Summer 2007 - Sares

Summer 2007
S A R E S • R E G I S
G r o u p
N e w s l e t t e r
Strategies
Years Of Struggle End With OK
Of 92-Acre Cabrillo Business Park
As tough as it is to develop real estate in Santa
Barbara it’s even tougher in its smaller coastal neighbor to
the west, Goleta.
Nevertheless, SARES•REGIS Group recently pulled off what
at times seemed doubtful even to the principals: After years
of battling county and local governments, the company won
entitlements from the City of Goleta to transform a former
92-acre defense-aerospace testing range into the Cabrillo
Business Park. The project will contain 956,000 square feet
of state-of-the-art research-and-development facilities.
It’s no surprise that ardent pro-environment sentiments are
popular and deep-seated in this community that includes the
University of California at Santa Barbara. After all, the site is
less than a mile from where anti-Vietnam War protesters
burned the Isla Vista branch of the Bank of America in 1970.
In this Issue
Page 3 Guest columnist Gene Godbold, President of Bank of America’s
Commercial Real Estate Lending, says Bank of America believes environmentally sustainable building is critical. The bank has announced a $20billion initiative to support “green” business practices and is developing
creative financial solutions to support future sustainable development.
Page 5 Taking an aggressive first step toward a major re-entry to the
Denver market, SRG completed the $38-million acquisition from JPI of a
241-unit, Class-A apartment community. CityGate – popular among urban
professionals – is at the downtown’s gateway and an easy walk to Coors
Field, home of the Colorado Rockies baseball team.
Page 6 SRG got the jump on some competitors in Orange County’s
flagging for-sale housing market when it decided to auction off 10 percent
of the condominium units at Canyon Villas, a 344-unit Class-A conversion
in Aliso Viejo. Bidders, who snapped up the units in a few hours, re-set
pricing for the project and re-ignited the pace of sales.
Page 12 SRG goes international with two developments in the flourishing
Tijuana industrial market. The first project, a 175,000-square-foot warehouse and distribution building, was leased by Mattel Inc. for five years.
Construction is under way on one other building totaling 225,000 square
feet.
The SARES•REGIS Group is one of the leading developers and managers of commercial and residential
real 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 combined
portfolio of property and fee-based management contracts valued at more than $4 billion, including
more than 13,000 rental apartments and 15 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.
So the climate that SRG faced was anything but calm after
residents seeking local control voted to incorporate the
City of Goleta in 2002. Cityhood came after four previous
unsuccessful tries. At the same time, voters installed a
vehement no-growth city council that immediately threw
up major hurdles even to homeowners seeking simple
room additions. To make it more frustrating for SRG, which
acquired the site in 1998, the vote for the new city came as
the company was on the brink of winning project approval
by Santa Barbara County. The vote placed SRG’s property in
the new political jurisdiction.
Huge Open-Space Requirement
Even though nine years passed since the site was acquired
from Hughes Corp., the struggle has been worth it, says
continued on page 2
Aerial photo shows planned 92-acre Cabrillo Business Park just
left of the Santa Barbara Municipal Airport.
w w w. s a r e s - r e g i s . c o m
SRG Strategies
.
Summer 2007
Cabrillo – continued from page 1
Russ Goodman, SRG’s Ventura Division President. Values have
been increasing and there are no competing commercial
projects existing or planned. About two miles from the ocean,
Cabrillo Business Park is at Hollister Avenue and Los Carneros
Road, a main intersection in Goleta, a city of 55,000.
“We acquired the property for about $22 million. Since then,
we incurred costs to rehab some existing buildings and other
significant pre-construction costs to finish the site prior to
construction. But the project as currently approved is valued
in excess of $100 million,” said Goodman, who negotiated
the purchase of the site and navigated the stormy seas of
Goleta’s no-growth bias to see the project through.
Construction will get under way next year on eight of 12
planned one- and two-story flex buildings ranging from
55,000 square feet to 80,000 square feet. The site also will
include a restaurant and three self-storage buildings that
are compatible with the adjacent Santa Barbara Municipal
Airport.
Under the development agreement, 46 percent of the site’s
land area will remain in either natural or landscaped open
space. It will include 19 acres of restored and expanded
wetlands and grasslands with publicly accessible trails.
Caught Up In City’s Growing Pains
In the moments after the 2002 election, optimism was hard
to come by for Goodman and Steve Fedde, Ventura Region
Senior Vice President. Both men already had spent four years
trying to guide the project through the county and it was
finally nearing approval.
“We were disappointed,” Fedde said. “We were very close
to having everything we needed to get approval from the
county. We were held up negotiating with the City of Santa
Barbara to sell a runway navigation easement for the
municipal airport.”
Confounding SRG’s prospects even more, the new city’s
financial viability didn’t produce the revenues needed to staff
2
Dupont Displays signed an 11-year lease of this SRG-renovated
150,000-square-foot R&D building, one of two leased-up existing 1960sera buildings on the 92-acre site of the planned Cabrillo Business Park.
up with senior managers to run the municipality effectively.
Despite the fact that there was no community opposition to
the SRG project, political consideration of any new developments simply wasn’t a priority.
“We had very, very little community opposition to our project,
chiefly because there were no significant adjacent residential
projects. We thought we’d have more opposition because it
was the biggest project ever proposed in Goleta. But generally
speaking, people believed our project would be a community
asset and a job generator. The difficulty was the city staff was
not being directed to focus on our project,” Fedde said.
‘Hard-Fought Negotiation Sessions’
In the meantime, Goodman and Fedde were forced to the
sidelines while closely watching Goleta’s creation of what
Fedde called an “extraordinarily complex general plan, to
make sure that it didn’t hurt us.”
