sares• regis group newsletter · pdf filedespite monthsof capital market turmoil that...

StrategiesS A R E S • R E G I S G r o u p N e w s l e t t e r

www.sares-regis .com

Summer 2008

Despite months of capital market turmoil that onlyrecently is beginning to show signs of settling, SARES•REGISGroup this year acquired two Southern California apartmentsites and construction is under way on both developments,totaling 570 units.

“We’re fortunate in two ways. First, we found two entitledsites at prices that make sense and, second, we found financing for both projects. In this environment, there arevery few, if any, development firms that can say that,” said Bill Montgomery, President of SRG’s Multifamily Acquisitions& Investments Division.

Grading is under way on both projects, a 312-unit develop-ment in Anaheim called The Crossings and the 258-unit The Grove at Marketplace in Ontario. (See stories on TheCrossings on P. 6 and The Grove at Marketplace on P. 7.)

“Sellers have been slow to adjust their expectations of landvalues to the new market realities of higher returns, slowerrent growth and more conservative underwriting metrics that all money is reasonably requiring today. So finding a seller who’s reasonable on value that you can actually closeon is more difficult today,” Montgomery said.

“The bigger problem is finding the financing and equity re-quired to do the deal. Equity dollars are sitting on the fence,waiting for the market to fully adjust. This tight capital environ-ment is comparable to the recession of the early ’90s,” he said.

Additionally, potential equity partners and banks almost areexclusively interested in in-fill multifamily sites in job centersas opposed to suburban markets. There’s a flight to quality.

Nevertheless, the forecast for Southern California apartmentdemand is strong, Montgomery said.

“In the rush to develop for-sale housing over the last fewyears, we never really built enough apartments for all thepeople who live here and are moving here. That’s why we’re actively looking for more multifamily developmentopportunities,” Montgomery said.

SRG Breaks Development Barriers; BuysTwo Multifamily Sites, Begins Grading

The SARES•REGIS Group is one of the leading developers and managers of commercial and residentialreal estate in the western United States. Currently, the company has more than 6.5 million square feet of commercial and over 2,800 residential units under development. SARES•REGIS Group has a combinedportfolio of property and fee-based management contracts valued at more than $4 billion, includingmore than 14,000 rental apartments and 14 million square feet of commercial and industrial space. Since its inception, the company has acquired or developed approximately 44 million square feet of commercial properties and 19,000 multifamily and residential housing units.

In this IssuePage 5 SRG nears completion of its second spec industrialbuilding in Tijuana. The 230,000-square-foot warehouse-distribution project comes on the heels of the lease by MattelInc. of its 175,000-square-foot building. AIG Global Real Estateis SRG’s financial partner on both projects.

1 Symantec hardly makes a move without SRGNC,which just completed a 550,000-square-foot campus in CulverCity for the giant software publisher. The project earned a LEED Gold Award.

Page 15 Construction is under way on 480 of 820 apartmentsby SRG at Westgate Pasadena, a transit-oriented village on 11.7acres that also will include 23,000 square feet of retail. SRG’sgoal is to earn LEED ratings on the entire project.

Luxury amenities at SRG’s 540-unit The Reserveat 4S Ranch are producing a glowing lease-uprate at the apartment project in North CountySan Diego’s sprawling planned community. See story on P. 15.

SRG Strategies . Summer 2008

than 1 million square feet of industrial space in the East Bayarea of the region.

Brokers Greig Lagomarsino, Todd Severson and AndyZighelboim of Colliers’ Oakland represented the seller.SRGNC will oversee the more than $43 million in new construction on the vacant land and serve as the propertymanager for the project. Irvine-based SARES•REGIS Group,an affiliate of SRGNC, actively collaborated on the acquisitionof the business park and will help implement the futuredevelopment of the new industrial product.

“The Richmond real estate market will always benefit from its central location,” said Birdwell. “There is very little newspeculative construction taking place in the area and the lackof available development opportunities and high land valueswill limit any new supply of industrial and warehouse productfor years to come.”

Construction is slated to begin next year that will more than doublethe profile of Point Pinole Business Park to 1.05 million square feet of warehouse and light-industrial space.

Point Pinole Business Park, a 475,000-square-foot industrial park consisting of three warehouse buildingson 30 acres and 43 acres of adjacent developable land, hasbeen acquired by San Mateo-based Sares Regis Group ofNorthern California. The property at Atlas Road and GiantHighway in Richmond was acquired from Pinole PointProperties Inc. An institutional capital partner financed theacquisition.

The business park includes three high-quality warehouse andlight industrial buildings built between 1999 and 2001. Theproperty is strategically located near highways 80, 580 and780, corridors that provide convenient access to the Bay Area’sthree international airports and the ports of Oakland andRichmond.

The adjacent land acquired with the existing business parkwill be developed with four new warehouse and light indus-trial buildings, totaling 580,000 square feet. Construction isscheduled to begin in the first quarter of 2009 with comple-tion in early 2010. The buildings are 82 percent occupied bysix tenants and the 89,000 square feet of vacant space is inlease negotiations. When completed, the business park willhave a total of 1,055,000 square feet of state-of-the-artwarehouse and light-industrial space.

“We have been actively searching for ground-up industrialdevelopment opportunities in the Bay Area for 10 years, and the acquisition of Point Pinole Business Park providedSares Regis Group an opportunity to further expand ourcommercial real estate holdings,” said Jeff Birdwell, Presidentof SRGNC’s Commercial Division. “The development oppor-tunities on the adjacent land provided an added-value playthat we couldn’t pass up and helps us get back to our indus-trial development roots.” The firm currently manages more

SRGNC Buys Major Industrial Park InRichmond; More Buildings Planned

Short -Term Interest Rates are Low

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Economic Outlook Weak But SoCal Apartments ShouldWeather The Stormn

Delores A. Conway, Ph.D.Director, Casden Real Estate Economics ForecastUniversity of Southern California

Economic growth in the United States slowed consid-erably in recent months due to significant headwinds from thefinancial markets. Credit strains that originated with subprimelending have recently intensified and led to financial turbulence.The housing downturn deepened with mounting foreclosures and home-price reductions. It is widely expected that economicgrowth will remain weak in the first half of 2008 as the credit crisis is resolved.

