This Week's LA Deal Sheet

California may not have a drop of water left, but there's one place liquidity abounds: the real estate finance market. Recent transactions by Sonnenblick-Eichner, with talking points like rate locks and non-primary markets, illustrate once again that everyone who's in the real estate lending business is keen to make loans.

Led by principals David Sonnenblick, Patrick Brown and Elliot Eichner, the firm recently arranged nearly $49.7M of 10-year fixed rate financing through Societe Generale for a portfolio of four Hilton Garden Inns totaling 477 rooms in Green Bay, Kimberly and Oshkosh, WI, and Grand Forks, ND. (If you Google secondary and tertiary markets, Wisconsin and North Dakota will show up.) Two of the hotels were on ground leases, and all were full-leverage fundings with interest rates in the mid-4% range, a 30-year amortization and five years IO. As with many of the firm's recent assignments, the client opted for early refi, paying prepayment penalties, to avoid higher rates later. Sonnenblick-Eichner closed the borrower's original loans in 2006, when the rate was 6.5% with 25-year amortization, and people thought terms couldn't get any better.

The firm also arranged $41M of 3.5% first mortgage financing for Continental Park Terrace, a 200k SF office building in El Segundo, for an owner that had a maturing loan and didn't want to pay a prepayment penalty. The Class-A property, located in a high-quality campus setting in a trending South Bay submarket, generated tremendous interest from both life insurance companies and Wall Street investment banks. The borrower ultimately went with an insurance company that provided a free rate lock for over 100 days until the prepayment burned off, during which rates increased by at least 40 to 50 bps.

Depending on the transaction, Sonnenblick-Eichner is seeing 10 to 20 competitive quotes for every deal. A $153M first-mortage financing for the Pacifica hotel portfolio, consisting of 10 oceanfront properties totaling 739 rooms in central and Southern California and Port St. Lucie, FL, drew bids from multiple capital sources before a CMBS lender was selected. But even a smaller deal like a $10.5M refi for the Holiday Inn Express Santa Barbara (above) received 20 quotes. Built in 1916 as the Hotel Virginia, the 61-room limited service hotel is listed on the National Register of Historic Places and is a City of Santa Barbara-designated historical landmark. The low-leverage loan, funded by a Wall Street investment bank, is IO for the entire term.

SALES

Est4te Four (no, our numbers key isn't stuck) bought a 44k SF mixed-use building in LA's Arts District, including additional land for potential development, from Thirty By Investments for $21.6M. Originally built in the 1920s for Challenge Cream and Butter, the building (929 E 2nd St) is occupied by creative users. The buyer plans to redevelop it as a hub for the creative industry by adding additional floors on top of the two-story structure. Paolo Carini with Est4te Four says the company is seeking a high-end co-work membership club to anchor the property, which also will feature retail and dining. The buyer is new to LA but has a successful track record, having developed projects in Milan, Italy, and New York, according to CBRE’s Brandon Gill, who repped the buyer with Brandon Burns and Jae Yoo. Metro Resources' Dave Stahl repped the seller. Construction: 2016.

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DP Grand Simi bought Woodlands Plaza, a 61k SF shopping center in Simi Valley (530-660 E Los Angeles Ave) for $15.9M. CBRE's Alex Kozakov, Patrick Wade and Maxx Cohen repped seller B/C Sinaloa Plaza LLC. During escrow, the Vons anchor space was taken over by Haggen, which closed the store before the sale was completed. Alex, Patrick and Maxx were able to negotiate a continuation of the transaction, while navigating through a CMBS loan assumption to close the deal. Major tenants still there include Fantastic Sam’s, Goodwill, H&R Block and Subway.

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Mkott Pich LLC bought an 11k SF office building in Long Beach (1900-1934 Atlantic Ave) from the City of Long Beach for $1.8M. Coldwell Banker Commercial BLAIR WESTMAC's Becky Blair and John Eddy repped the seller.

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Lee & Associates-LA North/Ventura's Mike Tingus and Grant Fulkerson, in conjunction with Sage Realty Group's Joel Kirschenstein, repped Conejo Valley Unified School District in the purchase of two industrial buildings in Newbury Park for a combined price of just under $6.3M. The school district will use the properties (750 Mitchell Rd and 667 Rancho Conejo) to relocate maintenance and operations facilities. The two firms represent multiple school districts and municipalities throughout the state under a strategic alliance. In a submarket where larger buildings are rare, the team had to hit the books to solve Conejo Valley Unified's need for a more efficient facility. "It was pretty clear to us that we weren’t going to find a turnkey solution," Mike says. The 37k SF Mitchell Road property was too small by itself. The answer was to combine it with the 12k SF Rancho Conejo building directly behind and adjacent, connecting the two properties to create a fully functional space. Mike and Grant also repped 750 Mitchell's seller, 3K Properties LLC. CBRE's Bob Boyer and Michael Slater repped the seller of 667 Rancho Conejo, SIMA Rancho Conejo LLC.

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Progressive Real Estate Partners' Frank Vora repped the sellers of a pair of single-tenant properties in Riverside County for a combined $6.9M. CBRE's Don LeBuhn repped the buyer, a San Francisco-based private investor. A 5k SF Chase Bank in Lake Elsinore (31575 Canyon Estates Dr) sold for just over $4.4M or $885/SF. A brand-new, 5k SF Firestone in Riverside (18580 Van Buren Blvd) sold for nearly $2.5M or $500/SF. The 5.28% cap rate was one of the lowest for a tire store in SoCal.

