Office vacancy rates in the San Fernando Valley have doubled in the past two years – in some areas like the Warner Center, vacancy rates are close to 20 percent. In today’s market tenants are being choosier and more careful than ever when deciding on a space, especially when there might be a risk that a property may be underwater or end up being foreclosed on by the lender. Today tenants are evaluating property owners more extensively, inquiring about the owner’s finances, debt level and overall viability before signing lease agreements, said Scott Romick a principal at Lee & Associates- LA North/Ventura Inc. “It’s interesting, now tenants are interviewing the owners making sure that they are viable,” said Romick, who is in the process of closing a lease transaction with a national institution interested in relocating to an 8,000 square foot space in Sherman Oaks. Romick, who represents the property owner, said the non-conventional space would have to be gutted and rebuilt to accommodate the national institution’s requirements, which would translate into approximately $300,000 in tenant improvements or $40 per square foot. The tenant, he said, is requesting to review the property owner’s finances and debt structure in order to make sure that those tenant improvement dollars are available and will be paid – a request that is becoming more and more common these days. There’s always the risk that an owner in financial trouble may not be able to meet tenant improvement and building maintenance obligations as well as commissions and broker fees involved in the lease transactions. Taking it one step further, more tenants are now requesting the landlord provide them with a non-disturbance agreement from its lender before they sign a lease. A non-disturbance agreement is a document whereby the landlord’s mortgage lender agrees that the tenant may remain in possession of the premises if the lender takes the property back in foreclosure. Without such an agreement, the lender may be able to foreclose on the property and require the tenant to vacate the premises. Getting these agreements from the lender adds another layer of work that must be put into a lease transaction and it’s not always easy to get a lender to agree. According to Romick, the most important thing is to be upfront and honest with tenants in order to move these transactions forward. The property owners he represents, he said, have been meeting one on one with potential tenants. Big Deal New York –based American Reality Capital Trust Inc., a real estate investment trust, purchased two distribution facilities leased to Payless and Brown Shoe Co. from Clayco Construction Co. for $68.78 million. One of the distribution centers is located in the Tejon Industrial Complex, an area that more San Fernando Valley brokers are starting to see as the new frontier for property and land acquisitions. Brown Shoe Co., owner of Famous Footwear, currently leases the 351,723-square-foot building at 5621 Dennis McCarthy Drive, which American Reality Capital purchased for $23.85 million. John DeGrinis, Patrick DuRoss and Thomas Taylor of Colliers International, partnered with Chicago-based Venture One Real Estate’s Roy L. Splansky and Mark B. Goode, in representing the seller, St. Louis-based Clayco Realty Group. The investment trust, according to DeGrinis, offered the buyer a long term income stream from a name brand tenant in Famous Footwear. At $68 per square foot this was not an example of an investor looking for a cheap deal. Instead it reflects a trend of investors looking to find opportunities that provide continued returns, said DeGrinis. The Tejon Ranch distribution center services over 350 Famous Footwear stores west of the Rockies. New Construction A Beverly Hills-based real estate firm operating as NK Studio City, LLC plans to begin construction immediately on a 125-unit apartment complex in Studio City, after securing a $21 million construction loan arranged by Lucent Capital, a Los Angeles-based real estate investment banking firm. The development called The Grand Vista Apartments would be located on 11154 Aqua Vista Street. The project would consists of a mix of one, two and three bedroom market rate apartments and would feature amenities including a swimming pool, sun deck, tennis courts, and a clubhouse. The project is slated for completion in mid 2012. Transactions Steve Weiss of NAI Capital’s Encino office represented Northridge Business Center in the sale of 35,000 square feet of land located at 8875 Tampa Avenue in Northridge to Chi-fil-A, Inc. The transaction value was not disclosed. The 35,000 square foot lot is part of a larger 100,000 square foot parcel NAI Capital currently has on the market for sale. The parcel that Chick-fil-A purchased is currently occupied by Sizzler until early next year. Weiss said the buyer intends to demolish the existing building and build a new Chick-fil-A. The remaining 65,000 square foot parcel (formerly occupied by Harper’s Bar & Grille) is still for sale. Multifamily deals Clyde Isaacson, an investment specialist in Marcus & Millichap’s Encino office, marketed a 28-unit apartment property located in Van Nuys, which recently sold for $2.9 million. Isaacson also represented the buyer, a private investor. Marcus & Millichap also transacted the sale of a 26-unit apartment property located in Winnetka which sold for $3.3 million. Jeff Louks and Matt Ziegler, investment specialists in Marcus & Millichap’s Encino office, had the exclusive listing to market the property on behalf of the seller, a limited liability company. They also represented the buyer, also a limited liability company. Staff Reporter Andrea Alegria can be reached at (818) 316-3124 or at [email protected]
