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1_LBBJ_Feb18_SectionB_LBBJ MASTER LAYOUT 2/16/14 1:51 PM Page 1

Real Estate Quarterly

INSIDE • Update on Real Estate Markets • The Vault Long Beach • Tax Relief For Historic Property Restoration • State Energy Reporting Mandates Complicated • Moving Day For Harbor Department Staff • Leases/Transactions

The Vault Long Beach is getting a fresh start thanks to a team committed to activating the 30,000-square-foot venue as a space for live music, theater, education and more. Pictured, from left, are: Brian Russell, vice president of Coldwell Banker Commercial Blair WESTMAC; Rod Schreckengost and John Kempton Bryan, partners in Bryan Schreckengost, LLC; DW Ferrell, founder of Localism; and Blake Christian, partner and certified public accountant with Holthouse, Carlin & Van Trigt. (Photograph by the Business Journal’s Thomas McConville)


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REAL ESTATE QUARTERLY February 18-March 3, 2014

Long Beach Business Journal 3-B

Real Estate Experts Focus In On Downtown Activity As A Positive Catalyst For The Long Beach Market family home and move into multi-family

â–  By SAMANTHA MEHLINGER Staff Writer

units as well.� Sharply increasing home prices may also

A

surge of multi-family devel-

be leading young professionals to rent.

opments in various stages in

Housing affordability rates in California

Downtown Long Beach are creating a

declined for six straight quarters through

positive outlook among investors and bro-

the end of 2013, according to the

kers in all sectors of the real estate market,

California Association of Realtors (CAR).

according to local real estate profession-

From 2012 to 2013, the median price of

als. The investments will help position

homes in California increased 21.4 per-

downtown as an attractive destination and

cent, according to Zillow.com, a residential

eventually help reinvigorate retail and

real estate website. At the end of 2013, only

office activity, brokers speculate.

32 percent of California homebuyers could

About 938 multi-family units are

afford the median priced home at

planned for the downtown area thanks to

$431,510, while at the end of 2012, 48 per-

these projects, which are in various stages

cent of homebuyers could still afford a

of planning. While several of these devel-

median priced home, CAR reported

opments involve tearing down or convert-

recently.

ing existing office buildings, real estate

Last year’s double-digit price hikes were

agents are optimistic that a larger residen-

partially caused by an influx of non-dis-

tial base will create more demand for

tressed or non-bank owned homes on the

retail space and, eventually, attract office-

market, according to Gary Painter, director

related sectors to invest in the area.

of research at University of Southern

Kimberly Ritter-Martinez, economist with

the

Los

Angeles

Economic

California’s Lusk Center for Real Estate. Equity homes made up 84.3 percent of

Development Corporation, said that

California’s

lifestyle changes among young adults and

December of last year, while equity sales

senior

accounted for 63.4 percent of total sales in

citizens

are

contributing

to

increased demand for multi-family resi-

single-family

sales

in

December of 2012, according to CAR.

dences throughout Southern California.

The increase in home prices last year

“What we are finding is now that we

means that more homeowners have gotten

are starting to see stronger job growth,

out from underwater on their mortgages,

you’ve got more young people that are

leading them to sell this year, according to

leaving the family nest and . . . are choos-

Painter. Ritter-Martinez agreed. More

ing to rent,� Ritter-Martinez explained.

inventory should mean that prices will

“At the other end of the age spectrum,

appreciate at a less rapid rate, although she

there is a huge baby-boomer generation

said she expects price increases to remain

that’s already started retiring, so a lot of

in the double digits this year.

those people will choose to sell the old

(Please Continue To Next Page)

Renovations of the Meeker-Baker building in Downtown Long Beach, part of the Millworks project for Molina Healthcare, should be completed by September, according to Michelle Molina, managing partner of Millworks. “With the approval of the cultural heritage commission, the Millworks development team was given the opportunity to improve the facades of the designated historic landmark that is the Meeker-Baker building, restoring some of the historic pieces of the exterior of the structure and incorporating them into a new, six-story office space for Molina Healthcare,� she told the Business Journal. The Meeker-Baker building at Pine Avenue and 7th Street is roughly 120,000 square feet and will house about 600 employees, she said. (Photograph by the Business Journal’s Thomas McConville)

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REAL ESTATE QUARTERLY 4-B Long Beach Business Journal

February 18-March 3, 2014

Phil Jones, owner of Coldwell Banker Coastal Alliance, visits one of his firm’s listings at 1817 Elmfield Ave. The property, listed at $656,900, represents the upper end of the price range of Long Beach homes that are highest in demand, which Jones estimated to be around $400,000 to $600,000. (Photograph by the Business Journal’s Thomas McConville)

Activity in the office market continues

months. “Unfortunately we’re not seeing

year growth among all job sectors from

volumes at the San Pedro Bay Ports contin-

to remain flat, according to local real

a lot of improvement in the office mar-

2012 to 2013, trends to reduce the

ues to drive demand for industrial space in

estate agents as well as Ritter-Martinez.

ket,” Ritter-Martinez said.

amount of square feet allotted per worker

Long Beach and the South Bay, according

means that more office employment may

to local real estate professionals. Both

not translate to higher demand for office

ports reported that cargo traffic was up

space, Ritter-Martinez said.

about 11 percent from 2012 to 2013. The

The exception is investments from the

Although the California Employment

health care sector – SCAN Health Plan

Development

and Molina Healthcare both secured large

reported in January that office-related job

leases in Long Beach in the past two

sectors experienced the largest year over

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REAL ESTATE QUARTERLY February 18-March 3, 2014

Long Beach Business Journal 5-B

California, Los Angeles Anderson Forecast

percent increase in sales from January

noted that these elevations “may create an

2013 to January 2014.

increased demand for warehouse space.”

