Sares-Regis Working on 157-Acre Industrial-Retail Project in Pico Rivera
COMMERCIAL
Could another REIT buying binge be on the horizon? Maybe.
The stocks of real estate investment trusts have made a nice rebound lately, thanks to Wall Street’s ongoing search for relief from the sometimes wild fluctuations of tech and Internet stocks.
“People have gone back and looked at the earnings REITs are generating and the fundamentals in the real estate market and deciding that this is a pretty attractive place to allocate capital right now,” said Jim Bracken, an analyst with Greenstreet Advisors, a respected Newport Beach-based research firm. “I think if you look at the first two quarters of 2000, the number of positive surprises greatly outweighs the number of negative surprises in the REIT market.”
This search for stability has resulted in REIT stocks rebounding almost to the point of their net asset value (the value of that company’s property holdings). Indeed, some REIT stocks have already surpassed that magic net asset value figure,Menlo Park-based Spieker Properties for one.
Trading near or above their net asset value allows REITs to “start talking to property owners that have assets,” Bracken added. “This gives them currency to go to the auction tent and bid with everyone else. It’s not the turbocharged currency of years past, but now they have the currency.”
“I wouldn’t be surprised to see them become more active as buyers, which is something that hasn’t happened for two years,” said Bracken.
In the past, REITs simply issued additional stock to raise funds for acquisitions. That practice came to a near-halt when REIT share prices fell to levels their managers believed were undervaluing their firms.
Instead, most REITs decided to slow their acquisition activity. Instead firms concentrated on selling some of the properties they acquired earlier in the current real estate cycle, believing that they had already taken most of the upside. The funds generated by those sales were then used to acquire properties that were judged to still be undervalued,an increasing rarity in today’s mature market,or to develop entitled land parcels, a more common occurrence. Bracken doesn’t see REITs moving away from this strategy just yet.
He also does not believe a round of consolidation is in order.
“If both companies are trading at deep discounts to their net asset value, a combination may make sense,” he said. “But there aren’t that many synergies among REITs. It’s a zero-sum game.”
Sares-Regis’ Big LA Project
The Irvine-based Sares-Regis Group,very active in Orange County, having signed a co-development agreement with Starpointe Ventures to jointly develop a $55 million, 250,000-square-foot office complex at The Campus Centre masterplanned project in Irvine,also has quite a bit on its plate in Los Angeles County.
The real estate investment and development company is moving forward on its acquisition of a roughly 157-acre property in Pico Rivera owned by the Northrop Grumman Corp. Last month, Sares-Regis signed a purchase and sale agreement for the property, which at one point was the headquarters for the B-2 stealth bomber program and employed 13,000. The deal, terms of which were not disclosed, is expected to close by the end of September.
John Hagestad, managing director and principal of Sares-Regis, said his company is doing its due diligence on the property. Sares-Regis plans to developed 50 to 60 acres into a retail center of roughly 500,000 square feet. The remaining acreage will be developed into industrial and manufacturing facilities, which will total roughly 2.5 million square feet.
There’s still quite a bit of work to be done before any new construction can take place, namely the demolition of roughly 3 million square feet of existing buildings, Hagestad said.
“Our hope would be that by the end of the first quarter or the beginning of the second quarter we can begin construction,” he said.
“We think it’s a very strong market,” Hagestad added. “We’re extremely optimistic about the mid-counties market. We’re very bullish and extremely excited about that project.”
Sares-Regis continues to eye opportunities closer to its OC headquarters, Hagestad said. In addition to the joint venture with Starpointe, Sares-Regis also is developing a luxury apartment complex at The Campus Centre site.
“We’re always looking,” he said. “I think our plate is full for the immediate future. With these two projects (in Irvine and Pico Rivera), I think we have enough, at least for the next six months. Obviously there’s little things that are not nearly as big that we are processing as well.”
RESIDENTIAL
JH Real Estate Partners of Newport Beach has paid $12.5 million for the 160-unit The Arbors Apartment complex at 1100 E. Fairhaven Ave. in Santa Ana.
Built in 1969, the Arbors Apartments underwent a major renovation in 1998 and 1999 by former owner CT Realty Corp. of Newport Beach.
Joe Leon and Ray Eldridge of CB Richard Ellis represented both parties in the transaction.
Mohican Complex Sold
Mohican 1152 Partners LLC of San Gabriel has paid $1.3 million for the 21-unit Mohican Apartments complex at 1152 N. Mohican Way in Anaheim. The property was owned by Corona del Mar-based Mohican Properties LLC.
Ken Morgan and Jay Skenderian of Morgan Skenderian Investment Real Estate Group represented the buyers.
