Irvine’s SVN Equities LLC has unloaded the one Orange County holding in its portfolio with the $11.3 million sale of a business park in Garden Grove.
Twomey Holdings LLC of Newport Beach bought Garden Grove Business Park, a 99,674-square-foot office and industrial business park.
The park, on Westminster Boulevard near the Santa Ana (I-5) and Garden Grove (22) freeways, has five single-story and two-story office buildings. The park is full.
Don’t expect to see SVN Equities,the investment offshoot of brokerage Sperry Van Ness,out of the local market for long, President Burton Young said. The company has its eyes on a few properties, as it looks to buy about $200 million worth of office, industrial, retail and apartment buildings this year.
That’s up from recent years, when SVN Equities aimed to buy $100 million to $150 million annually. It mostly owns business parks in Colorado, Georgia, Idaho, Utah and elsewhere in California.
The company, formed in 1998, has posted a stronger than expected track record, according to Young. It aims for net returns of about 16% to 18% for investors. For the first 30 properties it has bought and sold, returns have been closer to 40%, Young said.
SVN Equities paid $5.2 million for the Garden Grove park in 2002, more than doubling its money in the sale. John Rothwell and Jim St. Omer Roy of Daum Commercial Real Estate Services’ Newport Beach office represented Twomey Holdings in the buy. Frank Kosi of Sperry Van Ness’ Newport Beach office represented SVN Equities.
SVN Equities’ primary investors are wealthy people. It also deals with a number of money managers for athletes and entertainers, Chief Executive Rand Sperry said. It also encourages brokers to invest in the deals they bring to SVN Equities.
Sperry describes the company as a “boutique” investor that takes a different approach to investing than the tenant-in-common companies it often competes with for deals.
“We don’t make money until (our investors) make money,” Young said.
Industrial Strength
Orange County’s industrial market has moved up a few notches in the rankings of the country’s best markets to invest in, according to a report by Marcus & Millichap Real Estate Investment Services.
The county now ranks No. 3 among 22 markets covered by the company. It was No. 5 a year ago. Los Angeles is the country’s top market, followed by Seattle.
Average asking monthly rents here are expected to rise 3.8% to 68 cents per square foot this year, on par with last year. Developers are set to add 2 million square feet of industrial space by year’s end.
Capitalization rates,expected returns from rents and fees,appear to have bottomed, according to the report. Buyers and sellers are likely to rely more on revenue growth projections for valuations rather than potential appreciation, according to the report.
“A large pool of buyers will continue to compete for the limited number of industrial properties that come to market in 2007, which will sustain pricing pressure,” said John Przybyla, regional manager of Marcus & Millichap’s Newport Beach office.
A year of slow housing sales has made a big difference for high-rise condominium plans around the county.
To get construction loans for condo projects, developers in the past usually have had to get their projects about 40% sold before starting construction.
Now that threshold is closer to 50% or 60%, according to Matt Montgomery, director of real estate development for Phoenix-based Opus West Corp., who spoke at a recent housing industry conference sponsored by the Orange County chapter of the Building Industry Association.
Construction loans are just one issue facing developers. In Irvine in particular, “It’s not a slam-dunk to get land entitled to residential now,” Montgomery said.
Opus West doesn’t have any near-term plans for more housing in the area, Montgomery said.
“We’d love to do one (high-rise) near the coast, but we can’t get that approved,” he said.
Opus West and partner Geoffrey H. Edmunds California Inc. of Arizona already have financing in place for their third and final condo tower being built along Jamboree Road. It is set to be completed in about 18 months.
The companies are using different sales tactics for the last building, where about 40% of the condos already are sold.
“We’re reaching out to the broker community more for this project,” Montgomery said.
Brokers, by and large, have not been speaking highly of high-rise living in the area, he said.
