What is it with Whole Foods Market?

In Santa Monica it seems like there’s one on every corner. Some of the natural and organic foods supermarkets are big, others smallish. Regardless, every time I drive by the siren song starts and I end up perusing the isles of fresh, organic and pricey foods.

And I can’t remember the last time I walked out spending less than $20. A full-scale shopping trip easily costs $150 or more. And I keep going back… three or four times a week. The nickname “Whole Paycheck” is about right in my case.

It seems like the grocer is staking a similar “on every corner” claim near Ventura Boulevard. It recently opened a flagship store at 18700 W. Ventura Blvd. in Tarzana, the third Whole Foods Markets on or near Ventura Blvd. in an area that spans from Canoga Ave. in Woodland Hills to Sepulveda Blvd. in Sherman Oaks.

The new Tarzana store occupies 30,000 square feet of space and employs 200 people. Among the offerings: in-store sit down eateries; a 40-seat wine bar that serves tapas, beer, wine by the glass and sake cocktails; and the largest olive bar in Los Angeles.

Time for olive aficionados to get off the sidelines and invest!

Love or hate Whole Foods, one thing is for certain: The company’s presence in a neighborhood or retail center can do miracles for boosting foot traffic and spending. I have never seen one of the stores doing less than steady to heavy business.

Another benefit for the surrounding community is the number of jobs the publicly traded company creates. Fortune magazine ranked it as one of the 100 Best Companies to Work For in America.

In fact, I watched the grocer move into an old strip mall in Albuquerque, N.M. that had lost its anchor tenant. Other businesses had moved out and the mall was an eyesore. Within a year of Whole Foods setting up shop, the property was bustling and beautiful again.

Whole Foods’ eco-friendly and health conscious mission aside, these guys are shrewd business operators. The company has more than 275 stores in the U.S., Canada and UK and generated more than $8 billion in revenue in 2009. Its stock steadily climbed from approximately $10 per share in early 2009 to approx. $40 per share currently.

The newest location is in close proximity to another prominent up-scale market. Competition will surely be high. And I’ve heard from local real estate professionals that Whole Foods is a tough negotiator that’s quick to play the loss leader card.

But Whole Foods staking a heavy claim in this area is a retail real estate opportunity. It proves the Valley has the demographics to support the company’s expansion.

But it seems like the Ventura Boulevard communities, and even Santa Monica for that matter, would also benefit by attracting more savvy competitors into the area that can undercut Whole Foods. Trader Joe’s is one such retailer.

Another company that, in my opinion, has the potential to give Whole Foods a run for its money is Boulder, Col.-based Sunflower Farmers Markets. It was founded by some of the folks involved in the Wild Oats market chain, which Whole Foods purchased a few years back.

Sunflower is expanding in Southwestern states, but does not yet have a presence in California.

The stores are brilliant. Versus being an up-scale and pricey environment, they’re a no-frills version of Whole Foods – albeit the stores are usually smaller. They mix conventional groceries with natural and organic products. And they offer well-priced wine and beer.

Just food for thought.

Augmented Reality

Here’s a bit of tech news for all you business owners that love things that speed up the process of finding and/or leasing a piece of property.

Rofo (www.rofo.com), a search engine dedicated to matching businesses with office space, and junaio (www.junaio.com), a new mobile augmented reality platform, recently joined forces.

Junaio 2.0 features a new Rofo commercial real estate channel that’s available as a free app on the iPhone and 3GS. It will soon be available for Android devices.

It gives business owners instant access to complete information on available property listings by simply pointing their phone at a building of interest.

Rofo provides up to date national commercial real estate listings to mobile users via junaio’s augmented reality technology. The latter utilizes the phone’s compass and GPS to show digital content overlaid on real time locations.

Users can access information on nearby office spaces, including type of space, space size, monthly rent expense, and lease type. They can make direct inquiries to the appropriate broker or landlord right from the mobile device.

You can either point the camera on the phone at an appealing office building or city block to identify availabilities, or browse nearby spaces within a specified radius using a Map View feature. Users can also snap and post images or notes on interesting locations directly within the app for future reference.