It wasn’t long before Goleta voter discontent began to
emerge over restrictive city policies and an onerous revenuesharing deal the new city had struck with the county four
years earlier. Citizen unrest grew to such a level that in 2006
a new, more moderate city council majority was elected that
“wanted to see economic opportunities happen that would
benefit the city,” Fedde said.
At that point, SRG re-ignited its efforts to process the proposed development. With the changed political climate, the
city’s staff was instructed to meet with SRG and hammer
out the details.
Steve Chase, the city’s Director of Planning and Environmental
Services, who was hired after the city was formed, said closing
the deal with SRG “all came down to a 100-day push.”
“There were 14 long, hard-fought negotiation sessions”
between SARES•REGIS Group and Goleta that lasted, Chase
said, “many nights into the early morning.”
continued on page 10
Volume 11
Guest Column
Is ‘Green’ Only A Buzzword
Or A Business Imperative?
Gene Godbold, President,
Bank of America Commercial Real Estate Banking
The term “green” can mean something different based
on your role as a business owner, developer, consumer or citizen.
However there is one reality that cuts across all of these roles –
the decisions you make about the environment matter.
Earlier this year, Bank of America announced a $20-billion initiative
to support the growth of environmentally sustainable business
activity to address global climate change. This 10-year initiative
encourages development of environmentally sustainable business
practices through lending, investing and the creation of new
products and services.
We continue to improve our operations to become more environmentally friendly, while also working with other businesses to do
the same. As the leading provider of financial solutions to real
estate development companies, we serve as strategic advisors to
our clients throughout the United States.
Growth in sustainable projects
It is clear that environmentally sustainable development is top of
mind and the need for “green” expertise in financing, contracting,
appraising, and other areas will only accelerate over time. In fact,
sustainable/green projects under design or construction amounted
to 500 million square feet of new commercial space as of spring
20061 and it was predicted that by the end of the year sustainable/
green projects will account for 6 percent of commercial construction in the U.S., valued at $15 billion2.
So, how is green building defined? Based on a report to the
California Sustainable Building Task Force, green building3 is a
project constructed with green/sustainable design/technology
and materials intended to:
■
Minimize environmental impact
■
Reduce energy and resource consumption
■
Optimize the healthfulness and productivity of the
work environment
■
Achieve financial impact through long-term cost
effectiveness
■
Exist and function in harmony with public interest
and policy on subjects like climate change and
environmental contamination
As we review real estate projects for potential financing, we
broadly categorize them into two areas:
.
Number 1
Greenbuilding Construction—Often developer companies
engage in construction activity and secure materials that provide a
significant long-term environmental advantage over conventional
industry practices. Many projects in this category will apply for
the US Green Building Council’s Leadership in Environmental
Energies and Design (LEED) certification, are constructed in accordance with the majority of LEED building practices, or have a
clear focus on the reclamation and reuse of existing materials.
Green Land Planning and Development—The site and
development plan for the project limits environmental impact,
protects resources and demonstrates a clear focus on environmentally sustainable growth. Projects in this category will include
transit-oriented smart-growth, remediation of environmentally
contaminated sites (brownfield reclamation) and developments
that demonstrate a clear focus on the sustainable management
of environmental resources.
Because of the potential complexity of green building projects,
it is important to have a financial partner that can recognize
the value, assemble the appropriate capital stack and execute
efficiently. At Bank of America we create integrated debt and
equity solutions to maximize the value of green elements in a
development. Tax credit incentive
programs can be particularly
effective in enhancing the viability
of a project. For example, Green
Tax Credits and Brownfield Tax
Credits are offered by various states,
including New York, Oregon and
Maryland.
Credit quality may be
improved
These programs provide tax credits
for following specific green building
requirements and remediating contaminated properties. In addition to
Green Tax Credit programs, Historic Tax Credits can be another
option, as they are provided to eligible historic properties to subsidize the cost of rehab. Historic Tax Credits can be combined with
other subsidy programs such as New Markets Tax Credits and Low
Income Housing Tax Credits. Bank of America assists its clients in
monetizing these tax benefits, providing more capital for construction and reducing the long-term project costs.
We recognize that “green” elements may improve the credit
quality of commercial real estate projects. For example, energy
efficient utilities typically reduce operating expenses, and certified
green products may command a premium in certain markets. We
actively analyze such risk mitigants and work with our clients to
maximize the value of environmentally sustainable development.
We also consider the financial strength, experience and track
record of the client in developing these projects.
continued on page 8
3
SRG Strategies
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Summer 2007
SRG Breaks Ground On Ontario’s Last
Major Industrial Project; A Prime Parcel
SARES•REGIS Group has commenced grading on a
prime 100-acre parcel in Ontario that the company purchased
last year. The project is called the California Commerce
Center, Phase 5. SRG plans to develop 2 million square feet
of warehouse and distribution space on the site.
Seven buildings, including a 10,000-square-foot office building,
and industrial buildings, ranging from 23,000 square feet
to 680,000 square feet, will be constructed. The largest
building is slated to be finished early next year followed by
completion of the remaining buildings by mid-2008. The
development is valued at $200 million. The site was excess
land owned by the County of San Bernardino that was
purchased at auction for $47 million by SARES•REGIS Group.
“Ontario city officials tell us this site, which is two blocks
from Ontario International Airport, represents the last masterplanned distribution park in the city of Ontario,” said Peter
Rooney, President of SRG’s Commercial Investment Division.
“There is very little undeveloped industrial land left in the city
and there are few competing buildings in this area. So it’s no
surprise that our buildings already are attracting significant
interest,” Rooney said.
SARES•REGIS Group acquired the site in May 2006. Within
10 months the company had obtained approvals to begin
developing the project.
“We bought the site from the county, which was
very cooperative throughout the process and good to work
with. I’m very proud of what we’ve accomplished in terms
of entitlements for the site. We did a full EIR and successfully addressed all biological concerns with state agencies.