Although the national economy is slowing, economic activity out-side of the housing and financial sectors has been expanding at a steady pace. The Southern California economy and apartmentmarket are not immune from the economic slowdown. However,they are also supported by increased demand for commerce andtrade, a regional strength, as well as an infusion of higher paying

jobs associated with health care andbusiness and professional services.With short term adjustments alongthe way, employment growth shouldcontinue to slow, but pick up later in the year.

The Southern California apartmentmarkets are poised to weather thestorm, as long as job losses are nottoo severe. Although softening,occupancies are above 95 percent in nearly all submarkets of OrangeCounty and exceed 96 percent in allsubmarkets of Los Angeles County.The Inland Empire absorbed 3,200

new apartments in 2007 and occupancies moved upward. Rentscontinue to rise in all three regions and apartment fundamentals remain healthy.

Los Angeles CountyThe Los Angeles economy continues to grow with the addition of 30,400 new jobs or 0.7 percent in 2007. Although apartmentdemand was weak in the first half of 2007, it picked up consider-ably in the second half, supported by tighter lending standardsand the “credit crunch.” More than 6,200 new apartments werecompleted in 2007, mostly in Downtown LA and Hollywood.

Effective rents increased 3.2 percent in Los Angeles County with an average monthly rent of $1,580 at the end of 2007, up7.5 percent from $1,470 one year earlier. Within California, LosAngeles rents trailed only those in San Francisco and San Jose.

Orange County Orange County has enjoyed several years of strong economicgrowth. But the subprime difficulties in the mortgage sector seriously affected employment growth in 2007, resulting in a lossof 6,600 jobs or 0.4 percent. Demand for apartments increasedsignificantly in 2007 with 1,350 units absorbed. But demand was lower than the 2,163 new units completed and occupanciesdecreased slightly to 96.2 percent.

The average monthly rent for all apartments in Orange County at the end of 2007 was $1,550, up 5.3 percent from 2006.Apartments are no longer undervalued, with effective rents forexisting apartments increasing by 4.2 percent in 2007 and 5.3 percent in 2006.

Inland EmpireThe housing market downturn has led to a slowdown in newhome building and mounting inventories of homes for sale in the Inland Empire. Because the region is underserved by servicessupporting the local population, the apartment market continuedto grow with 3,200 new units completed in 2007 and occupan-cies increased to 95 percent.

Guest ColumnVolume 12 . Number 1

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Delores A. Conway

U.S. GDP Growth is Slowing

Continued on page 20


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Tenant Retention Effort Yields $13.8 MillionIn Lease Renewals By SRG CommercialSARES•REGIS Group’s Commercial Property ServicesDivision renewed five leases totaling $13.8 million with a446,624-square-foot deal for Ontario warehouse-distributionspace to AutoZone and 105,850 square feet of retail space at The Mart in the “Tile Mile” district of Anaheim. Both projects are managed by SRG.

Michael Wood, Director of Leasing in SRG’s CommercialProperty Services Division, engineered the renewals. He saidthe five-year $9.2-million renewal of AutoZone, an aftermarketauto parts seller, was for a building at 1800 Wineville Road inthe Inland Empire’s west industrial market. SRG representedthe owner, Ontario Industrial Partners. AutoZone was repre-sented by Mike McCrary, a broker in the Ontario office ofColliers International.

Wood said the retail lease renewals, which ranged from threeto seven years, were for showroom and warehouse space atThe Mart at State College Boulevard and Winston Road. Theproject totals 182,800 square feet and is 100 percent leased.

Cabinet Factories Company, which signed a $1.5-million leaseof 40,000 square feet, was represented by Darin McDonaldof Lee & Associates Commercial Real Estate Services.

American Floors signed a $1.1-million lease for 10,650 squarefeet and was represented by Peter Loh of ReMax.

Ceramica Tile Pour La Maison signed a $1-million lease of15,200 square feet, and the Sweet Factory signed a three-year, $1-million lease of 40,000 square feet. Both were selfrepresented.

The Mart (below), in Orange County’s building materials hub, is 100 percent leased. AutoZone signed a five-year lease for its West Coast distribution center.

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Volume 12 . Number 1

the-clock manufacturing facility adjacent to the SRG buildingthat Mattel uses to store raw materials.

CB Richard Ellis broker Rich Kwasny, who represented SRG inthe site acquisitions and Mattel lease, says Tijuana’s industrialbase totals 46 million square feet with an overall vacancy rate of 5.9 percent compared to a 15 percent vacancy rate inSan Diego’s adjacent industrial district just over the border.

Kwasny says SRG’s building is in the Alamar industrial districton Teran Teran Boulevard and is less than 1 mile from theU.S. border. “Its proximity to the border crossing is excellent,and that’s important to truckers,” Kwasny said.

Companies with operations in the Alamar industrial areainclude Hitachi, Panasonic, Tyco, Caterpillar, Benson Globaland BAE Systems, a defense and aerospace company. Acrossthe street from the SRG building, the real estate investmenttrust ProLogis is building three warehouse and industrial facilities totaling 692,000 square feet.

Following the successful developmentand lease-up of a warehouse and distribution building inTijuana, SARES•REGIS Group has launched construction on asecond and larger project nearby that’s slated for Septembercompletion and available for lease.

SRG has completed the grading of the 10.16-acre site and isdigging footings for the 230,000-square-foot state-of-the-artindustrial building.

The new building will have a 28-foot interior clear height, 34 dock-high doors, three grade-level doors and a truck courtwith a 120-foot radius. With site coverage of 52 percent, therealso will be space to accommodate storage for 22 trailers.

The new building is in Tijuana’s Alamar industrial submarketwhich has about 13.3 million square feet of inventory. SRGacquired the land in 2007 for $4.5 million. AIG Global RealEstate is the financial partner on SRG’s new and the existingTijuana facilities.

Last year, SRG completed a 175,000-square-foot warehouse-and-distribution building and signed Mattel Inc. to a five-year lease. The giant toy maker has a 500,000-square-foot around-

SRG’s new building is in the Alamar industrial district, within one mile of the United States-Mexico border. Tijuana’s 46-million-square-foot industrial base has a 5.9 percent vacancy rate.

SRG Nears Completion Of Second Industrial Building In Tijuana’s Growing Marketplace

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SRG Under Way On 312-UnitAnaheim Apartment ProjectGrading is under way on a 5.2-acre site inAnaheim that SARES•REGIS Group purchased recently for a312-unit apartment community called The Crossings. Thegoal is for the project to be LEED Certified by the UnitedStates Green Building Council. (See story on P. 16.)