Retail activity is fairly flat in Long

Increased international trade means

Beach, local agents reported, although

more business for logistics, distribution

certain areas of the city are experiencing

and transportation companies, which trans-

growth. Several multi-family develop-

lates to more space needed for operations,

ments in Downtown Long Beach incorpo-

according to Ritter-Martinez. In its 2013

rate plans for ground floor retail, and

4th quarter report, CBRE, Inc. cited the

local real estate agents hope an increased

South Bay’s industrial vacancy rate at 2.3 percent, among the lowest in the Los Angeles region. Lee & Associates quoted the rate more conservatively at about 5.9 percent vacancy. Retail spending trends seem to be supporting growth in the industrial real estate

residential base in the area will create more demand for retail.

More Sellers Increase Inventory, Slow Price Hikes In The Single-Family Market

T

he single-family market’s annual slow season has been busier than

sector rather than in the retail sector,

usual, according to local real estate

Ritter-Martinez observed. “Catalogue

agents. Home prices continue to increase,

and Internet sales are the fastest growing

although at a slower rate than last year

retail sector,” she said. “What you have in

now that the number of homes on the

the retail industry is a lot of companies

market is starting to ease up.

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reducing their brick and mortar footprint

Phil Jones, owner of Coldwell Banker

and expanding online sales,” she said,

Coastal Alliance, told the Business Journal

adding that this spurs investments in

that his company experienced about 8 per-

industrial distribution facilities. The U.S.

cent more sales activity this January com-

Census Bureau reported last month that

pared to last January. He cites increasing

retailers without storefronts (typically e-

consumer confidence and stable low inter-

commerce businesses) experienced a 6.5

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REAL ESTATE QUARTERLY 6-B Long Beach Business Journal

February 18-March 3, 2014

Team Effort To Open The Vault Long Beach Adds Momentum To Pine Avenue Revival

“My feeling is that what was wrong with the other development is they didn’t engage the local business owners and heads of different organizations,” John Kempton Bryan, partner in Bryan Schreckengost, LLC, told the Business Journal of the previous development team for 350 Pine Ave. “What I’ve done all my life is be a team builder. So for me you’ve got to engage the local community and tap into their expertise.” Pictured, from left, are: Brian Russell, vice president of Coldwell Banker Commercial Blair WESTMAC, Rod Schreckengost and Bryan, partners in Bryan Schreckengost, LLC; DW Ferrell, founder of Localism; and Blake Christian, partner with Holthouse, Carlin & Van Trigt. (Photograph by the Business Journal’s Thomas McConville)

By TIFFANY RIDER, Editor n the next six weeks, a team of pasI sionate individuals hopes to start breathing life into the 30,000-square-foot property at 350 Pine Ave., formerly known as The Vault 350. Entertainment writer/producer John Kempton Bryan and construction development consultant Rod Shreckengost, partners together in Bryan Shreckengost, LLC, are working with three members of the Long Beach community to complete a multi-million-dollar deal for ownership and operation of the venue, to be renamed The Vault Long Beach. The deal is in negotiations with owner Rudy Medina, who acquired the property in 2009 with his former partner Luis Kaloyan under the name MID Pine Avenue, LLC. After spending more than $5 million to improve and outfit the property as a premiere mid-sized entertainment venue in Downtown Long Beach, Kaloyan left the partnership and the project fell into bankruptcy. Bryan, who has been involved with the

project for nearly five years, watched what happened to the building and was compelled to get involved. And, he said, Bryan Schreckengost, LLC has a right-topurchase clause in its existing lease with MID Pine Avenue, LLC. For an exclusive interview with the Business Journal, Bryan and Shreckengost brought together the members of The Vault Long Beach team: Blake Christian, partner and certified public accountant with Holthouse, Carlin & Van Trigt; Brian Russell, vice president of Coldwell Banker Commercial Blair WESTMAC; and DW Ferrell, local entrepreneur and community builder through his company, Localism. The plan for the venue is to create an entertainment destination – a 1,200-person capacity space for arts education, filming, live music, live theater, dining, catered events and a speakeasy downstairs. “I’d say we would have a similar ambiance to The Edison downtown, but with something like the member benefits of the Arclight Cinemas and the size and scale of the House of Blues,” Ferrell said.

Why now? “I think the right team is in place,” he said. “Going back to the team, I think involvement with the right players – Blake and Brian and DW and the city – I think we can look to move forward in a way it perhaps couldn’t before.” Rand Foster, owner of Fingerprints Music, said he sees The Vault Long Beach project as part of a larger movement in the city toward being more welcoming to live music. “I’m very happy that we have venues developing in Long Beach,” Foster told the Business Journal. “I think that the city has been reluctant due to some problems they’ve had in the past. And then we got used to having to drive out of town to see live music. People are very excited to stay local and see live music in the neighborhood.” The timing for moving this venue forward makes economic sense as well, according to Christian. “We wouldn’t be doing this two or three years ago,” he told the Business Journal, noting that there is also opportunity for significant economic impact. Revenue projections for the first

year are above $15 million and are predicted to hit more than $48.5 million in three years’ time. When the venue is fully operational, Bryan said he expects to hire between 100 and 120 people. The project also fills a geographic void, Christian noted. “I would much rather go here than to the Nokia center or to San Juan Capistrano’s The Coach House,” he said. “This is easy to get to, and we have a huge parking lot right behind us. If guests don’t want to eat here – which they should want to eat here – they have some 30 restaurants to walk to.” Working on a project that has been halted for so long is the biggest hurdle for The Vault Long Beach team, which has been working behind the scenes to assure business owners, city officials and other downtown stakeholders that this effort is brand new. According to Ferrell, “Separating the false start from the fresh start, we’re trying to get all of that behind us.” The team launches an updated website, www.thevaultlb.com, today (February 18) with details on the project, its progress and how the community can get involved. ■


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REAL ESTATE QUARTERLY February 18-March 3, 2014

Long Beach Business Journal 7-B

est rates of 4.25 to 4.5 percent as factors

increase in the median price of homes in

supporting a busier start to 2014.

Long Beach from 2013 to 2014.