It was very quick,” Rooney said.
The Ontario industrial market remains one of the nation’s
healthiest. Last year rent increases averaged 10 percent,
which “is very favorable for the development,” Rooney said.
Joe McKay and Mike Wolff of the Ontario office of Lee &
Associates are marketing the project. JPMorgan Investment
Management is SARES•REGIS Group’s financial partner.
Aerial photo shows 100-acre parcel in Ontario surrounded by big-box industrial buildings.
SRG is developing the site with 2-million square-feet of warehouse and distribution space.
4
Volume 11
.
Number 1
CityGate is a
“first-class asset
that is located
at the gateway
to downtown
Denver…”
–Bill Montgomery
The 241-unit CityGate apartment community is on the edge of the central
business district in Denver, which is showing strong long-term growth potential.
SRG Returns To Denver With Purchase
Of Downtown Apartment Community
SARES•REGIS Group acquired CityGate, a 241-unit
Class-A apartment community in downtown Denver for $38
million. The purchase signals the company’s commitment to
return to the Denver market as a major investor.
CityGate is on Brighton Boulevard and is within walking
distance of Coors Field, home of the Colorado Rockies professional baseball team. The property is close to Denver’s lower
downtown and the city’s central business district.
“CityGate represents the first step toward our goal to reacquire a large portfolio presence in Denver. We’ve owned and
sold several apartment-home communities there in the past
and we’ve been working aggressively to return to Denver. It’s
a solid market, showing strong long-term growth. We understand it and believe in it,” said Bill Montgomery, President of
the company’s Multifamily Acquisitions & Investment Division.
Montgomery added that CityGate also should benefit from
continued redevelopment that is occurring in the area as
“significant re-use is being processed for neighboring
properties.”
SARES•REGIS Group bought the apartment-home community
from JPI, an Irving, Texas, real estate company, which developed the apartment project in 2004 for the urban professional
market.
Montgomery called CityGate a “first-class asset that is located
at the gateway to downtown Denver and features a variety of
floorplans.”
“With newer construction, the opportunity is in management
and in obtaining the upside in the differential compared to the
property’s nearest competitor in Denver,” Montgomery said.
Beginning in the late 1990’s SARES•REGIS Group
began acquiring properties in Denver and its suburban
markets. But, in 2005 the company liquidated its Colorado
portfolio and sold six apartment communities. They included:
Cottonwood Creek, Quail Ridge, Hunter’s Cove and Briarsglen,
which were purchased by Redpeak. Westhills was sold to
Fairfield and Parkside was sold to Arsenault Holdings.
SARES•REGIS Group’s financial partner in the CityGate
project is Centerline. JPI was represented in the transaction
by Doug Andrews and Ray White, of Apartment Realty
Advisors of Denver. SARES•REGIS Group was self-represented.
5
SRG Strategies
.
Summer 2007
The auction caused a stir among local new home sellers
and the news media, too, with stories appearing in the Los
Angeles Times, The Orange County Register and the Orange
County Business Journal.
SRG purchased the project in 2005 and renovated it to make
it suitable as a competitive for-sale community. It was developed in the mid 1980s by The William Lyon Company, which
operated it as Innsbruck Resort Apartment Homes, a Class A
rental product.
Rhett Winchell, an executive at Kenndy Wilson, which ran the
SRG auction, said he received calls from other sellers after sale.
Bidders purchased all 34 condominiums in three hours.
“A lot of builders were tracking the SARES•REGIS Group
auction. They saw the success out there," he said, adding
that after SRG’s experience others throughout Southern
California are using the auction strategy.
Auction Jump Starts Sluggish Sales
At SRG Project in Orange County
As inventories of new and resale homes in Orange
County began rising last year, SARES•REGIS Group adopted
an aggressive strategy to jump-start home sales by holding
an auction last fall of 34 of 344 condominium units at its
Canyon Villas project in Aliso Viejo.
The strategy worked. About 300 prospective buyers were
in a crowd of some 700 people who showed up for the oneday auction in the South Orange County city. All the twobedroom units were sold in a few hours. The average selling
price was $400,000.
The company initially sold 152 units early last year before the
residential slowdown took hold. SARES•REGIS Group determined that an auction would re-set the prices for the units
as well as reinvigorate sales. Minimum bids for the units were
placed at $295,000, 38 percent less than the previous asking
price. The one- and two-bedroom units range from 791
square feet to 1,100 square feet.
“The general mood among buyers was that the
market was going down. Buyers figured by waiting their
odds of getting a lower price improved,” said Ed Eyerman,
Vice President of Sales and Marketing for Regis Homes.
“By holding an auction, we knew we would create excitement, allow the market to determine the bottom and regain
our sales velocity. It was very successful. The new price set by
bidders represented a 15 percent discount from the previous
sale price,” Eyerman said.
“Since the auction we’ve been outpacing the Orange County
market and we’re achieving pricing equal to what we were
doing before the auction,” he said, adding that 60 units
remain unsold.
6
Multifamily Management Signs
To Advise Caruso, Clarett Group
SARES•REGIS Group’s Multifamily Property Management Division has been engaged to consult on the design of
two major Los Angeles area apartment communities totaling
some 1,200 units.
The Clarett Group, a prominent New York City-based developer of apartment communities, commercial and mixed-use
projects, retained SRG on a two-year agreement to advise
the company on design and development of BLVD 6200, an
approximately 1,000-unit apartment community planned for
Hollywood Boulevard at Argyle Avenue.
SRG received a similar assignment from Caruso Affiliated
for its 232-unit Americana at Brand apartment community
at 233 S. Brand Ave. in Glendale that is currently under
construction in conjunction with 475,000 square feet of
high-end retail space.