The property on La Palma near Tustin Avenue is near theconfluence of the 55, 91 and 57 freeways and is in a north-ern portion of the major Orange County city that initially wasdeveloped with industrial buildings.

Bill Montgomery, President of SARES•REGIS Group’s Multi-family Acquisition & Investment Division, says the area ofOrange County’s largest city is undergoing a transformationfrom obsolete industrial buildings to a mix of residential and commercial uses.

“There are a lot of new things going on there, including several parcels nearby that are being reprocessed for residen-tial use. This area’s going to be very different a few yearsfrom now,” Montgomery said.

Montgomery said Anaheim is one of the fastest cities interms of processing time and the city favorably views theredevelopment of the area. Other projects planned nearbyinclude a new Class A office project and a major medicalfacility by Kaiser Permanente.

SRG purchased the site that was partially entitled. BlackRockis SRG’s financial partner in the project.

The Crossings is in an area transforming from commercial to residential use.


SRGNC And BlackRock Team Up On First Residential VentureSares Regis Group of Northern Californiaacquired the Hidden Willows Apartments, a 112-unit garden-style property in San Jose.

The deal represents the first residential joint venture withSRGNC and BlackRock Realty Advisors, which provided equityand a bridge loan, said Kenneth Gladstein, SRGNC’s SeniorVice President of Investments.

Hidden Willows was built in 1979 in the historic Willow Glenneighborhood of San Jose. The property has access to thelight rail system and all major Silicon Valley highways. Theproperty has “beautifully manicured grounds, a heated swim-ming pool and spa and unique Mediterranean architecturaldetails,” Gladstein said.

“This acquisition provided the opportunity to acquire anunder-managed property in a desirable submarket that isexpected to achieve above-average rent growth,” Gladsteinsaid, adding a two-year renovation program is under way.

On the operations side, the existing owner management willbe replaced by the SRG professional team, which will applyprofessional pricing premiums, tenant screening and marketing.

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Recent Land Purchase Gets SRG Going On Large Apartment Project Construction is under way by the SARES•REGISGroup on a 258-unit apartment development in Ontariocalled The Grove at Marketplace. It is on an entitled 10.88-acre site that SRG recently purchased from Archstone-Smith.

“This project was ready to go. On May 8, the day after weclosed escrow, we had guys out there grading and workingon the site. There was no time lost in land carry,” said BillMontgomery, President of SRG’s Multifamily Acquisitions &Investments Division. He said leasing is slated to begin in late2009 with completion planned by April 2010.

The project is on South Grove Avenue near the 60 Freeway,Interstate 15 and the Ontario International Airport. It is adjacent to The Marketplace on Grove, a recently completed,leased-up 207,000-square-foot neighborhood shopping center anchored by a Lowe’s home improvement store. The shopping center was developed by NewMark Merrill, alarge regional retail developer based in Woodland Hills, Calif.

Montgomery said that SRG was contacted by the seller andwas able to take advantage of recent corrections in InlandEmpire land prices. The cost of the project included all construction drawings, paid permits and other significant on- and off-site work.

UBS is SRG’s equity partner for construction debt and perma-nent financing.

“It’s very tough to find money today even in multifamilydespite the fact that there are some sellers who have morereasonable expectations than they had a year ago. But lendersare reluctant to step up and close escrow on somethingbecause there’s a perception that values are going down.Nobody wants to be the one to pay today what would bemore than they would pay tomorrow,” Montgomery said.

SRG originally looked at the financing from a joint-ventureperspective but UBS said they thought it was better suited fortheir participating mortgage program, he said. The programcreates fixed interest rate steps for 100 percent of the devel-opment costs at inception, through construction and lease-

Inland Empire land price corrections led to SRG buying the apartment site from Archstone-Smith.

up. Then the rate is fixed at 6.10 percent for the 10-year balance of the ownership period.

“We talked to five or six typical equity partners at the start ofthe year with this project and all were still on the fence. Wefeel fortunate that UBS was interested in the deal and workedto get it done,” he said.

Regis Homes Nears Close OutOf Its Two For-Sale ProjectsIn spite of the continuing tough residential market, theSARES•REGIS Group is close to selling the final units in its twoSouthern California condominium projects: Canyon Villas inOrange County and Hollywood Regis, which is steps fromthe Kodak Theatre in the heart of Hollywood.

In an effort to spur sales of last 25 condominiums in its 344-unit Canyon Villas project in Orange County, the companyhas applied for Federal Housing Administration financing.Expectations are that the FHA 3 percent-down program will reduce qualifying hurdles for first-time buyers for theremaining two- and –three-bedroom units.

With prices starting at $299,000, Canyon Villas is offering a 6 percent builder incentive package that can be usedagainst the purchase price, mortgage interest rate, home-owner association fees, closing costs and even toll road fees, says Ed Eyerman, Regis Homes’ Vice President of Sales andMarketing.

The 100-unit Hollywood Regis is a similar challenge. Therewere 12 remaining units priced in the low $500,000s for1,100 square feet. Regis Homes has reduced prices by$50,000 and offers an additional $20,000 builder incentive.


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In 2005, SRGNC’s Commercial Division President Jeff Birdwelland Senior Vice President John Igoe created the redevelop-ment concept and presented it to Northwestern Mutual, withwhom SRGNC officials have had a decades-long relationship.

“Then we helped the city amend its general plan by sittingon advisory boards and giving input to the policy-makingprocess. We then created a master plan that fulfilled that policy,” Wilson said.

In order to get city approval, SRGNC and Northwestern hadto partner with two landowners on adjacent property. “It wasa unique arrangement that resulted in a joint master planthat is greater than the sum of its parts,” Wilson said.

“The master plan has been extremely well received by keycommunity stakeholders who include the Housing LeadershipCouncil of San Mateo, The Greenbelt Alliance, the Foster CityChamber of Commerce and the Lions and Rotary clubs. Thecity’s staff also was very supportive,” he said.

The apartment project represents the first new multifamilyproduct in the city in the last five years, Wilson said. Theproject is 15 minutes from the San Francisco InternationalAirport, 30 minutes from the San Jose International Airportand in the heart of the San Francisco peninsula.

Sares Regis Group of Northern Californiahas won approval from Foster City to develop a major mixed-use development of 200,000 square feet of office and 300luxury apartment units.