Connie Wildasinn, owner of MetroCal

Jones and Wildasinn don’t expect to see

Brokers, a firm which primarily operates

the median price of homes increase as rap-

in Northwest and Central Long Beach,

idly this year, although they do anticipate

noted that so far this quarter she is seeing

that prices will continue to appreciate. Last

more listings come on the market than in

year, investors and house flippers were

previous months. Jones acknowledged

buying houses at low prices “and then rid-

the same trend. “We are seeing some

ing the appreciation, selling at higher

growth in inventory, but it’s not strong

prices,” Jones said. “Now that prices have

enough yet to alleviate the shortage we

increased so much, investors aren’t as

faced,” he said.

active on the market,” he added, which

The latest estimate for the supply of sin-

means more “standard sales” and less flip-

gle-family homes in Long Beach was about

ping this year. Increasing inventory should

1.7 months of inventory in December,

also help alleviate some pressure on prices.

meaning that all of the homes on the mar-

The median price of single-family

ket would sell in about 1.7 months given

homes in Long Beach was $438,000 at

current demand, according to Jones.

the end of December, Jones said. The

Last year, the Long Beach single-fam-

average list price per square foot is cur-

ily market was characterized by a supply

rently $337, according to Zillow.com,

that was insufficient to meet strong

which is about $9 higher than in the Los

demand as buyers looked to take advan-

Angeles metropolitan area.

tage of low prices and low interest rates.

Demand continues to be strong, as evi-

These market characteristics, coupled

denced by the shrinking average number of

with an increase of equity or non-bank

days homes are sitting on the market. “The

owned homes on the market, led to what

average days on market at the end of 2012

Zillow.com cites as a 20.7 percent

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REAL ESTATE QUARTERLY 8-B Long Beach Business Journal was 80 days. It was 58 days at the end of December 2013,” Jones said. Wildasinn pointed out that a home’s time on the market is a function of

February 18-March 3, 2014 Long Beach Blvd. “Downtown Long

LBDS. The ground floor and basement

Beach is about to make a resurgence,”

will continue to house the restaurant The

Robert Stepp, owner of Long Beach-

Federal Bar and its entertainment venue,

based multi-family real estate f irm

the Underground. “The applicant has also

owntown Long Beach is experi-

Stepp Commercial, said of the develop-

filed a tentative tract map to create air-

encing a surge of activity from

ments.

right (referring to the empty space above

New Multi-Family Developments Concentrate In Downtown Long Beach

whether or not its list price reflects its

D

current market value. “It really depends on whether or not the sellers have taken

investors in the multi-family real estate

Two new developments are now in the

a property) units to allow for the possibil-

the advice to be price appropriate,” she

market, with several large residential

pipeline, according to Long Beach

ity for condominiums in the future,”

said, noting that some homes may sit on

projects in various stages on Broadway,

Development Services (LBDS) staff,

Quenga added. LBDS was unable to pro-

the market as long as 100 days, while oth-

Pine Avenue and Long Beach and Ocean

both

adaptively

vide the name of the investor for this

ers may be sold in less than a month.

boulevards.

reusing existing office buildings for

project at this time, as a formal request

multi-family residential units.

has yet to be presented to the city.

of

which

involve

“The highest demand areas are where the

Projects approved by the city include

prices are lower,” Jones explained, citing the

the 224-unit first phase of the Shoreline

A developer has proposed turning the

The city has also received a proposal to

$400,000 to $600,000 range as the most

Gateway project at 635 E. Ocean Blvd.,

2nd through 12th floors of the Security

convert the 14-floor Ocean Center office

active. He also noted the condo market in

a planned 222-unit complex at 245 W.

Pacific National Bank Building at 110

building at 110 W. Ocean Blvd. into 84

Downtown Long Beach’s 90802 zip code

Broadway, the adaptive re-use of City

Pine Ave. into 123 residential units with a

residential units, which Quenga said

continues to be strong, with the median price

Hall East into 156 units and the 129-unit

fitness room and other amenities, accord-

might range in size from 423 to 1,575

increasing 33.5 percent in 2013 from 2012.

Urban Village development at 1085

ing to Joey Quenga, spokesperson for

square feet each. Ground floor retail is

Tax Relief For Historic Property Restoration Is On The Horizon ■ By SAMANTHA MEHLINGER Staff Writer

T

he city’s Mills Act Historical Property Contract Program, which has been suspended since 2006, may be in place again as soon as this summer to grant tax reductions for qualifying historic property owners in Long Beach seeking to restore their buildings. Through the Mills Act program, owners of designated historic properties enter into contracts with the city and agree to restore and maintain their properties in return for tax reductions on the increased value of their homes. The savings are meant to fund restoration and maintenance efforts for the property. The program was suspended in 2006 to allow Long Beach Development Services (LBDS) staff to inspect properties contracted through the program to ensure that property owners had completed building maintenance and to verify if they received tax reductions. “There are currently approximately 30 single-family houses and 200 condo units that have existing Mills Act contracts. We are currently auditing all of these contracts,” Amy Bodek, director of LBDS, told the Business Journal. She added that while the audits of single-family homes only took about six months, it has

The Long Beach Heritage-owned Bembridge House at 953 N. Park Circle Dr. benefits from the Mills Act program, according to Amy Bodek, director of Long Beach Development Services. The program grants property tax reductions on designated historic properties to fund improvements to those properties. The Victorian-style home was constructed in 1906 and was originally occupied by Stephen Green, a founder of City National Bank, and his wife, Josephine. House tours are available most Tuesdays and every fourth Saturday of the month. For more information, call 562/493-7019. (Photograph by the Business Journal’s Thomas McConville)