A couple months ago, I decided to sell my house in Albuquerque, N.M. So I traveled to the Duke City, did some upgrades and maintenance, and worked with a Realtor to get it on the market in the last week of September.

The 1,300 square foot home, which I purchased in 2004, has three bedrooms, two baths and a large landscaped backyard. It’s located in a nice part of town, the Northeast Heights, but not too nice. Asking price: $190,000.

The last time I tried to sell was exactly a year ago, right as the economy was tanking. I put my For Sale sign up and within a week 20 other people in the immediate vicinity did the same thing. Home values had also plummeted. Fear was in the air.

Last year I showed the house twice over a two month period. And 90 percent of the telephone inquiries I got were from people asking if I could carry the note –indicative of the tight credit markets. So I chose to rent it out instead.

My hopes were not high this time around. But being an out-of –state landlord is also not my cup of tea.

In the first two days on the market, my Realtor showed it five or more times to quality prospective home buyers. An offer was on the table by day three. If all goes as planned we’ll close on the sale by the end of the month. Sales price: $185,000.

My Realtor no doubt helped it sell quickly. But my hunch is another factor weighed into the process: The house was priced in the “starter home” category at a time when many buyers are taking advantage of the federal government’s 2009 First-time Home Buyer Tax Credit.

I didn’t grill prospective buyers, but my guess is the economy showing signs of recovery plus the $8,000 tax credit increased the activity in my neighborhood. Maybe a coincidence, but I noticed in September that there were a lot less homes on the market in my neighborhood.

The tax credit is set to expire on Dec. 1, and there’s a lot of talk about whether it should be extended and possibly expanded. My answer is unequivocally, “Yes!” and not just because it may have helped sell my home.

The National Association of Realtors projects that by the end of the year the program, in addition to high affordability, will have brought two million new buyers into the market. About 350,000 of those people would not have bought without access to the tax credit.

Home sales nationwide would have declined six percent for the year without the program. Instead, sales are projected to be up about 1.5 percent for the year, according to a spokesperson for the association.

The credit applies to first-time home buyers who purchase homes between January 1, 2009 and December 1, 2009. To qualify the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase. The credit may be applied to primary residences, including single-family homes, condos, townhomes, and co-ops.

Each home buyer’s tax credit is determined by the price of the home -the credit is equal to 10 percent of the purchase price of the home, up to $8,000; and the buyer’s income -single buyers with incomes up to $75,000 and married couples with incomes up to $150,000 may receive the maximum tax credit. The credit decreases for buyers who earn more.

The San Fernando Valley’s real estate market is a lot worse off than Albuquerque, which makes this credit even more important locally. There’s still a glut of homes on the market and honest people out there who could benefit from selling their homes, even at a loss, and getting on with their lives.

Selling my home in Albuquerque is beneficial for the buyer, Realtor, me, and even California.

The buyer gets a great home in a great neighborhood at a price that’s a lot less than it would have been a couple years ago. As the market recovers, the home is in a prime location to steadily increase in value and boost the buyer’s equity and wealth.

My Realtor is a good friend who has had to hussle to make ends meet lately. So I can honestly say I’m glad to pay her a commission on the sale. She earned it 100 percent.

I didn’t make a ton of money, but I also didn’t take a loss. For me, the benefit is that I’m no longer financially tied to New Mexico and the stress of managing a rental property from out-of-state.

Since moving to California last March, I’ve also been living in an apartment that’s “cozy” to say the least. Proceeds from the sale will immediately go towards securing a larger abode.

Then I will start looking for opportunities to invest, and maybe even by a home, right here in California.

Staff Reporter Eric Billingsley can be reached at (818) 316-3124 or at ebillingsley@sfvbj.com.

The Walt Disney Co. has proposed building a 56-acre soundstage and production facility in the Santa Clarita Valley to address a shortage of studio space in Burbank.

The facility would be constructed on the Golden Oak Ranch, a Disney-owned property set against a backdrop of mountains and meadows that has been used in film and television productions for more than 50 years.

The media conglomerate’s plans call for six pairs of soundstages, talent bungalows, administrative and production offices, storage and a commissary and other amenities.