The $200-million development is known as the Pilgrim/TritonMaster Plan. It is the first of two projects that are astride stateHighway 92 and about 30 minutes from downtown SanFrancisco.

“It’s a pretty special project. This is going to be a flagship ofsustainable mixed-use on an infill site. We’re creating a placewhere people can live, work and play within a quasi-urbancontext. That’s something that does not exist in Foster Citytoday,” said Zach Wilson, SRGNC Project Manager.

Northwestern Mutual Life Insurance Company is the ownerof the project whose development concept was crafted bySRGNC, which is acting in a fee-development role.

The environmental impact report was certified and zoningapproval for the master plan came following a general planamendment that was crafted in part by SRGNC.

Fall of 2009 is the projected groundbreaking on the multi-family portion of the development. That will be followed bygroundbreaking for the office portion in the first quarter of 2010.

Northwestern Mutual has owned the property since the 1980sand the two sites are developed with about 230,000 squarefeet of suburban industrial and office product.

SRGNC involvement in Foster City’s policy-making process andassistance in the general plan amendment led to approval of the mixed-use infill project.

Foster City OK’s Major SRGNC $200-Million Mixed-Use Project For Northwestern Mutual

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Buyers Drawn To RHNC’s New Townhomes In Mountain ViewRegis Homes of Northern California recentlyunveiled Gables End, a 108-home New England-styled villagein Mountain View, and home shoppers and buyers areresponding enthusiastically. Two thirds of the first phase ofhomes have sold since the March grand opening.

“Homebuyers are attracted to these homes for a number offactors. Among these are the traditional architecture and lushgreen spaces that really give people a sense of serenity. Thehomes have front porches and stoops – features common ineastern design but unique in the western U.S. – providing a restful open-air retreat right outside their front door,” saidRob Parker, RHNC Senior Vice President of Marketing.

The two- and three-bedroom townhomes are priced fromthe high $500,000s and are offered in six floorplans from1,250 square feet to 1,950 square feet.

Additionally, Gables End is “Built Green”® and exceedsCalifornia’s strict Title 24 energy code by 16 percent.

The project was built on previously developed land and most of the lumber and wood used in construction camefrom managed forests and recycled content. Gables Endhomes also are equipped with advanced ventilation andwater efficiency systems and Energy Star appliances.

Two thirds of the units have been sold in the first phase ofGables End, RHNC’snew home project in Mountain View.

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Construction is well under way on the TaubeKoret Campus for Jewish Life in Palo Alto, a $270-million project by Sares Regis Group of Northern California.

Due for completion in late summer next year, the 8-acre sitewill include a 125,000-square-foot Jewish Community Center,193-unit, 270,000-square-foot independent- and assisted-livingfacility and a cultural hall.

SRGNC Buys San Mateo OfficeComplex; Renovation Under WaySares Regis Group of Northern Californiaacquired five office buildings totaling 199,442 square feet anda five-story parking structure in San Mateo for $40.7 millionand is under way on renovating the 40-year-old development.

The project was formerly called Bayview Plaza but has beenrenamed Tower Plaza @ 2121. Located at 2121 South ElCamino Real, the development includes four one- and two-story buildings and a 12-story building that is one of only afew high-rise structures in the area. It offers panoramic viewsof the San Francisco peninsula. Due to its close proximity to Highways 92 and 101 it provides outstanding signage opportunities.

BlackRock Realty is SRGNC’s financial partner in the investment.A $10.5-million renovation is planned over the next five years.

Tower Plaza @ 2121 is within walking distance to restaurantsand retail. The project offers tenants a delicatessen, fitnesscenter with showers and lockers and direct shuttle service to and from the Hillsdale CalTrain station, connecting commuters to San Francisco and San Jose. The parkinggarage can accommodate 593 cars. There are 29 spaces of surface parking.


Construction Under Way On Palo Alto Taube Koret Campus For Jewish Life

The project is being financed through a $140 million fund raising campaign and $302 million bond financing.

Additionally, Regis Homes of Northern California is developing103 units of market rate for-sale housing on an adjacent 3-acreparcel that was originally part of the Sun Microsystems campus.Models will open in the fall of 2008.

Completion is slated next summer on the 11-acre residentialcampus.

Tower Plaza offers panoramic views of San Francisco peninsula.

SRGNC’s office campus for Symantec “is the most exciting commercial office project to be developed on the Westside in years,” a Culver City spokesman said.

Closing another chapter in its long and excellentrelationship with Symantec, Sares Regis Group of NorthernCalifornia recently completed development of the securitysoftware and hardware giant’s 550,000-square-foot state-of-the-art campus in Culver City, Calif.

Located atop Fox Hills with sweeping views of the SantaMonica Bay, the project’s successful completion was punctu-ated with a LEED Gold Award from the United States GreenBuilding Council.

It is SRGNC’s sixth project for Symantec in the past eightyears and it took five years to complete.

The new facility features two, four-story R&D buildings and aparking structure with 1,940 spaces. With its defined, innova-tive architecture designed by HOK and immaculately land-scaped grounds, the campus is a prime commuter location.

“The campus is the most exciting commercial office projectto be developed on the Westside in years,” said a spokesmanfor Culver City.

Jeff Birdwell, President of SRGNC’s Commercial DevelopmentDivision, said the LEED rating was achieved by embracingbasic sustainable principals that included a highly efficientHVAC system and use of recycled materials.

“We also did a series of seven solar light sculptures. They arepowered by photovoltaic panel arrays that embrace sustain-ability in an artistic way. The solar panels power the lightswithin the sculptures and feed electricity back into the grid,”

Birdwell said. He added that the sculptures were created byinternationally renowned artist Brad Goldberg of Dallas.

The project required removal of 330,000 cubic yards of dirtin order to bring the site closer to street level. It helps fulfillthe vision of the Culver City Redevelopment Agency to com-plete one of the last two remaining portions of the CorporatePointe Development with an office campus that is compati-ble with the existing Corporate Pointe office buildings.

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SRGNC Completes Development of Symantec’sCulver City Media Center; Wins LEED Gold Award


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SRG Sells 99 Prime AcresIn Ontario For $96 MillionSRG sold 99.18 acres of prime industrial propertyin Ontario to ProLogis for approximately $96 million.

The company acquired the land from the County of SanBernardino at auction in May 2006. JPMorgan was SRG’sjoint-venture partner. The property is about two blocks fromOntario International Airport and represents one of the lastmaster-planned distribution sites in the city of Ontario.