taken years to gain access to condo units enrolled in the program due to absentee owners. LBDS has also had difficulty determining how to assign property tax credits to individual units within a historic building, Bodek said. “It’s difficult for us to attribute what portion of that investment should be given a tax credit since the entire building essentially paid for it. So it does set up an equity situation that we are going to try to resolve,” she explained. Although the Mills Act program has been on hold for eight years, LBDS is in the process of revising guidelines to resolve some of these issues, Bodek said. Instead of allowing individual multi-family units within a historic building to apply for the program, a revision would ensure either that all the units in a building must apply to be eligible, Bodek said, or that the building’s homeowner association must be the applicant. The city may also cap the number of yearly applications for the program, Bodek said. “It is going to be based on volume and how much we think we can handle per year,” she explained. John Thomas, past president and current consultant for Long Beach Heritage and preservation consultant for the Queen Mary, testified at the February 4 Long Beach City Council meeting to emphasize the importance of the Mills Act. At the meeting, the council requested that LBDS staff return to city council within 30 days to report on how the program would be reinstated. “In these days where property owners are looking for all kinds of resources to realize historic preservation or restoration projects, this is a critical tool,” Thomas later told the Business Journal. Thomas noted that historic buildings in Long Beach are typically in older portions of the city, which he said “are sometimes exposed to blight and other conditions.” Mills Act tax incentives ultimately “stabilize our historic districts and corridors,” he added. “Ideally, we would craft a program which would allow qualified properties to receive tax credits in exchange for property reinvestment, without becoming a financial burden for the city,” Bodek said, explaining her vision for the future of the Mills Act program. “We would see appropriate reinvestment in historic resources and incentivize such investment.” Bodek expected to have program revisions ready for Cultural Heritage Commission approval in April. The revisions would then have to be seen by the planning commission and city council, she said, and would hopefully be approved some time in the summer. ■


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REAL ESTATE QUARTERLY February 18-March 3, 2014

Long Beach Business Journal 9-B

also planned. “Residential amenities include multiple roof decks, a fitness room, a yoga pavilion, dog park and garden,� Quenga said of the proposal. Mark Hungerford of LBDS said that money behind the 110 W. Ocean Blvd. project appears to be from Levy Affiliated, a commercial real estate firm, with Studio One Eleven as architects. In terms of transaction activity among existing multi-family properties in Long Beach, demand continues to be high for properties priced right, while inventory continues to be low, according to local real estate agents. Stepp said that the Long Beach multifamily market might typically have as many as 90 listings at one time. “We probably have on average right now around 45 [listings],� Stepp said, adding that his company has 15 of those listings, with seven properties currently in escrow. Most available properties are Class C buildings, which typically consist of older properties, 1960s construction or earlier, that aren’t in the best shape. (Please Continue To Next Page)

Stepp Commercial, a multi-family investment firm, has sold more than $100 million in multi-family properties in Long Beach over the past three years, according to owner Robert Stepp, pictured. The sellers of this apartment complex spent $800,000 renovating the 1.34-acre property, which has 40 units. (Photograph by the Business Journal’s Thomas McConville)

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REAL ESTATE QUARTERLY 10-B Long Beach Business Journal

February 18-March 3, 2014

Eric Christopher, senior associate at

erties. “The way I look at it now is the

INCO Commercial, said he believes that

price curve is correct,” he said, explaining

buyer demand has reached pre-recession

that the current prices of those buildings

levels. “It’s kind of the same story as last

more accurately represent their true value

quarter,” he observed. “There is hyper

than did the pre-recession price highs.

Health Care Companies Lead Office Space Leasing

A

lthough vacancy in the Long

vice president with CBRE, Inc., told the Business Journal. Smith manages leasing at 1500 Hughes Way.

Beach office market remains high,

Molina has put down a lot of roots in

mixed-used developments in downtown,

Long Beach over the past two years

Stepp said a lack of inventory coupled

low interest rates and investments from the

through major investments, including

Those dynamics have been driving up

with low interest rates continues to drive

health care sector are all creating a positive

Downtown

prices, Christopher said. “For example,

demand among buyers. Christopher also

outlook for the office sector among

Center,

the 1980s-built stuff is up about 12 per-

pointed out that real estate offers a hedge

investors, local brokers report.

Millworks project, which includes the

cent [in price] over last year,” he said. He

against inflation and an attractive alterna-

Two health care companies have made

former Press-Telegram and Meeker-

called 1980s built apartments “the most

tive for investors who are wary of the

major investments in Long Beach in the

Baker buildings. Smith called Molina

desirable kind of animal out there,” with

stock markets. Stepp agreed.

past couple of months, with Molina

Healthcare “the bright spot in the Long

More sellers may come on the market

Healthcare leasing an additional 42,000

Beach user market.”

Older buildings that are somewhat out

this year, which should slow down price

square feet at 1500 Hughes Way and

Becky Blair, president of Coldwell

of shape, which Christopher said were

appreciation, Stepp speculated. “I think

SCAN Health Plan adding about 50,000

Banker Commercial BLAIR WESTMAC,

“over priced beyond reason” before the

prices will steadily keep increasing but

square feet to its lease at Kilroy Airport

is also seeing health care companies

recession, have not experienced the same

not at the same rate they have been

Center/Long Beach. “Health care is cer-

sparking activity in the Long Beach

kind of price appreciation as newer prop-

increasing,” he said.

tainly a growth area,” David Smith, senior

office market. “I would say probably 30

demand and kind of mediocre supply.”

“prices right where they were in 2006.”

State Energy Reporting Mandates Complicate Commercial Real Estate Transactions ■ By SAMANTHA MEHLINGER Staff Writer

B

y July of this year, all owners of commercial buildings (excluding manufacturing-type buildings) sized 5,000 square feet and larger must report their buildings’ energy use data to potential buyers or lessees before a sale or lease transaction. This will mark the final implementation process that began in July of last year. Then, buildings 50,000 square feet and larger were required to begin complying with the energy reporting mandates. That was followed in January of this year when owners of buildings 10,000 square feet and larger were required to comply. However, real estate professionals are having a tough time understanding the California Energy Commission’s mandates associated with Assembly Bill 1103, known as the Nonresidential Building Energy Use Disclosure Program, according to professionals who reached out to the Business Journal. Assembly Bill 1103 (AB 1103) requires that an owner of a commercial building open an account on the federal government’s Energy Star website 30 days before a sale, lease or lending transaction and provide all sources of energy use data for the entire building for the most recent 12 month period. This data may be uploaded by utility and energy providers at the owner’s request or may be manu-