Richard Ballering, executive director of production for ABC Studios said that the new facility provides production not available at the Burbank lot.

With only seven soundstages on the Walt Disney Studio lot, production ends up scattered at facilities throughout the region, Ballering said.

The construction phase of the project would create more than 3,000 new jobs and $522 million in direct Economic activity. Once built, the facility is projected to have over 2,800 full and part-time jobs and $533 million in annual economic activity, according to Disney.

“I want to thank Disney for their continued long-term commitment to California’s motion picture and television production industry and congratulate them on this outstanding news,” Gov. Arnold Schwarzenegger said in a prepared statement. “This move will create quality jobs and a great deal of direct economic activity – all right here in California – the best place in the world to shoot films and television.”

We’ve been talking a lot here at the business Journal about how to best leverage our resources. The goal: reallocate resources to provide higher quality business news, information, and data to readers.

And we’ve already taken some concrete steps in that direction.

We cut the Econowatch section, because polls showed it wasn’t being read, retooled Around the Valleys to make it newsier, planned only special reports that are truly “special” for the 2010 editorial calendar, and changed our paper stock to increase the quality and clarity of print and photos.

These changes are about expanding the creative potential of the staff and getting more news into the newspaper. Readers will reap the benefits.

And some of these changes relate directly to the real estate column. We recently contracted with CoStar to obtain lease and sales transaction data for industrial, office and retail space in the greater San Fernando Valley area.

Instead of me trying to track down every press release that comes across my desk, and plug all of that transaction information into the column, we will soon launch a section that gives a clear breakdown of the who, what, where, and for how much of each deal.

This will allow the Business Journal to publish more transactions, the most up-to-date ones, and present it in an easy-to-read format for readers. Equally important, this will free up my Energy to make this real estate column into everything it can be.

But, I am still interested in getting those inside tips on significant deals that can make a great news story.

If there’s one blessing of the Economic meltdown, it’s that it has forced many companies to take a serious look at efficiency in order to be lean and mean for the future.

And this gets to my vision for the column.

Over the past six months I’ve experimented with writing themed pieces, running straight transactions and news, and even using the space for a story or two. Running quarterly market reports in the column no doubt fills space, but sorely lacks in human appeal, in my opinion.

The reason I’ve approached the column this way is two-fold: being new to California, I’ve been learning about the local real estate market; and, I’ve spent my whole journalism career writing news stories versus columns, so it’s taking time to develop a distinct voice.

But this hither thither approach is exhausting and I don’t think it gets to the heart of what columns are all about: insight, opinion, and spurring dialogue and debate with readers about issues that matter.

I’m fascinated by the greater San Fernando Valley region, and that’s a good thing. This is definitely not a boring place to live or work. And the business community reminds me a lot of New Mexico, because there’s a certain scrappy mentality mixed with pure genius.

In the coming year I want to use this column to comment on issues important to all of the players involved in the Valley’s real estate industry, including brokers, buyers, sellers, legislators, builders, construction workers, and more.

A few of the issues I’m currently interested in include: how growth of L.A.’s mass transit system will affect real estate positively and negatively, the pros and cons of LEED-certified buildings; whether or not predatory mortgage lending is still going on in the Valley; what types of legislation are bound to affect the local market; and brokers’ personal stories about strange and cool transactions they’ve put together lately.

These are just a few ideas. But I would love to hear from people in the real estate community about other hot button or just plain interesting and out-of-the-box issues. Consider this an invitation. I would like to leverage your insights, knowledge and opinions to take this newspaper and column to the next level.

Staff Reporter Eric Billingsley can be reached at (818) 316-3124 or at ebillingsley@sfvbj.com.

Los Angeles-based Younan Properties Inc. seems to be pursuing some sort of recycling investment strategy these days, at least in regards to the property located at 5959 Topanga Canyon Blvd. in Woodland Hills.

The real estate investment and asset management firm bought the three-story office building in 2004, sold it less than 12 months later to Value Home Loan, and purchased it again in the past couple of weeks.

The 62,000 square foot Class A office building, known as WarnerView Corporate Center, was built in 1981 and is 93 percent leased to what the company said is a “desirable roster of professional tenants.”