ProLogis, a publicly traded real estate investment trust andthe nation’s largest owner and operator of industrial facilities,will develop approximately 2 million square feet of ware-house and distribution buildings on the site.

The Ontario industrial market remains one of the healthiestindustrial markets in the country, said Larry Lukanish, VicePresident of SARES•REGIS Group’s Commercial InvestmentDivision, who oversaw the disposition of the asset.

Brokers Darla Longo at CBRE’s Ontario office and Joe McKayat Lee & Associates’ Ontario office represented theSARES•REGIS Group and ProLogis.

Three Fontana Distribution BuildingsSold To AMB Property CorporationSRG sold the remaining three warehouse and distributionbuildings in its 3.1-million-square-foot Sierra Business Park inFontana to AMB Property Corporation of San Francisco forapproximately $55 million.

The sale of the three buildings, which total 604,720 squarefeet, closes out SRG’s holding in the business park. All sixbuildings have been leased or sold, said Larry Lukanish, Vice President of SRG’s Commercial Investment Division, who oversaw the disposition of the asset.

SRG began developing the property in 2004 when it purchased 60 acres from LNR. In 2005, SRG acquired anadditional 92 acres with two 1.1 million-square-foot buildingsthat were under development from LNR. SRG sold threebuildings to users, which include Tireco Inc., a Torrance-based tire manufacturer and importer, and Sole Technologies,maker of the popular Etnies line of sports footwear andapparel.

The three buildings acquired by AMB were 116,205 squarefeet, 167,525 square feet and 320,990 square feet.

Two of the AMB-acquired buildings were leased to AmericanSporting Goods and Hagen Pet Supplies. The third buildingwas vacant.

Sierra Business Park is close to interstates 10, 15 and 215 and state highway 60. The property also is close to OntarioInternational Airport.

Brokers Darla Longo and Barbara Emmons at CBRE’s Ontariooffice and Joe McKay and Mike Wolfe at Lee & Associates’Ontario office represented both SRG and AMB. RREEF wasSRG’s financial partner in the project.

ProLogis purchased SRG’s site, which is approved for 2 millionsquare feet of warehouse-distribution facilities.

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SARES•REGIS Group’s Ventura Divisionhas engineered new leases in its Cabrillo Business Park inGoleta and at The Arbors of Thousand Oaks.

Minneapolis-based ATK, a defense and aerospace contractor,leased 14,285 square feet of research and development space in SRG’s Cabrillo Business Park in Goleta. The five-year lease is valued at $1.5 million.

Additionally, Steve Fedde, SRG division Vice President forOperations and Development, said plans are being finalizedfor the first phase of office and retail buildings at CabrilloBusiness Park with groundbreaking taking place later this year.

In Thousand Oaks, SRG signed Agfa, a graphic design company, to 12,000 square feet of office space, bringing the275,250-square-foot office park to 100 percent occupancy. The five-year lease was valued at $1.73 million.

Two Santa Barbara commercial brokers, Mark Mattingly of Pacifica Commercial Realty in Santa Barbara and JohnPeckham of Grubb & Ellis, represented SRG in the ATK lease.Michael Slater and Tom Dwyer in CB Richard Ellis’ Camarillooffice represented SRG in the Agfa transaction.

SRG signed defense contractor ATK to a five-year lease in its Cabrillo Business Park (below). SRG’s office project The Arbors in Thousand Oaks is 100 percent leased with the signing by Agfa, a graphics design firm.

SRG’s Ventura Division Signs Tenants To Leases In Goleta/Thousand Oaks

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The property is just off Gerald Ford Drive at 35751 GatewayDrive and close to restaurants, shopping and entertainment.

With six floor plans of one-, two- and three-bedroom condominium rentals, the apartments range from about 886square feet to 1,454 square feet. These highly upgraded condominiums have 9-foot ceilings, wall-to-wall carpetingand window coverings along with oversized closets and large private balconies or patios.

Kitchens have maple-grained cabinetry, granite countertops,and stainless steel appliances. Master baths feature Roman-style soaking tubs, porcelain sinks and granite countertops.

The resort-style rentals come with a private garage and somefeature “super-sized” garages, large enough to fit four hybridcars.

Most homes have fireplaces, media niches, spacious kitchenpantries, walk-in closets and dual vanity sinks in the masterbathrooms.

The craftsman-style architecture, luxury interior finishes and spacious floor plans at The Enclave inPalm Desert are proving to be irresistible to people looking for gated, condominium resort-style apartment living in the desert.

Since the opening, 65 percent of SARES•REGIS Group’s 320condominium apartments at The Enclave has been leasedand the project is projected to be 90-percent leased by theend of the year.

“The Enclave is undeniably the desert’s premier rental community,” said Lynn Klug, Vice President of Marketing &Training in SRG’s Multifamily Property Management Division.

The private community features a 3,600-square-foot club-house, a 1,500-square-foot fitness center, two putting greens,swimming pools and spas, cabañas with misters, lush land-scaping and sun decks.


Stabilization On Track At The Enclave, Palm Desert’sPremier Resort-Style Rental Condominium Community

Luxury finishes and resort-style amenities have placed The Enclave at the top of Palm Desert’s apartment market.

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Westgate Pasadena ResidentialProject Proceeding With 820 Apartment UnitsConstruction is under way by SARES•REGISGroup on 480 apartments in Pasadena and plans are todevelop 340 more multifamily rental units on 11.7 acres that SRG acquired in 2005. The goal is for all 820 units to beLEED Certified by the United States Green Building Council. (See related story on P. 16)

Westgate Pasadena, a transit-oriented urban village approvedby the city, originally was slated for a mix of apartments andfor-sale condominiums. The project also includes 23,000square feet of retail.

But the downturn in the for-sale residential market andimproved conditions for multifamily rental caused SRG andits financial partner, Equity Residential, to modify its blueprintfor the prime infill parcel near the 710 Freeway.

Work on the foundation for the first phase of WestgateApartments is slated for completion early next fall. Plans areto begin leasing in the third quarter of 2009. The project willbe four stories of apartments over two levels of undergroundparking. Thomas Cox Architects of Irvine is the architect.