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Orchard Adams LLC bought Palisades Apartments (1210–1226 W Adams Blvd), a 28-unit apartment building near USC, from Palisades USC LLC for $12.6M or $450k/unit. The new owners plan to update the units to maximize rents, according to Avison Young's Robert Ip, who repped the buyer. The opening of the 15-acre, mixed-use USC Village development in 2017 will add to the value of surrounding areas, he says. CBRE’s Laurie Lustig-Bower and Kamran Paydar repped the seller. Located within the USC Public Safety patrol area, the property boasts controlled-access parking, on-site laundry facilities and furnished rooftop decks.

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Universe Holdings completed the $10.5M acquisition of 6600 Woodley Dr in Van Nuys, a two-building, 53-unit apartment complex. The one-acre property has been rebranded Chateau W6600, with plans for $750k in immediate property upgrades and improvements. Marcus & Millichap's Joshua Luchs brokered the deal. This marks the third acquisition in Van Nuys for Universe, which wants to build a concentration in the submarket, reflecting the region's strong multifamily fundamentals and providing benefits of scale.

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Mission Suites, a 117-unit affordable multifamily property in Pomona (1379 W Mission Blvd) traded to a long-term investor in Arcadia for $8.1M or $143/SF, from a seller that was coming to the end of its initial tax credit compliance period. Berkadia's Bruce Furniss negotiated the deal. The  property was 98% occupied at the time of sale. Berkadia also provided the HUD financing for the sale. Community amenities include two swimming pools, two laundry facilities and a learning facility.

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Zian LLC bought 1830 12th St, a six-unit apartment building in Santa Monica, from 2820 3rd St LLC for $2.2M or nearly $367k/unit. Stepp Commercial's Kimberly Roberts Stepp marketed the fully occupied property as a value-add opportunity with a 40% upside in rents, and garnered six offers. The closing cap rate for the 1959-vintage property near the new Light Rail Metro line was 3.6%.

LEASES

Avison Young's Derrick Moore and Amit Parekh completed three long-term retail leases at Level DTLA, a new 303-unit corporate housing tower in the Downtown financial district, on behalf of landlord Onni Group of Canada. SoulCycle (4,177 SF), Sakana Sushi (2,601 SF) and Cognoscenti Coffee (1,416 SF) will be on the ground floor of the 33-story luxury high-rise, which opened its doors in June at 888 S Olive St. The AY team also repped Cognoscenti Coffee and Sakana Sushi, while CBRE repped SoulCycle.

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IDI Gazeley signed a 1M SF lease with a major home improvement retailer at Stratford Ranch in Perris. The developer says the building, which the tenant will use for storage, warehousing and distribution, features several innovative design and sustainability measures. They include the submarket's first use of Ductilcrete, a thinner yet stronger concrete floor slab system, for both the building slab and truck courts. Sustainability features include 100% LED exterior lighting with motion sensors, skylights in 3% of the roof surface to help reduce energy costs, and indigenous landscaping. CBRE's Joey Sugar repped the tenant, while Lee & Associates' Bill Heim and Michael Chavez repped IDI Gazeley.

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The Federal Public Defenders Office renewed its 50k SF offices at 321 E 2nd St in Little Tokyo for another 10 years. Charles Dunn Co's John Anthony and Chris Steck repped the landlord, Chicago-based 321 E Little Tokyo Master LLC. The GSA repped itself. The lease renewal is valued at $16.8M.

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Dollar Tree signed a pair of leases at neighborhood centers in the IE. Several contiguous shop spaces will be combined to accommodate an 8,700 SF store at Vineyards Marketplace in Rancho Cucamonga, bringing the property to 97% leased. In addition, the discounter will operate a 9k SF store in the recently renovated Peppertree Square center in Claremont. Progressive Real Estate Partners' Janine Peltier repped the landlord in both deals.

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Furniture and electronics retailer Dearden’s signed a 10k SF lease at La Puente Shopping Center, Hacienda Boulevard and Fairgrove Avenue in La Puente. James Rodriguez of Colliers Retail Foresight repped the tenant.

KUDOS

No, this isn't a flash-mob game of "Seven Up," but the volunteers from Avison Young's six SoCal offices who helped improve the outdoor spaces at Selma Avenue Elementary School in LA. About 60 employees teamed up with EnrichLA, a nonprofit dedicated to bringing a garden to every school in the city, as part of AY's company-wide Global Day of Giving. Above, LA City Councilman Mitch O’Farrell presents AY's Jeff Vertun, who organized the event, with an appreciation of service award as a red-shirted Tomas O’Grady from EnrichLA looks on.

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Jeff says the SoCal employees donated materials as well as "a lot of sweat equity." The outdoor areas of the elementary school, located in one of the city's lower socioeconomic areas, previously consisted of metal picnic tables on blacktop, and lacked shade. The volunteers built redwood picnic tables, hung large shade sails, and planted a large native garden. They also made enhancements to an existing vegetable garden provided by EnrichLA.
 
EXECUTIVE NEWS

Veteran industrial broker John DeGrinis (here with wife, Lori, on recent trip to Italy) was elected president of SIOR's Greater LA Chapter. The Colliers International senior EVP plans to use his two-year term to increase awareness of the SIOR designation, and how it can enhance members' professional reputations. John, an SIOR since 2001, and his team have closed more than 20M SF of industrial sales and leases totaling $1B over the past decade. Last year, SIOR members reported an average per person dollar volume of more than $33.5M worth of property leased or sold, he notes.

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Jay Rey-Hipolito was named director of property management for MWest Holdings, where he'll help lead the company's national expansion, focused on the acquisition of classic, core-plus and value-add properties that showcase fine or historic architecture. Jay previously worked in management, human development, resident relations and financial management at some of the nation's largest REITs, including Archstone, Equity Residential and UDR.