ally input by the owner. The mandates also require that the use of the building be disclosed. The Energy Star website uses this data to create what’s called a “data verification checklist” for the owner, which outlines the building’s energy use and efficiency. Elizabeth Watson, a partner and attorney at Los Angelesbased Greenburg Glusker Fields Claman & Machtinger LLP, who specializes in environmental litigation and real estate issues, told the Business Journal that the website also ranks a building’s efficiency in comparison to other buildings of similar size and use. “It’s like the label you get on your fridge when you buy it that says here is the Energy Star rating for the appliance,” she explained. “To be able to distill the performance of the building to a single number under the federal Energy Star rating system means you can really do more of an apples to apples comparison if you are a buyer or a tenant.” The bill’s purpose was summed up for the Business Journal by Teresa Schilling, a public information officer for the California Energy Commission: “Nonresidential buildings account for nearly 40 percent of the energy consumed in California. With energy conservation and efficiency playing a big role in meeting California’s climate change reduction goals . . . AB 1103 was signed by Governor Schwarzenegger in 2007 to advance efforts to ‘benchmark’ commercial and public buildings.” Watson explained that by creating these reporting requirements, the state incentivizes a building owner to make more energy efficient changes to a property so that it is more attractive to prospective buyers. “What’s clever about this is it is incentivizing those changes without dictating them,” she said. Becky Blair, president of locally-based Coldwell Banker Commercial BLAIR WESTMAC, said that the bill affects the largest percentage of commercial property owners, but the energy commission could not provide data to the Business Journal on how many buildings within the state are subject to the mandates. The state mandates indicate that “if there is information missing from a disclosure,” a building owner must demonstrate that he or she “has made a reasonable effort to ascertain missing information” before being permitted to approximate the energy use information. What constitutes a “reasonable effort” is not defined. Penalties for not providing the required information prior to a sale or lease of a building are the following, according to Schilling: “Investigating noncompliance allegations (which can involve issuing subpoenas, com-

Long

Beach’s

formerly ARCO,

Molina and

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pelling testimony, and convening investigative hearings); initiating administrative proceedings before the full energy commission for an order compelling compliance; initiating a civil judicial proceeding to enforce an energy commission order; initiating a civil judicial proceeding to obtain injunctive relief; or settling enforcement actions through negotiated settlements that impose reasonable and appropriate requirements, including possible payment of penalties.” Neither Blair nor Watson was aware of what penalties might be incurred if energy disclosure requirements are not met. They are not outlined in the mandates themselves, but rather are available on the frequently asked questions page of the energy commission’s AB 1103 website. The generally vague language of the mandates is becoming a source of confusion for commercial real estate agents and property owners, Blair and Watson observed. “I am certainly getting a lot of calls about it. In terms of how the energy commission could go about doing a better job of publicizing it I am really not sure,” Watson said. Energy disclosure information must be provided to a potential buyer or lessee of a building at least 24 hours before a transaction and within 30 days of a report’s generation. Generating the report sometimes holds up a transaction, Blair said. “When I was selling a building, we had an offer from a buyer that we had been working on for three months and we were at acceptance,” Blair said. “This Energy Star disclosure was not finished even though we had started on it four weeks ahead of the end of the year. It held up our escrow . . . the seller couldn’t accept for almost two weeks,” she recalled. Blair and Watson both wished that the mandates’ requirements included energy data disclosure during escrow, rather than at the time of a transaction. “In the nature of real estate, deals get signed up and then people figure out whether they want to go forward. That’s the real world,” Watson said. As it stands, this situation is analogous to someone buying a house, and the home inspection occurring after the sale, not before. “If the law had been prior to close of escrow, that would have helped tremendously,” Blair said. “There are more questions than answers right now because it is in the early stages,” Watson said. “I think eventually it will become a routine part of a deal, but it is getting to that place that is going to take some time.” For more information about AB 1103 regulations, visit www.energy.ca.gov/ab1103/. ■


1_LBBJ_Feb18_SectionB_LBBJ MASTER LAYOUT 2/16/14 1:51 PM Page 11

REAL ESTATE QUARTERLY February 18-March 3, 2014

Long Beach Business Journal 11-B

percent of our buyers are medical users,”

viously occupied by Boeing. These two,

she told the Business Journal.

two-story structures – one totaling 75,000

Both Blair and Smith characterize the

square feet and the other 75,201 square

local office market as flat, continuing last

feet – are connected by an atrium.

year’s trend, with not enough demand to

Meanwhile, the six-building Kilroy

drive down vacancy rates. Smith said that

Airport Center, adjacent to the 405 free-

there is little activity from companies

way and totaling nearly 1 million square

looking to move into Long Beach, and

feet of office space, remains the top loca-

most existing tenants in the city are not

tion for businesses, with two buildings

looking to take up more space. “The

fully occupied, two others at nearly 100

activity we see tends to be tenants looking

percent and the remaining two at more

for the same amount of space that they’re

than 90 percent occupied.

currently in, which generally leads to

Low interest rates mean more activity

renewals,” he explained.

in sales rather than in leasing so far this

Trends in how office space is configured

year, Blair and Smith both observed.

within a building is also impacting

“Our interest rate is driving the market,”

demand, Blair pointed out. “We’re looking

Blair said. “Tenants are looking to cap the

at more of an open floor plan and better uti-

amount that they are going to pay monthly and are looking at a [lower]

lization of space because expenses are ris-

& Wakefield estimated that the vacancy in

Renovations on a 102,356-square-foot office building at 200 W. Ocean Blvd., owned by Milan Capital Management, should begin within a month, according to David Smith of CBRE, Inc., who is the listing agent on the property. The interior of the building has been gutted and is being redesigned by Long Beach-based Studio One Eleven. The exterior will feature “entirely new landscaping . . . and a totally different paint scheme on the exterior than anything that we see in Long Beach,” Smith said. (Rendering courtesy of CBRE, Inc.)