The later phases of the Westgate Pasadena will consist of 111Dayton Street Apartments, 141 Valley Street Apartments and88 Green Street Apartments. They are being designed byOakland-based Steinberg Architects’ office in Los Angeles, MVE & Partners of Irvine and a collaboration of DanielianAssociates and Coe Architecture International, respectively.

When the project is complete, plans are for 20 percent of the820 Westgate Apartments to be available as very low-incomehousing. The project is being built with a density of 70 unitsper acre. The 20 percent affordable unit set aside enabledSRG to qualify for a 35 percent density bonus under guide-lines established by California Senate Bill 1818.

Lease-Up Velocity Is Strong At The Reserve At 4S Ranch, A Top-Tier Apartment ProjectA little more than one year after its opening, The Reserve at 4S Ranch, SARES•REGIS Group’s540-unit apartment project in the North County San Diegoplanned community, is turning in a solid leasing performancewith 338 units leased or occupied.

The development is on track to have stabilized occupancy of 95 percent by the end of this year.

“The leasing velocity has been very strong at The Reserve.The entire community is brand new and it’s in a very desirable area of Rancho Bernardo,” said Chip Harvey, SRG’sSenior Regional Manager and Director of New Lease-UpCommunities in SRG’s Multifamily Property ManagementDivision.

The apartment community is on the 2,900-acre 4S Ranchjust off I-15 near Rancho Bernardo. The planned communityby Newland Communities is being developed with an arrayof neighborhoods by more than a dozen of the nation’s premier homebuilders.

The Reserve was built by SRG’s Multifamily Development &Construction Division.

“One of the main draws to The Reserve is the ability of resi-dents to walk to the nearby 266,000-square-foot shoppingcenter called 4S Commons,” Harvey said. The 53-acre retailcenter contains a grocery supermarket, pharmacy, hardwarestore, restaurants and major home furnishing stores.

BlackRock is the financial partner in The Reserve. Bank ofAmerica and Mass Mutual provided construction financing.Mass Mutual also issued a forward commitment for perma-nent financing.


Artist’s rendering of Westgate Pasadena, SRG’s transit-orientedurban village.


16

In A Challenging Time For Real EstateSRG Commits To ‘Green’ Development

The Anaheim and Pasadena projects are near municipal and regional mass transit systems, giving the developmentsimportant LEED certification points. SRG also is including tenant bicycle storage and preferred parking for low-emissions vehicles.

Storm water management and cool roof design also will earn points. LEED points also are being accumulated withunderground parking that reduces the “heat island” effect,drought-tolerant landscaping, dual-flush toilets, energy-efficient mechanical systems, high-end insulated windowsand use of low volatile organic compounds in paints andsealants.

SRG also is achieving a 30 percent greater rating from ASHRAE,the American Society of Heating, Refrigerating and AirConditioning Engineers, for its overall ventilation of the apart-ment units by installing exhaust fans in baths and kitchens.

Additionally, SRG is instituting what Krout called“green education” of its leasing agents, residents and guestsby explaining the projects’ green features. Tenants will beadvised about cleaning products that are considered environ-mentally friendly and maintenance personnel will be requiredto use similar products in their work.

Kraut says the USGBC has aimed its LEED rating system atoffice, industrial and retail projects, putting multifamily development projects at a disadvantage.

“Some of these credits don’t make any sense for a multifamilyproject. I expect the USGBC will develop a special packagefor apartments,” she said, adding that it hasn’t stopped SRGfrom doing all it can.

“If SRG continues through in construction as they have indesign,” she said, “it’s possible they might win LEED Silverratings, which would be a real achievement.”

In addition to facing one of the most challengingreal estate economies in decades, SARES•REGIS Group hasadded to its challenges by instituting a policy that commitsthe company to sustainable building design and constructionfor all its new real estate developments.

SRG is putting its decision into practice with two ground-upapartment projects totaling 792 units in Anaheim andPasadena. Company officials are confident the United StatesGreen Building Council will award both the USGBC’s LEEDCertified rating in spite of a rating system that favors commercial over multifamily projects.

SRG construction executives estimate that green materialsadd $3 to $4 per square foot to the estimated $130 persquare foot direct building cost.

On the heels of its decision to go green, SRG invited twoexperts in sustainable development to speak at the company’srecent senior management retreat to help articulate what itmeans to adjust to this 21st century way of building.

Dan Winters heads Evolution Partners, a boutique real estateinvestment advisory firm that advises on financing environ-mentally responsible real estate projects. Based in Washington,D.C., Winters was the first LEED-accredited financial profes-sional and is the author of two books published by the UrbanLand Institute.

In his Power Point presentation that could be described as Al Gore meets Carl Icahn, Winters outlined the increasingpressures on the environment, society and businesses thatwill make green building underwriting an imperative for capital markets and rating agencies.

“It’s not changing underwriting standards. It’s more how doyou overlay this green issue on to standard underwriting procedures,” Winters said.

“We believe that if that’s adopted by the capital markets, it’s really going to create a sea change in people’s behavior.Right now there’s no lender who’s going to give you five or10 basis points off a loan if you’re green because it’s notunderwritten properly,” he said.

Chandra Kraut, formerly an environmental consultant withCTG Energetics of Irvine and who counseled SRG on its 312-unit The Crossings in Anaheim and 480-unit Westgateproject in Pasadena, said SRG “has gone above and beyond”the standards required for LEED certification.

“When a builder first starts out, it’s advisable to shoot for abasic certified rating. But because of SARES•REGIS Group’sprior experience and the location of the project, they reallypushed the envelope, which is unusual for a multifamilybuilder,” said Krout, who now is environmental programsadministrator for the City of Irvine.

Green building consultants Chandra Kraut and Dan Winters were featured at SRG’s senior management retreat.

17

Community OutreachVolume 11 . Number 1

Restoring The Home, Dignity Of Disabled VetSRG came to the aid of a disabled veteran and inthe process was instrumental in launching a Los Angeleschapter of Rebuilding Together, the national organizationthat assists in home renovations for needy individuals.

This latest effort was the renovation of the south Los Angeleshome of Alphonso Johnson, 80, a World War II veteran.Johnson’s eyesight was badly damaged by a bullet wound to his face that he received when his field artillery unit wasattacked by Japanese soldiers on Guam in 1944. After thewar, he worked as a machinist at Rockwell International inLos Angeles. After 10 years, his eyesight deteriorated and hecould no longer work. Johnson uses a wheelchair and his face still shows the scars from his wound.