More than $1.5 million was spent replacing the HVAC system, installing a new roof and making upgrades to the elevator and common areas.

“Although it is unusual for us to re-acquire a property we previously owned, this is an exceptional opportunity to acquire a property at a price well below the true market value,” said Zaya S. Younan in a press release.

“The significant expansion in the cap rate does not correlate to the deteriorating fundamentals, but more relates to the anxiety, fear and oversold market,” he added.

Younan represented itself in the transaction. Jeff Albee and Jeff Gould of the Calabasas office of Sperry Van Ness Real Estate Services Inc. were listing agents on the deal.

Gould said the deal went down for $11.9 million with a cap rate of 8.5 percent. And the existing financing (an approximately $9.4 million loan with five years left on the note and interest rate of 5.75 percent) was key to the sale.

“Without the existing financing it would have been harder to sell the property,” said Jeff Gould. “I think it’s one of the few transactions that tells the investment community and landlord community where cap rates are at these days. It sets the bar and is a good comp for Class A assets.”

Paying for Prestige

I normally don’t report on real estate transactions by Valley firms that deal with non-Valley properties. But the sale of the Hugo Boss building on N. Rodeo Drive. in Beverly Hills goes to show people are still willing to pay a premium for one thing: prestige.

National Equity Advisors represented seller, Spanish figurine company Lladro, for the 11,333 square foot building located at 414 N. Rodeo Drive. David Feldman of Marcus

The office market in San Fernando Valley and Ventura County saw total vacancy rates increase 40 basis points to 18.3 percent with net absorption of -123,600 square feet in Q3, according to Colliers International.

The rate of space givebacks continued to slow for the second consecutive quarter, but vacancy levels are already at the highest level since the dot-com bust earlier this decade.

The direct weighted average asking rent decreased for the sixth consecutive quarter to $2.37 per square foot, per month Full Service Gross, the lowest average asking rental rate seen market-wide in almost three years.

The small decrease in rents relative to what has been seen over the past 18 months may, however, be a sign that the decline in rents is moderating.

Leasing activity decreased 31 percent over last quarter to 439,100 square feet. The amount of space givebacks and increase in office vacancy were lower than expected, considering the sharp rise in vacancy levels at the beginning of the year, said the report.

Industrial Sales/Leasing

The area’s industrial market saw the total vacancy rate increase 20 basis points over last quarter to 3.9 percent. While the total vacancy rate increased only slightly market-wide, the availability rate continued to increase to a decade-wide high of 9.2 percent.

As available occupied space rolls vacant, it’s expected that vacancy rates will continue to climb to heights not seen in over a decade.

Despite the uncertainty facing most owner/users and investors, the market saw a 32 percent increase in the amount of sales and leasing activity from the previous quarter to 1.07 million square feet.

This is down 26 percent from the 1.5 million square feet of activity seen a year ago. But increased activity for the second consecutive quarter may be a sign that industrial users are finally making real estate decisions.

The vacancy rate in the area’s R

Bomel Construction Company just completed a 766-space, cast-in-place parking structure for Phase III of NoHo Commons, a crucial step indeed for the much anticipated mixed use development at Lankershim Blvd. and Weddington St.

Bomel finished the design-build parking structure a month ahead of schedule. It was also responsible for forming, placing, and finishing all of the concrete floors and columns in the development’s nine-story concrete framed office building.

The 181,000-square-foot office building, which has its first four floors leased to the Art Institute of California, is seeking gold-level certification from the U.S. Green Building Council. It’s slated to open in October. Phase III of NoHo Commons will also include retail space, a restaurant and movie theater.

Another bit of construction news, Intertex General Contractors completed tenant improvements for Advanced Bionics’ new digs in the Santa Clarita Valley.

The medical device maker announced in July it leased a five-story 144,000 square foot building at 28515 Westinghouse Place in Santa Clarita. The company plans to consolidate its corporate and manufacturing headquarters in the new building.

Intertex completed tenant improvements in the first, fourth and fifth floors of an existing Leadership in Energy and Environmental Design (LEED) certified five-story shell building. Advanced Bionics required all of the work to be complete in 12 weeks.