downtown office space was about 19.26

was moving into its new temporary head-

from the Long Beach Marriott, has already

ipate that lease rates should remain stable

percent, while vacancy in suburban mar-

quarters at the 4801 Airport Plaza Dr. build-

been accounted for in the 15.6 percent sub-

or perhaps increase slightly this quarter.

kets was about 15.6 percent.

ing, a 176,375-square-foot space previously

urban market vacancy factor. Two other

Several developments in Downtown

As the Business Journal went to press, the

occupied by The Boeing Company (see pho-

buildings at the Long Beach Airport

Long Beach are removing office space

400-member staff of the Port of Long Beach

tos, Page 14-B). That space, located across

Business Park remain vacant, both also pre-

(Please Continue To Next Page)

ing for office users,” and that means less space allotted per worker, she said. A 2013 4th quarter report from Cushman

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mortgage payment instead of paying higher rent. It’s a great investment right now to purchase,” she continued. With flat demand, Blair and Smith antic-


1_LBBJ_Feb18_SectionB_LBBJ MASTER LAYOUT 2/16/14 1:51 PM Page 12

REAL ESTATE QUARTERLY 12-B Long Beach Business Journal

February 18-March 3, 2014

from the market, with the adaptive reuse of

noting that this type of increase is typically

former office buildings into mixed-use res-

considered significant when it occurs over

idential and retail projects, such as City

a year’s time.

Hall East, 245 W. Broadway, the Security

In the Long Beach and South Bay areas,

Pacific National Bank Building and Ocean

only about 5.9 percent of industrial real

Center Building. Even though this may be

estate space is vacant, according to

a reflection of currently weak demand for

Massaro. With little space for sale on the

office space, Smith anticipates that the

market, most listed properties are seeing

developments will ultimately spur growth

multiple offers, he added. While demand to purchase has been

in the downtown office sector. “I think ultimately that is going to have a

high, “demand for buildings available for

very positive impact on the office market,”

lease has been fairly stagnant,” Massaro

Smith said, explaining that these develop-

said. Lee & Associates reports that low

ments position Downtown Long Beach as a

demand for leasing caused landlords to

“destination.” He noted, “But that needs to

lower rental rates in the fourth quarter of

cycle itself through and really take hold

last year to incentivize leasing activity. Although leasing activity may be stagnant

before you start to see the benefits of that.”

in the greater South Bay area, Watson Land

Sales Lead, Leases Lag In Long Beach Industrial Market

D

emand to buy is high in the indus-

Company isn’t having much trouble leasing up its vast industrial holdings in Carson, which are 98 to 99 percent occupied, accord-

5.5 percent range, according to local real

Pictured from left are Lee & Associates’ Brandon Carrillo, principal, Ryan Endres, associate, and Garrett Massaro, senior associate, who are leasing space in a multi-tenant industrial park at the corner of Anaheim Street and Oregon Avenue in West Long Beach. Demand to lease is currently outpaced by high demand to buy as business owners seek to take advantage of low interest rates, Massaro said. (Photograph by the Business Journal’s Thomas McConville)

estate professionals.

increase, according to Garrett Massaro,

in the third quarter of 2013 and is currently

what we would consider the smaller-sized

senior associate with the Long Beach

at about $111 per square foot, according to

ranges,” Ryan said. In the first quarter of

office of Lee & Associates.

a report by Lee & Associates. “That is a 7.7

this year, Watson Land Company experi-

trial market as interest rates con-

tinue to remain in the attractively low 5 to

The supply of industrial properties for sale in Long Beach and the South Bay is

ing to Lance Ryan, senior vice president of marketing and leasing for the company. “We’re seeing a great deal of demand in

tight and insufficient to meet current

The average price of industrial real estate

percent increase quarter-to-quarter, which

enced more interest in smaller properties

demand, which is causing prices to

in the South Bay was $103 per square foot

is big,” Massaro told the Business Journal,

ranging in size from 20,000 to 80,000

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1_LBBJ_Feb18_SectionB_LBBJ MASTER LAYOUT 2/16/14 1:51 PM Page 13

REAL ESTATE QUARTERLY February 18-March 3, 2014 square feet. A report from CBRE, Inc. corroborates Ryan’s observation, estimating that 71.1 percent of total leasing and sales activity within the Greater Los Angeles

Long Beach Business Journal 13-B

Interest In Waterfront Retail Space Gains Traction

F

rom downtown to Belmont Shore, Long Beach’s waterfront areas are

region occurred in properties in the 10,000

experiencing a pickup in commercial real

to 99,999 square foot range. This may be

estate activity as new retail developments

because now that large logistics and distri-

cargo volumes, continues to drive demand

continue to gain steam. In Downtown Long Beach, mixed-use residential and retail developments are underway, including Urban Village on Long Beach Boulevard, the 245 W. Broadway project, the Shoreline Gateway project on Ocean Boulevard and the Ocean Center Building on Ocean Boulevard, all of which include plans for ground floor retail space.

for industrial space in Long Beach and in

The Pike at Rainbow Harbor is also gear-

the South Bay. At the State of the Port

ing up for a retail overhaul. In October,

address in January, Acting Executive

Developers Diversified Realty (DDR)

Director Al Moro said that the Port of Long

spoke to Long Beach Development

Beach’s cargo volumes increased by 11

Services (LBDS) about potential plans to

percent from 2012 to 2013.

turn the somewhat sleepy center into an

bution companies have stabilized and reinvested in industrial properties, the smaller businesses that support them are starting to have better business velocity, Ryan explained. Both Ryan and Massaro agreed that proximity to the San Pedro Bay ports, which are experiencing an increase in

Ryan said that Watson Land Company

outlet mall. Amy Bodek, director of LBDS,

continues to keep an eye on import volumes

said that DDR returned to the city with a

when predicting demand for the rest of the

revised proposal in January and is continu-

year, but he anticipates that those volumes

ing to fine-tune its plans. Mitchell

will continue to improve. Massaro said that

Hernandez, a CBRE, Inc. associate special-

if interest rates increase, the market is going

izing in the Long Beach retail market, said

to react with decreased sales activity.