The Glendale project, which is scheduled to open next May
and will be managed by SRG, represents the first multifamily
venture for Caruso Affiliated, a well-known development firm
whose president, Rick Caruso, is a longtime Los Angeles civic
leader.
Jim Thomas, President of the Multifamily Property
Management Division, says because of SRG’s highly regarded
expertise in development, design, construction and management of multifamily housing, the firm is advising both developers on the scope and design of common-area amenities,
floor plan design and the level of finishes in the unit interiors.
Volume 11
.
Number 1
Hollywood Regis Succeeds With A
Sales Pitch That Suits The Area
The marketing of Hollywood Regis, a 100-unit condominium development, definitely is out of the ordinary. Then
again, so is Hollywood. But the strategy is working.
“It’s Holly-weird. And we’re living up to the name,” said
Ed Eyerman, Vice President of Sales and Marketing for Regis
Homes.
Hollywood and Highland, which is famous for the Academy
Awards, and we’re close to the Sunset Strip.
“We’re also on the boundary of West Hollywood, which has
a prominent gay community. Since Feb. 1, we’ve been in
alternative publications and are getting a huge response,”
he said. The campaign also included radio promotion.
Models advertising the project roamed the Sunset Strip on
Grand Opening weekend. Movie poster-like ads ran in alternative lifestyle publications. A big promotion for the project
on the region’s top-rated FM station was on radios everywhere.
“We worked with STAR 98.7, the region’s No.
Eyerman’s instincts were right. Fifty-five of the 100 Hollywood
Regis condominiums have been sold with strong sales-office
momentum ever since the campaign was rolled out.
The ‘Get A Life’ promotion reached millions of listeners. After
the special radio promotion got under way average daily
traffic jumped to 406. Simultaneously, he said, models were
sent out to hot spots on the Sunset Strip and West Hollywood
in snug-fitting tee shirts to hand out mini project brochures.
The message on the tee shirts said, ‘Forget about my phone
number. How about I give you my address?’ On the back of
the shirt was the website address.
The studio, one- and two-bedroom units are priced from the
mid $300,000s to the mid $600,000s.
Six weeks leading up to the opening, print ads
began appearing in local alternative newspapers. That doubled
the weekly sales-office traffic to 70 and produced 200 to 300
daily website hits, a 10-fold increase.
“Nothing about Hollywood is traditional real estate marketing. This region isn’t like the typical suburban community
where you run ads in new homes magazines. We’re in the
heart of Hollywood, a short walk to the Kodak Theatre at
1 music station, on a promotion called ‘Get A Life,’ in which
a lucky listener won a free one-year lease on a Hollywood
Regis home, use of a new BMW, a gym membership, personal
trainer and a $20,000 dental makeover.”
“You’re going for the demographic and psychographic rather
than people that are out specifically looking for a new
home,” Ed said.
Model interior at Hollywood Regis, which is being successfully
marketed via alternative media.
7
SRG Strategies
.
Summer 2007
Resort-Style Apartment Living – Elegant Santa Barbara architecture defines Vintage, a new SARES•REGIS
Group community of 300 apartment homes in Ontario. Touches of mission styling vary in each of the 12 residential
buildings that, coupled with a rich package of amenities and spacious floorplans, serve to elevate this project to the
top of the Inland Empire market. The recently completed project on the site of a former vineyard is expected to be
fully leased by December.
Guest Column – continued from page 3
Whether you have been building green for years or are considering
doing so, it is incumbent upon real estate and related industries
to learn how to support green efforts efficiently. This will take
commitment, practice and advocacy. At Bank of America, we
believe that environmentally sustainable building is critical to
our country’s future and we will continue to develop creative
financial solutions to meet the growing need.
The trend toward green real estate development offers real longterm economic advantages for our clients and our communities.
At Bank of America, we are committed to being a leader in this
8
trend by designing efficient financial solutions and demonstrating the highest level of expertise in the field to maximize the
value of green development for our clients.
1. Robin Suttell, “The True Costs of Building Green,“ Buildings (April 2006):
<http://www.buildings.com/Articles/detailBuildings.asp?articleID=3029> (May 7,
2007).
2. John Ritter, “Building ‘Green’ Reaches a New Level,” USA Today (July 26, 2006):
<http://www.usatoday.com/news/nation/2006-07-26-green-construction_x.htm>
(May 7, 2007).
3. Greg Kats et al., The Costs and Financial Benefits of Green Buildings: A Report to
California’s Sustainable Building Task Force (2003), p.1.
Volume 11
.
Number 1
SRG purchased the property in early 2004 from The Worldwide
Church of God, which used the property as the East Campus
of its 48-acre Ambassador College. Bill Montgomery, President
of SRG’s Multifamily Acquisition & Investment Division, engineered the purchase.
Pasadena OK’s SRG’s Westgate
Urban Village In Historic District
The SARES•REGIS Group won final approval from
the Pasadena city council to develop a transit-oriented urban
village called Westgate that includes a mix of 820 residential
units and 20,000 square feet of retail on 11.7 acres in the
city’s historic commercial district. SRG plans to break ground
on the project later this year.
SRG’s approval by the city followed more than two years of
planning and negotiations with community groups and city
officials. All sides in the talks sought a first-class project that
also would meet the city’s goals of building a measure of
affordable housing in a city that is known for some of Southern
California’s oldest and most stately homes.
“This is the single largest residential project ever approved
in Pasadena. Nothing like this has ever been done,” said Ed
Eyerman, SRG Vice President of Sales and Marketing and who
coordinated SRG’s community outreach and planning efforts
almost full-time for about two years.
One of the city’s objectives was to ensure the
project would contain some homes or apartments that would
be affordable for low- and moderate-income workers, he
said. As the affordable housing issue and traffic concerns
were being settled, the project was earning praise from every
community faction, even those whose mission is to stop all
new development, Eyerman said.