Intertex employees worked seven days per week, 12 hours per day to complete the project, investing a total of 16,000 man hours. The first week was used for contract negotiations, nine weeks were spent on the 50,000-square-foot build-out, and the final two weeks were spent moving in 160 units or partition furniture.

Companies on the moveCredit and debit card payment processing firm, iPayment, is relocating from Calabasas to Westlake Village. The company recently inked a lease agreement for 31,665 square feet of space at 30271 Russell Ranch Road in the Westlake North business Park.

iPayment is headquartered in Nashville and has been operating locally out of an office space at 26707 West Agoura Road in Calabasas. Terms of the transaction were not disclosed.

Jones Lang LaSalle and IDS Real Estate Group represented the owner, TIAA-CREF, in the deal. iPayment worked with Josef Farrar, David Kluth and Marc Schwartz of UGL Equis in securing the space.

The company chose the Westlake location because of its visibility, parking, ease of access and amenities, and the building’s ownership and management, according to a press release from UGL Equis.

Quest Diagnostics leased 24,000 square feet of industrial space at 15750 Strathern Street in Van Nuys. Total consideration for the five-year lease is $789,936.

John DeGrinis, Patrick DuRoss and Jeff Abraham of Colliers International represented the lessor, ARKA Properties Group and Black Equities Group. Jeff Myers of CBRE represented Quest Diagnostics in the deal. Quest plans to use the space for its logistical service center operations.

And J. Richard Leyner of NAI Capital’s Encino office represented AvalonBay Communities, Inc. in the lease of a 2,650 sq. ft. retail space at 16350 Ventura Blvd., Suite F, in Encino to KBG Dining Group, LLC (Rosti Tuscan Kitchen).

Rosti Tuscan Kitchen’s lease at 16403 Ventura is expiring and the restaurant will re-locate to the new mixed-use space sometime over the next 3-6 months. The value of the 10-year lease was not disclosed.

Lease-to-purchase

A family trust recently purchased a 32,233-square-foot industrial building that its family business, Pindler

The motto “Cash is king” is truer than ever right now, especially for investors looking to snatch up distressed and under-valued commercial real estate properties. And real estate veterans Rory Gardner and Steve Heimler said they have plenty of it to purchase multifamily properties throughout Southern California.

The duo formed Calabasas-based Keystone Investment Partners last summer. The firm is looking to purchase 500 to 1,000 multifamily properties per year over the next five years in San Fernando Valley, Los Angeles and further south in California. It’s also looking for properties in Hawaii.

“We were looking to do something a little more entrepreneurial,” said Rory Gardner, principal of Keystone, who used to work as an analyst and partner/managing director at Pacific Property Company. “Steve and I felt like it was a great time to take a little risk, because there are many firms playing defense right now.”

Gardner and Heimler are investing their own capital, assembled a group of high net-worth investors, and will be working with institutional investors on some of the larger deals.

Heimler founded Cirrus Asset Management in Calabasas. The firm owns and operates real estate investments in multiple states, and is the property management affiliate of Keystone. Prior, Heimler co-founded and eventually sold Stratus Real Estate Inc.

Gardner said the group is looking at properties as small as 30 units and as big as 400 units. The firm is considering purchasing distressed multifamily assets, but is also looking for stable but undervalued complexes. To date, Keystone has not closed on a purchase.

Values have dropped

“There are fewer players bidding for stable properties right now, while in the highly distressed category people are tripping over themselves,” said Gardner. It’s a good time to buy stable properties because rents have come off their highs and property values have dropped, he added. As job growth returns, demand will increase for apartments.

In the greater San Fernando Valley area, the firm is especially interested in purchasing rent controlled and non rent controlled multifamily properties in areas such as Sherman Oaks, along Ventura Blvd, Northridge and Chatsworth.

“The decision-makers are all here in this office,” said Gardner. “And we’re working with longer term investors.”

Apartment inventory and vacancies in Los Angeles County, which includes properties with 20 or more units, are steadily climbing and average rents decreasing, according to the most recent data from Reis, Inc.

