Buchanan Street Partners, a Newport Beach real estate adviser and investor, has closed more than $10 billion in deals since starting in 1999.
The firm provides funding for owners and developers and makes investments of its own in real estate deals.
About 70% of those deals have been made west of the Mississippi.
That could change a bit with a New York office opening this year.
For now, the West still rules. A recent $145 million investment and financing deal in Las Vegas represents the firm’s largest investment yet, said Robert Brunswick, chief executive of Buchanan.
Along with Irvine’s CIP Real Estate Property Services, Buchanan just bought 18 office and industrial buildings within Hughes Airport Center.
Stoltz Management Co. sold the buildings.
The buildings total 892,000 square feet on 51 acres and include two parcels totaling 10 acres that can be used for development.
The buildings run from 32,700 square feet to 75,866 square feet. They’re 95% full.
This deal is the largest commercial real estate buy in Las Vegas in the past year, according to CIP.
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Brunswick: Vegas investment is firm’s largest yet |
Buchanan and CIP invested $30 million in the deal.
Buchanan Executive Vice President Tim Hawthorne secured a $116 million combination of fixed and floating rate financing from Greenwich Capital Markets Inc., part of Royal Bank of Scotland.
It’s the second Las Vegas venture undertaken by Buchanan and CIP.
The two companies bought six buildings in Hughes Airport Center totaling 420,811 square feet of office and industrial space in early 2005.
With growth in Vegas, “(Domestic) real estate assets are harder and harder to build due to tight land availability and rising land and construction costs, making this acquisition extremely significant for us,” said Chuck McKenna, CIP principal, in a statement.
Shrinking Cap Rates
Capitalization rates,the expected return from rents and fees after buying a building,continue to go down.
In some cases, local industrial buildings are trading at cap rates of about 5%.
Rates for premier office buildings are even lower.
That’s sending some big investors to Europe and Latin America, where higher returns are possible.
“The flood of capital is terrifying to us,” said Christopher Fiegen, chief financial officer of Chicago-based Equity International, speaking at the IMN Real Estate Opportunity & Private Fund Investing Forum in Laguna Beach late last month.
Earning a strong profit on local real estate still is possible, said Timothy Ballard, chief investment officer for Buchanan.
The Newport Beach-based firm gets returns in “the high teens” by finding the right niches, Ballard said, days before the company’s Las Vegas buy was announced.
Buchanan buys into buildings being sold off by corporate owners. They often are more concerned about getting assets off their books than profits.
The firm also takes on redevelopment projects, he said.
“Find a niche where you can grow income and not just wait for land prices to increase,” Ballard said.
DBN’s Dirty Work
Laguna Hills-based DBN Development, formed last year, now has about $200 million of projects in the works, including a trio of retail projects in the Inland Empire’s San Jacinto region.
Now the company, led by Steve Delson, a former executive with Mission Viejo Co., is starting up a division focused exclusively on buying, cleaning up, rezoning and selling contaminated parcels in Southern California.
Bob Bunyan, who also worked at Mission Viejo Co. and J.F. Shea Co.’s Shea Homes, is managing director of DBN Environmental Properties.
“We’re looking at small and medium sized parcels, not the large superfund sites,” Bunyan said.
Typical buys could be of one to five acres.
The plan is to buy about four or five properties, totaling about $10 million worth of land, this year.
A $6 million deal the company is looking at in Santa Barbara could push that figure higher, according to Delson.
DBN is looking at space where land has been contaminated by cleaning fluids used by dry cleaners and gas stations.
The company plans to acquire the sites as-is and work with governmental agencies to remediate them.
Some of the sites could be local.
“There are a number of these types of properties in Southern California, as well as Orange County,” Bunyan said. “It’s more widespread, and pervasive, than you would think.”
Fluke of Nature
Brea-based Nature’s Best is looking for distribution space,but not as far away as New York.
In last week’s page 1 story on the distributor of health and natural products, we included background (and a picture) from a different Nature’s Best, a nutrition company in Hauppauge, N.Y. Our bad.
Brea’s Nature’s Best also distributes vitamins and health drinks. Its products also include groceries, frozen foods and other supplements.