The 710 Freeway separates the property from Ambassador
College’s West Campus and the city’s “millionaires’ row” of
historic homes. The property is an easy walk to two Gold
Line stations. Its close proximity to public transportation is a
key to earning the project a LEED certification from the U.S.
Green Building Council.
The property is one of the last in-fill sites of its size in Pasadena
and represents a unique opportunity to create a special
development to complement the downtown Old Pasadena.
“One of the most important things on this project
is that Pasadena is a very involved community. And the
community is turning out to be our biggest ally,”
Montgomery said.
“They’re not just anti-growth people saying we don’t want
any buildings. They were actually getting together on a
weekly basis to do nothing but discuss what should be
developed in their city, how it should be developed, what
the heights should be, zone-by-zone, block-by-block. They’re
meticulous in determining what the city should look and feel
like. They call it urban love. It’s astonishing to be part of this
process,” Montgomery said.
The property is bordered by Del Mar to the south and
DeLacey Avenue on the east. SRG’s equity partner is Equity
Residential. Land and construction financing is from Bank
of America.
For more information, go to: www.westgatepasadena.info.
Concepts of Westgate’s planned retail center (top) and
apartment project, designed by Thomas A. Cox Architects.
9
SRG Strategies
.
Summer 2007
Cabrillo – continued from page 2
Inland Empire Apartment Project
Acquired; Renovation Under Way
SARES•REGIS Group acquired a 300-unit
apartment project in the Inland Empire and is launching a
$5-million rehabilitation program on the development to
increase its market value.
Bill Montgomery, President of SRG’s Multifamily Acquisitions &
Investments Division, said the company purchased Woodlane
Apartments at 1540 W. 8th Street in Upland near the I-10
freeway from a private family trust for $40.9 million. He said
the property, which was built in the mid 1970s and is 94
percent occupied, has had no significant renovation during
the approximately eight years of previous ownership.
But because of “people with high integrity, a creative spirit
and humor, together we got something done of tremendous,
lasting value,” Chase said.
Goodman agrees. “This will be the lowest-density project in
that area and certainly less dense than anything SARES•REGIS
Group has ever done. He added that the open-space exactions and its “strong environmental orientation” will be a
beneficial feature.
“I believe it will enhance the project. Plus, it
was the right thing to do for the site. These are things that
are very important to the folks who live and do business in
the area. They pride themselves on being sensitive to the
The BlackRock Group is the SARES•REGIS Group’s financial
partner in the project. Following the renovation, Montgomery
says the strategy behind the investment is to increase the
average rents from the current $1.21 per square foot to
$1.40 per square foot and to sell the property in three to
five years. Woodlane Apartments consist of one- and twobedroom units ranging up to 1,200 square feet.
“The previous ownership and management has been basic
life-safety and keeping it operating. No money has been put
into the property for the last seven or eight years. Physically,
the development is worn and dated. We’re going to re-side
the buildings to give them a new contemporary look. We’re
repainting the entire community as well as giving it a major
landscape upgrade and rehabbing two swimming pools. Also,
we’re adding on to the leasing center to create an improved
1,500-square-foot leasing center with an internet café and a
small gym,” Montgomery said.
Site plan for
Cabrillo Business
Park
He said all the interiors will be renovated with new cabinet
facings and countertops in the kitchens and bathrooms as
well as new paint, flooring, window coverings and appliances.
environment and the world. They will appreciate and pay
for projects that are similarly designed,” he said.
Recently purchased Woodlane apartments getting major makeover.
Goodman also says that if it wasn’t for the patience of
JPMorgan, the company’s financial partner in the project,
it may have not gotten done.
“JPMorgan stuck with us throughout the whole process
despite some doubts at various times,” Goodman said.
Fortunately, he added, from 1999 to 2003 SARES•REGIS
Group was able to renovate, reposition and lease-up 300,000
square feet in existing R&D buildings on the property at topof-the-market rents that produced needed returns to enable
the principals to hang on for the many years of struggle that
lay ahead.
In the end the city council voted unanimously on every key
issue that the city’s staff had negotiated with SARES•REGIS
Group to accommodate the project.
Goodman said much notable history behind the property
makes its re-use both needed and worthwhile, especially
continued on page 15
10
Volume 11
.
Number 1
SRG’s Palm Desert Luxury Apartment
Community Welcomes First Move-Ins
The first residents began taking occupancy in
March at The Enclave, the SARES•REGIS Group’s collection
of 320 attached luxury apartment homes in a private gated
community in Palm Desert built in a craftsman design.
“The Enclave is the most luxurious, highest-priced rental
community in the desert so we’re not competing with
anything,” said Scott Monroe, Senior Vice President of SRG’s
Multifamily Property Management Division. “Additionally,
the community is surrounded by brand new high-end homes
pushing the $1-million range.
Rents at The Enclave are about 10 percent more than the
next level of rental communities.
“Because this project was designed as a luxury condominium
project, there’s a big segment of the market that wants what
we’re offering, which include high-end finishes and private
garages for up to four cars in some units. These are some
of the features that are unique to the desert rental market.”
Other resort-oriented features of The Enclave
include a 3,600-square-foot clubhouse, a 1,500-square-foot
fitness center, two well-manicured putting greens, swimming
pools and spas surrounded by lush landscaping and expansive sun decks.
With six floor plans of one- to three-bedroom apartment
homes, the units range from approximately 886 square feet to
1,454 square feet. Apartments at The Enclave are styled with
voluminous 9-foot ceilings, wall-to-wall carpeting and window coverings along with oversized closets and large private
balconies or patios. Every apartment home is equipped with
forced air heating and air conditioning with a night setback
thermostat.
