value-add side in new construction,” as
many overbuilt condo portfolios come
to market from banks taken over by the
FDIC. As far as growth, he notes that
grocery chains and some drug stores
are still maintaining through the down
economy.—Ian Ritter, GlobeSt.com
and stay out of the chain of
ownership. Once they get
the physical asset, they have
to deal with all of the ownership issues that accompany it.
UPSIDE: JEFF FRIEDEN SEES NOTE
SALES AS OPPORTUNITY
Irvine-based Real Estate Disposition LLC
and Jones Lang LaSalle Inc. recently
joint ventured to launch an online
auction sales platform for commercial
properties and notes. Certainly there
are platforms available for both asset
categories in the market now. What is
new in this venture, according to the two
companies, is that this will be the first
major initiative in which both properties and note sales are auctioned on the
same platform. RESoCal recently caught
up with Jeff Frieden, CEO of REDC, to
talk about why the company has opted
for this particular strategy.
RESoCal: What else is different about this offering?
Frieden: We are focusing
on one-off or local sales. We
want this to be more of a
retail approach to get these
assets to buyers in local markets. If you are a large bank
with assets all over the country, and you have an empty
or low-performing strip mall
in Modesto—there is a high
probability that you will find a
buyer in the general Modesto
area. Other auctions tend to
focus on bundling all the
notes together. The one-off
approach will be much more
successful.—Erika Morphy
RESoCal: I understand JLL’s role in this
initiative, given its capital-markets presence. But REDC has focused largely on
residential. Explain.
Frieden: We looked at the market trends
and concluded that the opportunities
will be huge for us in note sales during
this downturn—even larger than residential during the downturn in the 90s. We
reached out to JLL because they are a best-in-class partner with in-depth knowledge.
SAN DIEGO
EXPANSIONS STAND OUT
IN RENEWALS
A law firm in San Diego has
expanded by 25,000 square
feet. The Department of
Homeland Security has
added 19,783 feet. A healthcare firm in Texas has added 24,000. And
a high-tech firm in Oregon has grown by
23,000 square feet. These are just a few
examples of some notable office tenants
expanding despite the generally sluggish
state of office leasing. The deals are more
noteworthy than they would have been
a few years ago because, brokers say, expansions are the exception; they say the
action lately remains mainly in renewals, and most renewals are for the same
amount of space or sometimes less.
In the law firm expansion—the exception that proves the rule—the San
Diego-based Procopio, Cory, Hargreaves
& Savitch has signed a lease for 100,000
square feet at 525 B St., a building owned
by Hines. The law firm, which is scheduled to relocate in May 2010 after more
San Diego-based Procopio, Cory, Hargreaves & Savitch signed
a lease for 100,000 square feet at 525 B St., a building owned
by Hines.
RESoCal: For the note-sale auction process, what can you add to what is already
available?
Frieden: Traditional loan sales have been
on a sealed-bid basis. When we were talking to funds that buy these portfolios,
we found they spend a lot of resources
on due diligence to determine the true
value. A platform like ours adds transparency to this process.
RESoCal: Why do you see loan sales as an
important strategy? It hasn’t delivered
the returns many had expected.
Frieden: That is coming. Banks will take
back a home in a minute — but if they
have to take back a gas station, for example, they would rather trade the loan
than 40 years at 530 B St., says that the
decision to relocate was also due in part
to Hines’ commitment to sustainability
and its pursuit of LEED certification,
which the building is expected to attain
by year end.
In the Homeland Security expansion,
the US government agency has signed
a five-year lease renewal and expansion
totaling 44,760 feet at 610 W. Ash St., a
class A office tower in Downtown San
Diego. Pascal Aubry-Dumand of Cushman & Wakefield represented building
owner Glenborough Realty along with
Ron Miller of CresaPartners.
Not surprisingly, a number of the expansions lately have been in the medical office and healthcare-related fields,
which continue to perform relatively