(Please Continue To Next Page)

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James Stephenson, pictured, operations manager with San Diego-based Cohn Restaurant Group, has been overseeing the construction of the new Bo Beau restaurant at 144 Pine Ave. for more than a year. “We knew this building was in pretty bad shape when we took it,” Stephenson said. “The city has been great. Our project guys have been great. There’s just a lot more work that we anticipated. We stripped this to four walls. We re-piped the whole thing . . . We don’t want to open and have to fix things over and over.” The restaurant may be open in time for the Toyota Grand Prix of Long Beach in April. (Photograph by the Business Journal’s Thomas McConville)


1_LBBJ_Feb18_SectionB_LBBJ MASTER LAYOUT 2/16/14 1:51 PM Page 14

REAL ESTATE QUARTERLY 14-B Long Beach Business Journal

February 18-March 3, 2014

strong local customer bases, Hernandez

A rendering by Bickel Group Architecture shows what the future Dunkin’ Donuts at 5560 E. 7th St. might look like. On February 6, the Long Beach Planning Commission postponed approving a site plan review for the project, asking the developer, Frontier Real Estate Investments, to return with a new design and traffic study plan in a month. The location is currently occupied by The Daily Grind, recognizable for the large sign in the shape of a doughnut above the building. The developer agreed to incorporate the doughnut into plans for the site. (Rendering courtesy of Frontier Real Estate Investments)

said. He cited the intersections at Bellflower

CVS/pharmacy, Lucille’s Smokehouse

of its large tenants when Loehmann’s went

Overall, the South Bay’s vacancy rate for

Boulevard and Stearns Street and at 2nd

Bar-B-Que and City National Bank are all

bankrupt, Hernandez, who manages leas-

retail space remains at a low 3.2 percent,

Street and Pacific Coast Highway as exam-

underway. Across the street at the SeaPort

ing at the shopping center, believes the

according to CBRE, Inc. CoStar Group’s

ples of where retail demand is strong. Both

Marina Hotel, real estate developer Taki

vacancy should be filled soon. “I think

year-end 2013 report estimated that retail

of those areas have higher income residents

Sun, Inc. intends to tear down the aging

there is a lot of interest . . . It is a great

space vacancies in the South Bay were

and have big box retailers like Target and

hotel and turn it into a retail center. The

intersection,” he said, adding that “owner-

about 4.3 percent at the end of 2013,

Best Buy to anchor smaller retailers.

project, called Shoppes At 2nd + PCH,

ship needs to work through the potential

remaining essentially static from a year

needs an environmental impact report from

users and determine who is going to be the

before when the vacancy rate was 4.5 per-

the city before it may move forward.

best fit for the customer, the trade area and

cent. Hernandez characterized demand in

the shopping center.”

the local retail market as “flat” from last

that increased residential developments and interest from retail developers like DDR are spurring improvement in downtown’s retail market, but he added, “I think we still have a ways to go.” Hernandez noted that the Long Beach retail market is very segmented, much like its residential districts that represent a patchwork of neighborhoods from Naples to Bixby Knolls to Rose Park, and so on. The areas where retail is faring well have

Development activity continues to be high at the corner of 2nd Street and Pacific Coast Highway, where projects to build a

While Marina Pacifica recently lost one

Moving Day For The Harbor Department Staff

Long Beach Harbor Department staff – with the help of Bekins moving personnel and InterVision Technology employees hooking up computers and tech-related items – began moving into their new “temporary” headquarters at 4801 Airport Plaza Dr. on February 14-15. The approximate 400-member staff will relocate in phases to the eight-story, 176,375-square-foot building across from the Long Beach Marriott. The first two days focused on setting up the top two floors, which includes executive offices, government affairs, real estate, human resources, trade relations and the communications division. The top floor also includes individual offices for the Long Beach Board of Harbor Commissioners. At left, Commission President Doug Drummond proudly shows off a display representing his 29-plus year career with the Long Beach Police Department, retiring at the rank of commander in 1988. The building will be home to harbor department staff until a decision is made on a new headquarters in Downtown Long Beach. One possibility discussed is including the headquarters as part of a new Long Beach Civic Center along Ocean Boulevard, stretching from Magnolia Avenue to Pacific Avenue. (Photographs by the Business Journal’s Thomas McConville)


1_LBBJ_Feb18_SectionB_LBBJ MASTER LAYOUT 2/16/14 1:51 PM Page 15

REAL ESTATE QUARTERLY February 18-March 3, 2014

Long Beach Business Journal 15-B

The Port of Los Angeles is working on improvements to an area adjacent to Jerico Development Partners’ $1.2 billion overhaul of Ports O’Call Village in San Pedro, which is meant to function as a gateway to the project, according to Eric Johnson, president of Jericho Development. The work pictured was designed by AECOM. The building at right is the Los Angeles Maritime Museum. (Photograph by the Business Journal’s Thomas McConville)

quarter to this quarter. Lease rates remained stable as well, he said. CoStar estimated that lease rates increased by about 59¢ from 2012 to 2013. While Hernandez said that because the strength of the Long Beach retail market varies depending upon the area of the city, he said that “on more of a macro basis, you are continuing to see retail improve.” ■