Kitchens are finished with designer cabinetry and
plumbing fixtures, granite countertops, built-in microwave
ovens, gas ranges and multi-cycle dishwashers. Kitchens in
the three-bedroom designs have free-floating islands. Master
bedrooms and baths feature luxurious Roman-style soaking
tubs, porcelain sinks and cultured marble countertops.
Additionally, the apartment homes are pre-wired for security
systems and cable television in the living areas and bedrooms.
Most homes come with a private garage and automatic door
opener and garages for many homes have direct access.
Most homes have elegant fireplaces with pre-cast concrete
hearths, spacious kitchen pantries, walk-in closets and dual
vanity sinks in the master bathrooms.
AIG is the equity partner and Bank of America is the lender.
The property is just off Gerald Ford Drive at 35751 Gateway
Drive. The community is close to restaurants, shopping and
entertainment and is easily accessed from the I-10 at
Monterey Avenue.
Rendering shows clubhouse elevation of The Enclave, the top-of-the-market rental project in Palm Desert.
11
SRG Strategies
.
Summer 2007
Recently completed warehouse-and-distribution
building developed by
SRG in Tijuana’s El Florido
business park. Building
was leased by Mattel Inc.
Mexico Says ‘Bienvenidos’ To SRG; Company Develops, Leases
Building In Booming Tijuana; Another Facility Is Planned
SARES•REGIS Group has gone international.
The company has completed and leased its first development
– a 175,000-square-foot warehouse and distribution building
– in the surging industrial marketplace of Tijuana, Mexico’s
fastest-growing city that has become a booming North
American manufacturing center for U.S. and international
firms.
On the heels of its initial successful development in the El
Florido Industrial Park and five-year lease of the building to
Mattel Inc., SARES•REGIS Group has acquired two more
parcels nearby where the company plans development of
another building totaling 225,000 square feet. First quarter
2008 completion is planned.
“What spurred us to come across the border was when
Toyota purchased land to build a large plant where it
manufactures its Toyota Tundra pickup truck. That was a
bellwether,” said Peter Rooney, President of SRG’s Commercial
Investment Division.
“Over the years a number of our Southern California tenants
have moved their operations to Tijuana. But after Toyota started operations there we decided we should go down and take
a look,” he said.
CB Richard Ellis broker Rich Kwasny, who represented SRG in the site acquisitions and lease to Mattel, says
Tijuana’s industrial base totals 42 million square feet. The
3.5-million-square-foot El Florido Industrial Park is on the
city’s southeast side and about 10 miles from the border. It
is the city’s premier industrial location for labor intensive use.
Overall, Tijuana’s industrial vacancy rate is about 5 percent
and due to a constrained availability of land for development,
industrial land prices have doubled in the last two years.
Chief among the reasons behind the appeal of the El Florido
Industrial Park are topography of the area and the transportation that serves it.
There’s a new perimeter highway around Tijuana that’s
opened up additional land for development in the southeast
growth corridor. Also, southeast Tijuana is in an agricultural
12
valley that is more suitable for development than land closer
to the U.S. border with greater elevation changes.
Mattel was the likely candidate to lease the SRG building,
said Rooney. The company has a 500,000-square-foot manufacturing plant next to SRG’s site and the toy maker needed
additional space to receive and store raw materials for its
manufacturing processes which operate around the clock.
The SRG building has a 28-foot clear height, 20 dock-high
doors and a truck court with a 120-foot radius. Additionally,
the site has 25 additional truck stalls, which is an important
feature for the project due to the importance of trucking.
“We used a local contractor. There are a number
of very competent general contractors in Tijuana with
experience in concrete construction. Our U.S. construction
manager was highly complimentary of the concrete work
on our project, saying it was as good as any found here.
We were very pleased with the quality of the work. It was
completed on time and on budget,” Rooney said.
Rooney is dismissive of common perceptions and biases
connected with Mexico. Voters last year elected President
Felipe Calderón, 45, a pro-business, pro-growth career
politician who was the nation’s energy secretary under
former President Vicente Fox.
Tijuana has a healthy economy and also is experiencing a high demand for labor. Union representation is
strong with workers earning between $3 and $4 an hour
and receiving health and other benefits.
SRG’s financial partner in the project is AIG Global Real Estate,
which has extensive experience in industrial properties in
Mexico, Rooney said, adding that international tenants are
keen to deal in Mexico with U.S. developers that have
successful track records.
“We feel very good about building in Mexico and servicing
American and international tenants in Tijuana,” Rooney said.
“We put our foot in the pool and we have other big plans
for Tijuana.”
Volume 11
.
Number 1
SRGNC Buys 410 Units; Now
More Than 3,000 Owned
SARES•REGIS Group Renovates
Building; Wins A Seven-Year Lease
SARES•REGIS Group of Northern
California acquired The Arches Apartments, a 410-unit
SARES•REGIS Group of Irvine, Calif., engineered a
garden-style property in Sunnyvale. JPMorgan Investment
Management was SRGNC’s financial partner in the $82.5million purchase.
The Arches Apartments is a gated, 17-acre property located
at the intersection of the 101 Freeway and the Lawrence
Expressway in Sunnyvale. The December 2006 purchase
brings the acquisition activity of SRGNC to more than 3,000
units in 16 communities with a cost of approximately
$380 million.
“The Arches represents a classic value-added opportunity
for us,” said Kenneth Gladstein, Senior Vice President of
Investments at SRGNC.
“The property is extremely well-located and proximate to the
core job centers of Silicon Valley. We also believe the asset
was significantly under-managed by its former owner both
in terms of deferred maintenance and income potential.
Over the next two years we intend to renovate all of the unit
interiors of this 35-year-old property, upgrade the common
areas including a clubhouse and fitness room and two pool
areas and improve the entry and marketing window,”
Gladstein said.