While working for Rockwell, however, Johnson was able tobuy a small, two-bedroom home that over the years fell intoserious disrepair. SRG and its team of 33 subcontractors completed a five-week, $135,000 makeover of the home.

After gutting the house, construction crews installed a newroof, plumbing, electrical, interior walls, flooring and dual-paned windows. Doors were widened and wheelchair accessramps were built. The bathroom was remodeled and granitecountertops, new cabinets and appliances were installed inthe kitchen. The home was painted throughout. New furni-ture was donated and the property was re-landscaped with a new irrigation system. When Johnson returned, he was

greeted by scores of neighbors and Rebuilding Together volunteers who put up a trimmed Christmas tree in the living room.

A few days later, officials at SRG and Rebuilding Togetherreceived a letter from Johnson:

“In some ways I was spared at looking at the way I was livingbecause I am blind. One of the first things I did was take anice hot bath – no more cold showers for me. The wheel-chair fits into the bathroom, and I can wheel myself aroundthe house. I sat in my new recliner and felt that warm carpet.I cannot believe how clean and new my house smelled. Youracts of kindness will never be forgotten.”

Since 1995, SRG has completed 11 projects for RebuildingTogether. The total value of donated labor and materials isestimated at more than $500,000.

SRG Builds FriendshipWith ‘Baja Challenge’SARES•REGIS Group’s CommercialInvestment Division participated in the eighthAnnual Baja Challenge, a one-day charity event in whichteams from real estate companies build small homes forneedy families in east Tijuana. Fifty-two homes were built,setting a Guinness Book world record for most homes built in the shortest amount of time.

The homes were constructed on a concrete slab with lightframing materials providing a secure, weather-resistant shelter for the family. A sleeping loft, windows, front doorand roof ventilator are included. After the structure is complete, the family finishes and furnishes the home.

Disabled WWII vet Alphonso Johnson is greeted by family andwell-wishers as he returns to his Los Angeles home renovated by SRG.

SRG team builds one of 52 homes for needy families.

Acclaimed vocalist Ronan Tynan with Natalie Stack.


18

Natalie’s Wish Raises $1.811 Million To FightCystinosis; Vocalist Ronan Tynan Entertains

The seventh annual Natalie’s Wishfundraiser for the Cystinosis Research Foundation drew 350 people to the Balboa Bay Club and raised $1.811million, all of which goes toward research to find better treatments and a cure for cystinosis, the genetic and slowlyfatal metabolic disorder that afflicts 2,000 people, mostlychildren, worldwide.

Acclaimed Irish tenor Ronan Tynan headlined the May 30event. After losing his legs in a car accident when he was 20 years old, Tynan went on to win 18 gold medals in theParalympics and earn a medical degree. He entertained withsongs and an inspiring and sometimes humorous monologueon his personal triumph over adversity.

The event is named for Natalie Stack, 17, the daughter ofNancy and Jeff Stack. Jeff is a managing director of theSARES•REGIS Group of Irvine. Natalie was diagnosed withcystinosis as an infant.

In patients with cystinosis the amino acid cystine accumulatesin the tissue due to the inability of the body to transport cystine out of the cell. Over a period of years, the cystinedamages various organs including the kidneys, liver, muscles,white blood cells, eyes and central nervous system. Othercomplications occur that include muscle wasting and difficul-ty swallowing. As the cystine accumulates in the cells, thevarious organs slowly deteriorate.

All $8.3 Million Raised So Far Goes To Research“This year’s event was extraordinary because of Ronan’s mag-nificent performance, his inspiring story and the generosityand support from our community and friends. To them, weare exceedingly grateful,” said Nancy Stack, President and co-founder of the CRF.

There are an estimated 500 cystinosis sufferers in NorthAmerica. Twelve of them and their families attended thefundraiser.

The CRF has 17 ongoing studies with 30 different researchersin five countries – The Netherlands, France, Germany, Italyand the United States. Since 2003, the CRF has raised $8.3million, all of which goes directly to funding research.

Nancy Stack spoke of the progress that’s been made in battling the disorder. Clinical trials are under way on animproved treatment and she reported there are encouragingresults in gene therapy and bone-marrow stem-cell researchthat may lead to a cure.

Singer Pays Tribute To Cystinosis SufferersAfter becoming an orthopedic sports medicine physician,Tynan began singing at age 33. He won vocal competitionsand joined the renowned Irish Tenors. Tynan sang at the televised funeral for President Ronald Reagan at NationalCathedral in Washington, D.C., a performance heard by 35 million people worldwide.

“One can only applaud and have the greatest admiration for these children and their parents, who have been so challenged by cystinosis,” Tynan said. “Natalie Stack is one of the finest examples to all young people who live with this burden because she lives her life to the absolute fullest,inspiring younger children to lead a normal life while dealingwith the disease and the demands it makes on their lives.

“When you meet Natalie for the first time, you are totallyunaware of her struggles. That is something she can feel sovery proud of. She is not looking for sympathy or pity. She is eager to enjoy and engage with people. She is a class act,a young lady with great grace and poise.

“All the children with cystinosis, and their parents, shouldreceive a standing ovation for their love, devotion and dedication in helping each other and others less fortunate.Bravo to all. My life has been enriched by meeting you.”

For more information about Natalie’s Wish and the CystinosisResearch Foundation, call Zoe Solsby at (949) 223-7610 orvisit www.natalieswish.org.

19

AnnouncementsVolume 11 . Number 1

Michael P. Bissell joined SARES•REGIS Group in 2007 as President of the Multifamily PropertyManagement Division. He oversees the management of more than 14,000 apartment units in 48 propertieslocated in California, Arizona, and Colorado. Bissell’s 30-year career includes asset management, propertyacquisition, property disposition, development, merchandising, marketing and sales on residential and com-mercial portfolios throughout the United States, Germany and Sweden. Prior to joining SRG, Bissell held seniorposts with some of the nation’s largest apartment investment and management companies, including EquityResidential Trust, Archstone Property Trust, The Irvine Company and Western National Properties. He recentlycompleted assignments in Europe for Oaktree Capital Management and Stellar International Holdings. Bissell is a licensed real estate broker in California and Washington and past member of the Board of Directors of the California Housing Council.