Leases And Transactions Another nationally recognized company is relocating its headquarters to Long Beach within the next 30 to 60 days. National Emblem, Inc., has purchased a 15,259-square-foot building at 3925 E. Vernon St. within the Long Beach Business Center. Formed in 1972 and currently headquartered in the City of Carson, the firm has a long list of clients, including professional sports operations, law enforcement agencies and major corporations. According to its website, “We are proud to be an Officially Licensed Supplier of Authentic Collectible Embroidered Emblems to NBA and the NHL; both the team logos and special event designs which are worn on court and on ice by the players.” National Emblem purchased the building from Rhyme University in a nearly $2 million transaction handled by the local Lee & Associates team of Greg Gill, Sean Lieppman, Brandon Carrillo and Jeff Coburn. Coldwell Banker Commercial BLAIR WESTMAC (CBCBW) announced the following transactions: • A 14,400-square-foot industrial building at 2512 E. South St. in Long Beach sold to an undisclosed buyer for $1,750,000. The transactions was handled by CBCBW’s John P. Eddy and Marc Bonando. • Altamirano Chiropractic signed a five-year lease for 7,500 square feet of office space at 3501 Atlantic Ave. in Long Beach. CBCBW’s Hoyt Hochman handled the transaction. • Kinesis Chiropractic and Physical Therapy signed a five-year lease for 1,360 square feet of office space at 3662 Katella Ave. in Los Alamitos. The transaction was handled by CBCBW’s Greg Williams. • Dat Nguyen, an individual, signed a

three-year lease for 1,600 square feet of retail space at 242 E. 7th St. in Long Beach. The transaction was handled by CBCBW’s Hochman and Sheida Hosseinzadeh. • Groundwork Fitness recently signed a five-year lease for mixed-use space at 333 Pine Ave. in Downtown Long Beach. CBCBW’s Hosseinzadeh handled the transaction. • James Wilson and Dr. Annamalai Ashokan recently signed a three-year lease for 1,300 square feet of office space at 3762 Atlantic Ave. in Long Beach. CBCBW’s Hosseinzadeh handled the transaction. • The Antioch Missionary Baptist Church of Long Beach purchased an 1,825-square-foot residence at 1416 E. 16th St. in Long Beach for $420,000. The transaction was handled by CBCBW’s Becky Blair and Hosseinzadeh. Lee & Associates – L.A./Long Beach announced the following transactions: • JP8 Logistics leased a 32,083-squarefoot building at 5630 Cerritos Ave. in Cypress A February 1 move-in is planned. The transaction was handled by Lee’s Brandon Carrillo and David Bales. • BAM Packaging leased a 4,680square-foot industrial building at 10741 Noel St. in Los Alamitos. The transaction was handled by Lee’s Carrillo and Garrett Massaro. • Broadview Mortgage leased 2,534 square feet of office space at the Circle Business Center building at 4500 E. Pacific Coast Hwy. in Long Beach. Lee’s Jeff Coburn, Shaun McCullough and Say Jeon represented the landlord in the transaction, and Barbazza Commercial represented the tenant. • Kelly Services leased 6,599 square feet of office space at the 5000 East Spring Street building at the Long Beach Airport Business Park. The transaction was handled by Lee’s McCullough and Coburn, and Danielle Knudson of Daum Commercial. • Krieger & Krieger, a law corporation in Downtown Long Beach, recently renewed its lease for 2,699 square feet of office space at the 249 E. Ocean building. Lee’s McCullough and Coburn handled the transaction. • Bankers Life & Casualty Company recently opened a Long Beach office by signing a lease for 3,342 square feet of space at the 5000 East Spring Street building. The transaction was handled by Lee’s McCullough and Coburn, while

Wasserman Commercial represented the Bankers Life. • Late last year, 2L Property 3060 LLC purchased 1.38 acres of land at 1450 E. 27th St. in Signal Hill. The transaction was handled by Lee’s McCullough and Coburn, and Lary Carlton from Colliers International. • DLJ Produce, which is headquartered in the City of Industry, leased a 46,000-square-foot industrial building at 3100 E. 29th St. in Long Beach to serve as a cold storage facility. The transaction is valued at more than $2 million. Lee’s Greg Gill, Coburn and Carrillo handled the transaction. • Intersect Athletics signed a five-year lease for 4,800 square feet of retail space at 242 E. 3rd St. in Long Beach. The gym and health spa moved from Signal Hill to

Downtown Long Beach. The transaction was handled by Lee’s Noel Aguirre and Sean Lieppman. Marcus & Millichap’s Long Beach Regional Office announced the following transactions: • A 20-unit apartment complex located at 725-729 Sanford Ave. in Wilmington sold for $1,350,000. The two-building complex, built in 1924, includes 4 studio apartments and 16 one-bedroom units. Marcus & Millichap’s Kevin King and Arnie Suttipreechanun handled the transaction. • A 25-unit apartment property in Whittier sold for $4,300,250. The property at 6335 Newlin Ave. was built in 1969 and includes 5 one-bedroom, 17 two-bedroom and 2 three-bedroom units. Marcus & Millichap’s Henry S. Camacho handled the transaction. Stepp Commercial announced the following residential transactions: • A 7,650-square-foot apartment complex at 1065 E. Ocean Blvd. was sold by Lawrence E. Guesno Sr. for $2,575,000. The purchaser was not named. Robert Stepp handled the transaction. • A 6,442-unit apartment building at 2035 Pine Ave. was sold by Gated Properties II LLC for $1,200,000. The purchaser was not named. Stepp handled the transaction. • A 3,488-square-foot apartment complex at 5129 E. The Toledo was sold by Henry and Barbara Josepberg for $1,185,000. The purchaser was not named. Stepp handled the transaction. ■

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KīĞƌĞĚďLJ :ĂŵĐŽƋƵŝƟĞƐ͕/ŶĐ

562-421-6566 Jim Ault

ũŝŵΛũĂŵĐŽƚĞĂŵ͘ĐŽŵ BRE#01152520

Eric Ault

ĞƌŝĐΛũĂŵĐŽƚĞĂŵ͘ĐŽŵ BRE#01278820

INTERNATIONAL CITY ESCROW, INC.

PATREECE COBURN Commercial Escrow Officer

Specializing In s#OMMERCIAL4RANSACTIONS s"ULK3ALES s!"#,ICENSE4RANSFER s%XCHANGES s,EASE/PTIONS s!ND!LL9OUR%SCROW.EEDS

INTERNATIONAL CITY ESCROW, INC.

www.icescrow.com

An Independent Escrow Corporation. Licensed by the Dept. of Business oversight

562-497-9777

5000 E. Spring St. · Suite 120 · Long Beach, Ca 90815


1_LBBJ_Feb18_SectionB_LBBJ MASTER LAYOUT 2/16/14 1:51 PM Page 16

www.cbcblair.com


February 18 - March 3, 2014 Section B