Impressively, as of June 2007, barely six months
since closing on the acquisition, Sares Regis’ property
management has been able to achieve rent increases of more
than 10 percent on un-renovated units. Additionally, renovation work on the unit interiors has begun and is expected to
be completed by the end of 2008.
Gladstein said the company is optimistic that additional
income potential resulting from the physical upgrades to
the units and common areas can be realized as the Bay Area
continues to benefit from strong economic activity and job
growth and as the affordability gap between apartments
and home ownership remains significant.
A two-year renovation is planned for the Arches Apartments.
seven-year, $9-million lease with a Fortune 100 entertainment
company, for a 206,000-square-foot industrial building in
Anaheim.
Michael Wood, SARES•REGIS Group’s director of leasing, said
the lease included terms that the identity of the tenant would
not be disclosed. The tenant is using the building for storage,
he said.
The building is owned by JPMorgan Investment Management,
which bought the building in 1997. It is managed by
SARES•REGIS Group and had been leased by Homestead
House, a Colorado maker of fine furniture. Homestead House,
however, sought early termination from its lease, Wood said.
JPMorgan Investment Management agreed
with SARES•REGIS Group’s recommendation that Homestead
House’s early exit provided an opportunity to launch an
extensive renovation on the 25-year-old building at 1601
Cerritos Avenue.
SRG’s Commercial Property Services Division directed the
$2 million facelift, which came in on time, under budget and
included $1 million more in client-paid improvements on the
building, said Vince Ciavarella, president of the company’s
commercial property management division.
“This entire transaction worked to the great benefit of our
client,” Ciavarella said.
“In addition to giving the building a seismic retrofit, we
upgraded everything from sprinkler systems, lighting and
skylights, restrooms, asphalt, dock doors and levelers to a
new façade. The existing 12,000 square feet of offices within
the building also were redesigned and renovated. We took
an old industrial building and made it new,” Ciavarella said.
Homestead House agreed to buy out the balance
of the lease for $400,000, the equivalent of five months of
rent. The existing lease rate was 37 cents per square foot,
which was far below market, Ciavarella said.
Four months after Homestead House terminated its agreement, SRG had signed the new tenant at 52 cents per square
foot, a 40 percent increase. Moreover, the early termination
fee paid by Homestead House effectively reduced the renovation cost to $1.6 million. The renovation and the new lease
combined to add $5 million in value to the building,
Ciavarella said.
The new tenant took occupancy in December. Brokers Brad
Bierbaum of CBRE, Anaheim, represented SRG and Jeff Chiat
of the Irvine office of Cushman & Wakefield represented the
tenant.
13
SRG Strategies
.
Summer 2007
‘Clever’ Campbell Infill Project
Sells Out, Earns Industry Laurels
Gold Nugget judges and magazine
editors noted the striking overall
design and architectural touches of
Park Town Place. Interiors feature
two-story operable windows.
Regis Homes of Northern California had
an architectural and popular hit with its Park Town Place, a
development of 24 condominiums on a half-acre infill site
in a historic area in the City of Campbell, a quaint town of
38,000 residents about five miles south of Santa Clara.
Not only was the project of townhomes and flats a quick
sellout, it won the 2007 “Builder” magazine Gold Nugget
Grand Award for Best Attached Housing in its category.
In its June edition, the magazine wrote that design architect
and land planner Alex Seidel of Seidel/Holzman of San
Francisco “devised a clever solution” for the project, which
was sandwiched between the light-rail tracks, historic warehouses and Campbell Water Tower. Park Town Place is near
land that town founder Benjamin Campbell sold in 1887
at about $5 an acre for what was the town’s first recorded
subdivision. An adjacent warehouse was a brick fruit packing
plant since converted to an office complex.
The townhomes wrap around a central courtyard. Each has
its own walk-up entry that can be accessed from the street
14
or the courtyard. The magazine’s editors noted that the
“eclectic surroundings influenced the project’s exterior character with brick walls and steel canopy and balcony details.”
“The benefits of the building layout are best
expressed on the inside,” the magazine reported, “where
two-story operable window walls provide a plethora of
natural daylight and ventilation.”
The units, priced from $625,000 to $850,000, have multiple
exposures with views of the town, an adjacent public park
or the surrounding hills.
Volume 11
.
Number 1
First Residents Move In To The Reserve
North San Diego Apartment Community
The first residents are moving into a newly completed 540-unit SARES•REGIS Group rental community at
4S Ranch in North San Diego County.
premier homebuilders. Neighborhoods feature quiet treelined streets and homes with front porches and walkable
promenades. Several neighborhoods are complete.
Construction was recently completed on the 25-acre
development called The Reserve, which consists of two- and
three-story garden-style condominium apartments.
The project was built by SRG’s Multifamily
Development & Construction Division and will be managed
and leased by the Multifamily Property Management Division.
The land was purchased from Newland Communities for
$30.1 million in December 2005.
Blackrock is the financial partner for the project and construction financing was provided by Bank of America and Mass
Mutual. Mass Mutual has also issued a forward commitment
for permanent financing.
Mike Winter, Vice President of Development in SRG’s
Multifamily Development & Construction Division, said the
project consists of 32 buildings, some of which are townhome-style carriage units, containing as few as two units per
building. Other buildings contain as many as 28 units. The
community, which also has two clubhouse and recreational
buildings, will consist of one- to three-bedroom apartments,
averaging 984 square feet.
4S Ranch is a 2,900-acre planned community just off the
I-15 near Rancho Bernardo that is being developed with an
array of neighborhoods by more than a dozen of the nation’s
Current 4S Ranch amenities include a 22-acre community
park with a Boys & Girls Club, Stone Ranch Elementary
School, Oak Valley Middle School, a neighborhood park,
retail village center, fire station and 4S Connect, the community-wide Intranet. Planned amenities consist of new schools,
a sheriff’s substation, a library, a variety of neighborhood
parks and a network of pathways, as well as 4S Commons, a
53-acre town center with shopping, dining, apartment living
and office space. About 1,600 acres are set aside as permanently protected wildlife habitat.