Inventory was 755,950 (sf/units) in the third quarter of 2009 compared to 754,392 in Q3 2008, and 747,975 in Q3 2007. The vacancy percentage in Q3 was 5.4, compared to 4.3 for the same period in 2008 and 3.6 in Q3 2007. And the blended average rent for the region was $1,413 in Q3, down from $1,468 for the same period in 2008.

It’s a tough time for mom and pop shops because of the drop in property values and lack of access to financing, said Jim Fisher, partner at Lee

Craig Peters, executive vice president with CB Richard Ellis who specializes in the North Los Angeles County region, has worked with a dozen clients lately to meet with landlords and renegotiate their lease terms.

These clients, seven of whom are retailers and five of whom are office users, have been hit hard by the recession. They’re seeking lower lease rates as one way to ride out the tough economy.

But Peters said not all of the negotiations were successful. Just because the economy is struggling, average lease rates have dropped, and vacancies increased in many Valley markets, tenants should not assume landlords are eager to renegotiate terms.

“There’s a proper way to talk with landlords and you have to craft a win/win situation,” said Peters. “As a tenant you also have to understand that landlords are struggling too. Playing the ‘poor pitiful me’ defense doesn’t work.”

Peters said tenants looking for a rate reduction need to wear their marketing hats because landlords are going to want something in return. For example, a landlord may reduce the rate in the near term as long as he/she can recoup the reduction in future payments.

Landlords are getting hit with a flood of requests to renegotiate, he said, and some of those requests are from businesses who may not really need it.

“A lot of renegotiating a lease agreement boils down to opening up the kimono and saying, ‘Here are my financials,’” said Peters, adding most landlords are willing to work with good tenants who have a plan for making it through the hard times.

The guys who may be out of luck are the ones who pay late and are generally bad tenants to begin with, he said.

Michael Goodman of the Building Owners and Managers Association of Greater Los Angeles (BOMA) echoes Peters’ statements.

He said it’s tough to make broad brush strokes about whether or not a landlord or building owner is going to be willing to renegotiate. Each property owner is in a unique financial position, some better off than others.

The decision boils down to two issues: common sense, meaning the request needs to be realistic for the short- and long-term health of the property owner and business; and quality, meaning the tenant needs to be a quality business that takes care of the property, pays bills on time and is likely to stay around for the long-term.

“Many of the decisions are made on the ability of the company (tenant) to have a solid business plan and roadmap for how it’s going to make it through the tough times,” said Goodman.

Landlords value good tenants, because the last thing they want in this market is to have more vacant space, he added. A building’s value is based on the rental income that it’s generating.

But there’s give and take. Landlords may reduce rent in exchange for a longer lease term. If a tenant is downsizing, they will be responsible for payment on the unused space until the landlord can re-lease it.

And confidentiality agreements are a common practice to reduce the chances of other tenants getting word of the renegotiated lease terms. If a tenant breaks the confidentiality agreement, the concessions are voided and the lease returns to its original terms, said Goodman.

One thing many tenants don’t understand, he said, is that reducing rents can trigger a series of negative events with a building owner’s lender. That’s because most lenders have requirements that the rental income stream meet a certain level of performance.

“Sometimes tenants forget the fact that landlords are a business too,” said Goodman, “and they want to operate the best they can.”

Rickey Gelb, general partner of the Encino-based Gelb Group, a property management and development company, said the subject of lease renegotiations comes up all the time, and he looks at each request on a case by case basis.

He asks the tenant to prove his/her profits have dropped. And Gelb wants proof that if he decreases rent or restructures the lease agreement the tenant plans to stay around.

“Lately there have been fewer requests, but five or six months ago I was getting one or two a week,” said Gelb. “More people have been looking to downsize, so there has been a lot of musical chairs.”

Most of the requests are coming from tenants renting spaces from 1,200 to 2,000 square feet. They’re often business consultants, mortgage brokers, and other small operators. He is also seeing many older long-term tenants decide to retire and move-on

Gelb said he will absorb some of the loss if a tenant has a good track record. If the lease is coming due, he may ask for an extension. And he often requires confidentiality agreements, especially in the case of short-term agreements. Gelb also uses his property’s abundant free parking as a negotiating point.