Deborah Maietta joined SARES•REGIS Group in 2007 as Senior Vice President in the MultifamilyProperty Management Division and oversees the management and operations for the entire portfolio. She alsoparticipates in the due diligence and underwriting of acquisitions and new development in Southern California.With 25 years in the real estate industry, Maietta comes to SRG from Atherton-Newport, where she oversawnine multifamily communities in the Seattle area. She was responsible for investment yield, revenue growthand positioning assets for long-term growth. Maietta previously worked for Equity Residential on the privatiza-tion of military housing at Ft. Lewis in Texas. Maietta holds a bachelor’s degree from Augsburg College in St. Paul, Minn. She has a real estate license and is a Certified Property Manager from the Institute of Real EstateManagement.

Mike Winter has been promoted to Senior Vice President of Development in the SARES•REGIS Group’sMultifamily Development & Construction Division. He is responsible for coordination of land acquisition activities, entitlements, project feasibility, forward planning, design oversight, construction and developmentbudgets, marketing coordination, securing governmental approvals, capital investors and resolution of pertinent policy issues that support the company’s objectives. Winter joined the company in 1997 and hasmore than 30 years in the real estate industry. He is a licensed California General Contractor and serves on the board of the Orange County BIA and is a ULI member.

Greg Albert has been promoted to Senior Vice President of Development in the SARES•REGIS Group’sMultifamily Development & Construction Division. He is responsible for the development and entitlementprocess on several projects and works with an array of consultants and property management teams. Albertalso oversees budgets, personnel, contracting and construction matters for a mix of SARES•REGIS Group andthird-party projects. He is managing the development and construction of nearly 1,100 apartment units inMurrieta, Rancho Cucamonga, Ontario and Palm Desert.

Rob Parker returned to Regis Homes of Northern California as the company’s Senior Vice President, Sales & Marketing after leaving in 2006 to join Pacific Marketing Associates, a Bay-Area new home sales andmarketing firm. At RHNC he oversees all project marketing plans and forward planning. Parker also managesday-to-day sales efforts as well as branding, positioning, materials production and overall design of graphics,interiors and advertising. He has been with RHNC and its affiliate SARES•REGIS Group for eight of his 20 yearsin residential development. He also was with The Irvine Company and Oglivy & Mather in New York and LosAngeles. Parker has a bachelor’s degree in economics from the University of Pennsylvania’s Wharton School ofBusiness. He is an instructor for ULI educational programs and his work has earned numerous MAME awards.

Dan Hull was promoted to Vice President of Construction and Senior Project Manager in the SARES•REGISGroup’s Multifamily Development & Construction Division. Hull is supervising the on-site project manager andstaff at The Grove at Marketplace in Ontario, having recently completed The Enclave in Palm Desert. He joinedthe company in 2000 as an assistant superintendent. Hull earned a bachelor’s degree in construction manage-ment from Brigham Young University.

continued on page 20


20

Economic Outlook Weak continued from page 3

Announcements continued from page 19

Jim Ivory was promoted to Vice President of Construction and Senior Project Manager in the SARES•REGISGroup’s Multifamily Development & Construction Division. He is responsible for overseeing the managementstaff of The Crossing, a 312-unit apartment project in Anaheim. Previously, Ivory was construction project manager for the 540-unit The Reserve at 4S Ranch in San Diego. He first came to SRG as an intern in 1997,returning to the company in 2001 after earning his bachelor’s degree in construction management fromBrigham Young University.

Mason Williams was promoted to Vice President of Construction and Senior Project Manager in theSARES•REGIS Group’s Multifamily Development & Construction Division. Williams is responsible for supervisionof the on-site project manager and staff for the multi-phased Westgate Pasadena that will consist of more than800 residential units and retail. Williams joined SRG in 2001 after earning his bachelor’s degree in constructionmanagement from Brigham Young University.

than last year for many submarkets in Los Angeles and OrangeCounty. Occupancies in some Inland Empire submarkets declined,partly due to the shadow supply of condominiums and homesavailable for rent.

We expect rents and occupancy rates in the apartment markets tostabilize while the economy slows. Many households are findingrenting attractive due to tighter credit conditions and the down-ward pressure on home prices. Of course, our generally stable out-look would change if the economy fails to recover later in the year.

Ventura/Los AngelesRuss Goodman, Regional President500 Esplanade Dr., #470Oxnard, CA 93031(805) 485-3193

Phoenix–CommercialEva Bates, District Manager1600 W. Chandler Blvd., #150Chandler, AZ 85224(480) 497-5678

Phoenix–ResidentialEric LaMora, Vice President

Regional Manager4626 E. Shea Blvd., Suite C-200Phoenix, AZ 85028(602) 790-1576

Denver–ResidentialJennifer Nessett, Vice President

Regional Manager900 E. Louisiana Ave., Suite 101Denver, CO 80210 (303) 715-9600

The SARES•REGIS Group Regional OfficesCorporate OfficeJohn S. Hagestad, Managing DirectorGeoffrey L. Stack, Managing DirectorWilliam J. Thormahlen, Managing DirectorPeter Rooney, President, Commercial

Investment DivisionVince Ciavarella, President, Commercial

Property Services DivisionMichael Bissell, President, Multifamily

Property Management DivisionBill Albert, President, Multifamily

Development & Construction DivisionBill Montgomery, President, Multifamily

Acquisitions & Investments Division 18802 Bardeen AvenueIrvine, CA 92612(949) 756-5959 n www.sares-regis.com

Regis Homes & Regis Contractors18825 Bardeen AvenueIrvine, CA 92612(949) 756-5959

Sares Regis Group of NorthernCalifornia, L.P.Regis Homes of Northern California, Inc.Robert W. Wagner, PrincipalMark R. Kroll, PrincipalJeffrey A. Birdwell, President, Commercial

Development Division901 Mariners Island Blvd., Seventh FloorSan Mateo, CA 94404(650) 378-2800 www.srgnc.com n www.regishomes.com

Regis Homes of Sacramento, LLCBill Heartman, President1800 3rd Street, Suite 250Sacramento, CA 95814(916) 442-7299

Rents for all existing apartments averaged $1,104 per month atthe end of 2007, considerably below those in Los Angeles, OrangeCounty and San Diego. Effective rents for existing apartments in-creased 2.2 percent in 2007, which is below the national average.

ConclusionThe fundamentals for Southern California apartment marketsremain healthy, along with Northern California. But there are afew caution flags on the horizon. Apartment demand is softer

sares• regis group newsletter · pdf filedespite monthsof capital market turmoil that...

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