Cabrillo – continued from page 10
since many of the high-tech start-ups in the area are now
owned by multi-national firms. With new facilities in short
supply he’s also confident the project will lease up quickly
at premium rates.
“The university is the 800-pound gorilla with more than
100 entrepreneurial professors in the hard sciences who start
companies, license technology, or turn out students who start
companies. You can’t find a company up here that doesn’t
have a UCSB antecedent in the history of the company,”
Goodman said.
“Also, some very significant scientific and military developments came out of this site. This is where the first lunar
rover was tested before Neil Armstrong’s walk on the moon.
Guidance control systems that were produced for rocket
launches at Vandenberg (Air Force Base) and elsewhere were
developed here. It’s just a fascinating old facility with wetlands and archeology,” he said.
“It was important to work through all the issues to everyone’s
satisfaction,” Goodman said. “In the end it’s a positive resolution for several generations and for future innovation.”
Announcements
Albert Hur joined the SARES•REGIS Group as Director of Asset Management in Irvine. He is responsible
for implementation of SRG’s newly created asset management program, which will provide a platform for
senior management to formulate and review strategies for all company-owned assets. He previously was
finance director for The Olson Company, a privately owned homebuilding firm. Hur received his bachelor’s
degree in economics from UCLA and master’s in business administration from the University of Southern
California. He is a certified public accountant.
Dana Whitmer joined the SARES•REGIS Group as Assistant Vice President of Development in the
Commercial Investment Division. He comes to SRG from the Hammes Company in Atlanta, Ga., where he
was a project manager for the healthcare facilities development firm. Whitmer received a bachelor’s degree
in business administration from USC. After serving as an officer in the Marine Corps, he earned an MBA in
real estate from the Kenan-Flagler Business School at the University of North Carolina.
15
SRG Strategies
.
Summer 2007
Awards
The National Association of Home
Builders honored SARES•REGIS Group with the 2006
Honorable Mention National Housing Endowment Builder
Achievement Award for Outstanding Community Service
for Hurricane Katrina Relief. The award, given at the 2007
International Builders’ Show in Orlando, Fla., included $1,000
that the company directed to Rebuilding Together. Twentyone SRG employees traveled to New Orleans to reconstruct
two homes owned by elderly and disabled low-income
homeowners. Gary Garczynsky, the endowment’s chairman,
said, “This is the perfect example of one person, one company
truly making a difference in the lives of others. It’s an inspiration to home builders across the country, and serves as a
model for our industry.”
SRG was honored by the Orange County Chapter of
Rebuilding Together with the group’s 2006 Founders Award
for the company’s help in perpetuating the organization’s
mission, values and heritage. “SARES•REGIS Group has been
very, very important to the success of the Orange County
Rebuilding Together group for many years,” said Cy Bauman,
executive director. Receiving the award, a finely crafted
scale model of a house, was Bill Albert, President of SRG’s
Multifamily Development & Construction Division, and Ron
Dyer, Division Vice President and Senior Project Manager,
who have participated in every SRG project with Rebuilding
Together for the past 11 years.
Employee Achievements
Cancer Society Finds Friends
At SRG In Fundraising Effort
Employees at the SARES•REGIS Group’s Irvine headquarters
were recognized by the American Cancer Society as one of
Orange County’s leading corporate contributors for their
generous donations to this year’s American Cancer Society
Daffodil Days fundraising campaign.
Seventy-two SRG employees gave $4,470, exceeding their
goal of $3,500. SRG Managing Directors Jeff Stack, John
Hagestad and Bill Thormahlen added $6,500 to the total.
The American Cancer Society says the donations help
continue the battle against cancer by supporting the society’s
comprehensive programs of cancer research, public and
professional education, advocacy and services to cancer
patients and their families.
The SARES•REGIS Group Regional Offices
Corporate Office
John S. Hagestad, Managing Director
Geoffrey L. Stack, Managing Director
William J. Thormahlen, Managing Director
Peter Rooney, President, Commercial
Investment Division
Vince Ciavarella, President, Commercial
Property Services Division
Jim Thomas, President, Multifamily
Property Management Division
Bill Albert, President, Multifamily
Development & Construction Division
Bill Montgomery, President, Multifamily
Acquisitions & Investments Division
18802 Bardeen Avenue
Irvine, CA 92612
(949) 756-5959 ■ www.sares-regis.com
Regis Homes & Regis Contractors
18825 Bardeen Avenue
Irvine, CA 92612
(949) 756-5959
16
Ventura/Los Angeles
Russ Goodman, Regional President
500 Esplanade Dr., #470
Oxnard, CA 93031
(805) 485-3193
Phoenix–Commercial
Eva Bates, District Manager
1600 W. Chandler Blvd., #150
Chandler, AZ 85224
(480) 497-5678
Phoenix–Residential
Eric LaMora, Regional Manager
4626 E. Shea Blvd., Suite C-200
Phoenix , AZ 85028
(602) 790-1576
Denver–Residential
Jennifer Nessett, Regional Vice President
900 E. Louisiana Ave., Suite 101
Denver, CO 80210
(303) 715-9600
Sares Regis Group of Northern
California, L.P.
Regis Homes of Northern
California, Inc.
Robert W. Wagner, Principal
Mark R. Kroll, Principal
Jeffrey A. Birdwell, President, Commercial
Development Division
901 Mariners Island Blvd., Seventh Floor
San Mateo, CA 94404
(650) 378-2800
www.srgnc.com ■ www.regishomes.com
Regis Homes of Sacramento
Bill Heartman, President
1800 3rd Street, Suite 250
Sacramento, CA 95814
(916) 442-7299