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Thursday, May 19, 2022

Alliance Showing its Worth in Area Retail Market

A new alliance between Marcus & Millichap and CBM is already paying off in a very difficult real estate market, especially in the retail sector. The partnership, which was contractually formalized and announced this summer, enables Marcus and Millichap’s clients who want to buy or sell retail commercial space to tap into the expertise of CBM, who is devoted exclusively to the leasing and management of retail shopping centers, strip malls and lifestyle centers. The joining of forces has helped move deals forward, which otherwise might have never happened. The latest example centers around a freestanding property occupied by a fast food restaurant in the North Valley, which Rick Rivera, president of CBM, asked to remain undisclosed because the deal is in the process of being finalized. The property owner wants to sell (single tenant triple net leases are hot right now) but the national fast food chain will not be renewing its lease, which is scheduled to run through 2012. “The fast food chain wants out and wants to sublease the space for the remainder of their lease term,” said Rivera. “But the owner can’t sell a property with a sublease [for only two years].” Enter CBM. The company is now helping negotiate a long-term deal with a new tenant that would also help the fast food chain meet its lease obligations. “CBM is currently in negotiations on behalf of the landlord to sign a brand new ten year lease with a sublessee, and the sublessor [the fast food chain] will be responsible through 2012 as part of the contract,” he explained. By helping find a new tenant after navigating complicated negotiations, CBM made the property prime for selling, and ready for Marcus and Millichap agents to do their thing. Today, retail spaces and shopping centers with high vacancy rates can be impossible to sell. By partnering with CBM, Marcus and Millichap is making sure those properties are made viable, and therefore more appealing to investors, before they go on the market. Many of Marcus and Millichap’s clients are also tapping in to CBM’s expertise for information or advice on how to handle existing tenants who may be requesting rent reductions or have a lease that is expiring, said Rivera. In the process, many of those Marcus and Millichap clients have also hired CBM to manage and lease their properties. In today’s dreary real estate market, the alliance is an example of creative thinking that is boosting business for both parties. A good catch Dallas-based Lincoln Property Company snatched up a coveted brand new, LEED Gold certified office building in Glendale, for $23 million in a distressed short sale. “We had the opportunity to buy the best and newest building in Glendale at the cheapest basis in the entire market,” said David Binswanger, executive vice president of the investment and property management company. This “trophy asset” with heat resistant glass windows made from recycled materials and many other “green” features, was sold by MPG Trust, a firm that has been trying to turn itself around from a crippling debt load, which it incurred during the boom years to finance acquisitions. Located at 207 Goode Ave. the property is one of multiple buildings that MPG Trust owns in Glendale. CB Richard Ellis represented MPG Trust in the transaction. The building is in warm shell condition, meaning new tenants will have the opportunity to build the space out according to their needs and tastes, which is enticing in the current economy as businesses look to consolidate locations and use space more efficiently, said Binswanger. “It provides a blank slate in the market right now for us to try and attract the best tenants,” he said. Lincoln Property Company has already been talking with possible tenants and sending out proposals, he said. There’s been interest from multi-floor tenants, as well as from single tenants that would occupy the entire building. The company hopes to reach upwards of 90 percent occupancy in the next 24 months, he said. The Glendale property is one of five assets Lincoln Property Company has acquired in Southern California this year- all through similar short sale transactions, where a borrower has defaulted on a loan and is losing his property, and a lender is involved in the sale transaction, Binswanger said. The assets range in size from a 550,000 square foot building in Santa Ana, to a 50,000 square foot property in Calabasas. The Goode property was acquired in a joint venture with Morgan Stanley Real Estate Funds. Construction statistics According to Marcus & Millichap’s fourth quarter market report, approximately 2,500 apartment units were brought online in Los Angeles County during the 12 months ending in the third quarter, expanding the county’s inventory by 0.3 percent. In the preceding 12 months, nearly 1,900 units were added. Approximately 2,250 rental units are under way countywide. The report projects this year 3,300 apartment units will come online in Los Angeles County, slightly less than the five-year average of 3,400 units but up from the completion of 1,650 units in 2009. Only two apartment complexes were completed in San Fernando Valley over the past year, both of which were brought into service during the second quarter, adding 419 units. In the previous 12-month period, 374 units were added. During the height of the building boom from 2006 to 2008, apartment deliveries averaged more than 1,200 units annually, according to the report. Nearly 360 apartment units are under way in the area, all of which are slated for completion in the fourth quarter, the report stated. The firm projects San Fernando Valley construction activity will produce 778 units in 2010, up from 374 units last year. Vacancy, however, is expected to dip 10 basis points this year to 4.9 percent. Signs of Recovery Commercial real estate brokerage firm NAI Capital, headquartered in Encino, reported a significant increase in the firm’s business since 2009, indicating that the regional economy is improving. Gross commissions for the privately held company as of October 31, show a year-to-date increase by 20.11 percent compared to 2009. “I believe this is indicative of the improving regional economy,” said NAI Capital Chairman, Mike Zugsmith. “Of our 14 regional offices, 11 of them were up in their numbers and based on November’s already received income, 12 of our offices will be up by the end of the month. As the regional economy continues to improve, it is not unreasonable to expect NAI Capital to be up 25 percent by the end of 2011.” The firm has continued to recruit brokers even during the recession. The firm has added 88 new brokers over the last three years. Staff Reporter Andrea Alegria can be reached at (818) 316-3124 or at aalegria@sfvbj.com

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