market in the area was in high demand.
“Long Beach has a fantastic downtown, (it’s a) metropolitan city on the water, it’s the only downtown in L.A. that’s on the water,” he said. “It’s a great place to live, work and play. There has been a lot of new development down there. The city is very pro-development and you can live in a new, pretty building for a significant discount to all the other coastal markets in L.A.”

He said billions of dollars were now being invested in the area.
Anthony Muhlstein, a managing director at Newmark who works with Benton, agreed that part of Long Beach’s appeal was its discounted price.
“We believe Long Beach and San Pedro are one of the last markets on the coast to create value where the other markets are perfectly efficient,” he said.

Peter Yorck, a managing director at JLL, said Long Beach has really seen increased interest in the last two years.
“What we saw in Long Beach during Covid and over the last two years is increased migration into Long Beach from other parts of L.A. and other parts of Southern California,” he said. “You had more rental demand for apartment product and that translated to better rents and that lead to more transactions.”
“Long Beach, the downtown of Long Beach is emerging,” Yorck added. “There are more food and beverage options, more entertainment options going, there are more new build apartments in downtown Long Beach than there have been historically.”

Congressional Place sold for $41 million, pegged for redevelopment.

Benton called Long Beach a “newcomer” compared to other areas in L.A. with lots of development, making it a great opportunity for investors now.

Big sales

And all that interest has led to some big sales in Long Beach, particularly of multifamily assets.
The largest sale so far this year in Long Beach, according to data from CoStar Group Inc., was the Volta on Pine. Gelt Inc. purchased the 271-unit property at 635 Pine Ave. for $156 million.

Other big sales in the area include the 20-story Shoreline Square office building, which sold for $85.5 million; an industrial property at 5900 Cherry Ave. which sold for $51 million; 422 Residences, a 94-unit luxury multifamily property which sold for nearly $49 million; and a hotel which sold for more than $44 million.

Also this quarter, an office building called Congressional Place, which is pegged for multifamily redevelopment, sold for $41 million.
It isn’t the only property pegged for multifamily redevelopment to sell recently.

Late last year Onni Group of Cos. purchased a shopping center pegged for redevelopment for nearly $68 million dubbed Marina Shores at 6500 East Pacific Coast Highway.

Multifamily projects

Multifamily developments are in high demand in Long Beach, where a lot of new developments are planned or have opened.
Recently, the highly anticipated Shoreline Gateway opened. The 35-story project is at 777 E. Ocean Blvd. and was developed by Ledcor Development and Anderson Pacific, along with partners Qualico Developments Inc. and Lantower Residential.

One of the biggest projects on tap now comes from Waterford Property Co.
The company is working on redeveloping the 14-acre City Place Long Beach into Mosiac, a mixed-use property that will have 900 multifamily units, with partners New York-based Turnbridge Equities and Beverly Hills-based Monument Square Investment Group.

Waterford also owns the World Trade Center office asset and the Oceanaire multifamily building with partners.
Waterford’s co-founder, Sean Rawson, is a Long Beach resident and a big believer in the area.
“We’re very strategic in choosing the markets we want to be in,” Rawson said. “It’s a function of understanding the demographics, what the economic drivers are and it’s getting a sense for the business environment in terms of working with a city. What’s drawn us to Long Beach is it’s the fifth or sixth-largest city in the state, it’s situated between two large economic drivers the Los Angeles MSA and the Orange County MSA and it’s on the coast and adjacent to the largest ports in the world.

The economic drivers in place in Long Beach are significant and from a business standpoint, the city of Long Beach is extremely business-friendly and pro-development.”
Rawson said with the multifamily redevelopment, the company was looking at “highest and best use lenses” for the former City Place site.

Onni Group of Cos. paid $68 million for a shopping center slated center for redevelopment.

Muhlstein added that Long Beach has seen 12% rent growth in the last year and the city was “proactive” about development, furthering interest.
Benton, who was involved in the sale of Congressional Place and 6500 East Pacific Coast Highway, along with Muhlstein and other Newmark brokers, said there was “an aggressive bidder pool” for projects with multifamily redevelopment potential.

Benton said the downtown site plan for development made the area desirable.
“Our development site marketing processes in Long Beach have been some of the most competitive ever witnessed in the entire L.A. marketplace,” Muhlstein said.
Yorck agreed that he was seeing more redevelopment into multifamily as well as ground-up developments.

Continued interest

And experts say interest in Long Beach will only increase.
“I expect it to definitely continue to go in the right direction,” Carroll said. “It had good momentum pre-Covid…I anticipate the whole market continuing to trade in the right direction in both multifamily and office and industrial is already there with the port.”

Benton agreed, adding that the market has not seen a lot of new product open yet the way some other markets have.
“With the rent growth that has occurred over the past 12 to 18 months, we feel strongly that investor demand is going to stay high for Long Beach and San Pedro as well,” he said. “We do believe that there is still quite a bit of runway for Long Beach and that is easily seen by the institutional profile of buyer that we are talking about in all these deals…you have some real institutional demand in Long Beach.”

Yorck said that increased interest in the area could lead to more owners being willing to sell to capitalize on high demand and high prices.
More office spaces being built also make the multifamily market more enticing.
And for Rawson’s Waterford, Long Beach will be a continued area of interest.

Waterford Property Co. is creating Mosaic, a mixed-use project in Long Beach.

“We’ll always be interested in Long Beach,” Rawson said. “We’re such big stakeholders there and we’re really excited about the future of Long Beach. It’s not often that you get a city that’s coastal…that has the economic drivers that Long Beach has and also has an existing specific plan that provides development guidelines that have already been approved by the coastal commission.”
“We intend to be a long-term stakeholder in the city,” he added.

Top Q1 Sales in Long Beach

Volta on Pine
(635 Pine Ave.)
Tarzana-based Gelt Inc.
purchased the 271-unit property.
Buyer: Gelt Inc.
Seller: Holland Partner Group
and North America Sekisui House
Asset type: Multifamily
Price: $156 million

5900 Cherry Ave.
An industrial property sold for
$50.5 million.
Buyer: Link Logistics Real Estate
Seller: Plains All American
Asset type: Industrial
Price: $50.5 million

Shoreline Square
(301 E. Ocean Blvd.)
The 20-story property sold for
$85.5 million.
Buyer: Shoreline Square Holdings
Seller: Parallel Capital Partners
Asset type: Office
Price: $85.5 million

442 Residences
The 94-unit luxury multifamily property sold for $48.5 million.
Buyer: MWest Holdings
Seller: Ensemble Real Estate Solutions & Investments
Asset type: Multifamily
Price: $48.5 million

Residence Inn Long Beach
(4111 E. Willow St.) Residence Inn at v4111 E. Willow St. in Long Beach. (Photo by Ringo Chiu) 
The hotel sold for $44.5 million.
Buyer: Success Pro Co., Ltd.
Seller: Positive Investments
Asset type: Hospitality
Price: $44.5 million

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