But many of his tenants are lawyers, healthcare providers, accountants and businesses that rely on state contracts and have no desire to move. “Today it’s a lot harder to move than five years ago, with the amount of time it takes to install DSL lines and everything else,” said Gelb.

Craig Stevens and John Battle, principals at Lee & Associates and members of the company’s multi-housing group, just sold a piece of real estate that might be considered “The gift that keeps on giving.”

The duo, along with Jim Fisher and Mike Smith of Lee & Associates, recently transacted the purchase of eight acres of prime in-fill land located at 20600 Ventura Blvd. in Woodland Hills. This is the third time in five years the property has changed hands.

“I never would have imagined when I sold this site the first time that this would still be an empty parcel of land,” said Craig Stevens in a press release.

“In 2006 it seemed like we would never keep up with the apartment and condo housing demand, and this project, with its great location and elevations offering panoramic views of the Warner Center and the San Fernando Valley, promised to be among the very best of the projects in development,” he added.

The Troxler Group and Lehman Bros acquired the property for $25 million in 2006. Troxler took it through the development process and completed plans to build 355 entitled condominium units with 18,000 square feet of retail. In 2007, Troxler sold the property to JPI Development for $48 million.

But JPI got caught in the real estate market downturn and the property fell into default. Mike Smith said the land was considered an REO property and bank of America the owner/seller.

The property attracted numerous offers. And rumor has it a group out of Orange County locked-in the deal for between $13 million and $13.8 million.

The developer plans to re-entitle the parcel, but Lee & Associates said it’s too soon to know how many units they will build. Most likely the final project will be less dense than the first project back in 2006.

“The latest price reflects a new Economic reality in the marketplace,” said Stevens. “With banks requiring much more equity than they did in the past, bigger projects are not always better.”

Developers used to be able to obtain financing based upon rental growth trends and the strong housing demand. But today, rental growth assumptions are lower, and developers must allow for rental concessions and a longer time frame to lease up units, said Lee & Associates.

Marcus & Millichap Real Estate Investment Services also recently sold an REO property in the Valley.

The firm brokered the sale of 99 condominium units within the 161-unit, 57,459 square foot Sonterra Homes complex at 15425 Sherman Way in Van Nuys. The property sold for $6.15 million, or $62,121 per unit.

Ron Harris, of the firm’s National Multi Housing Group in Los Angeles, represented the seller, a Chicago-based lender, and the buyer, Gidi Cohen of Cohen & Associates.

“This is one of the larger broken condo deals to close in the San Fernando Valley,” said Harris. “These units were selling for as much as $310,000 each in 2007.”

The property was last purchased in 2005, said Harris. The owner converted the complex into condos and proceeded to sell off dozens of the units in 2006-2007 while the market was still good. But when real estate prices crashed, so did sales of the condos. The owner foreclosed on the property in June 2009.

The deal was unique in the sense that there are not many fractured condo deals happening, said Harris, and this is considered one of the larger ones in the Valley. Most are standard condo deals, and Sonterra Homes would have fetched a much higher price if it were un-fractured.

The buyer paid all cash. Forty-one of the units were occupied at the time of sale. And the new owner plans on renting out the remaining units until the real estate market turns around, at which time the units will be sold.

High affordability is fueling home sales in the San Fernando Valley right now. And the federal home buyer tax credit, which was recently expanded and extended until April 2010, has created heavy demand for properties in the $450,000 and less category.

But there’s a problem, according to local Realtors. Housing inventories are not meeting demand. And one thing is at least partially to blame: the long turnaround time for mortgage lenders to approve short sales.

“There’s not a streamlined system to facilitate these short sales,” said Patti Petralia of RE/MAX Olson

Valencia logged one of the largest deals of the past month, and in recent memory for that matter.

Valencia-based RAH Industries, a sheet metal, tube bending and machining business founded in 1971, closed escrow on the purchase of a 150,000 square foot industrial property at 24800 Avenue Rockefeller in the Valencia Industrial Center. Details of the transaction were not disclosed.

Jim Ebanks, Lauren Ebanks and Andrew Starnes of Realty Advisory Group, Inc. represented the buyer. And Brad Koehler, Rick Kaplan and Robert Lambert of Cushman