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FEATURE ARTICLE, NOVEMBER 2006
A VALUE-ADDED INVESTOR
Pacific Coast Capital Partners stays on top of the real estate investment market while improving properties.
Brian A. Lee
To be successful in the demanding, fast-paced world of real estate investment, it takes vision as well as the tools and speed to get a deal done. To reach the performance level of El Segundo, California-based Pacific Coast Capital Properties (PCCP), which boasts an investment portfolio in excess of $4.2 billion, it takes even more vision.
“When Denver had some trouble with the tech crash, we felt there was some fundamental value there, so we invested and that turned out pretty well for us,” says Bill Lindsay, founding partner at PCCP.
“Hawaii for a very long time [struggled to] recover from the recession and there was no capital available,” continues Lindsay. “By our thought process, when there’s no capital available, there’s opportunity.”
Be First, Be Fast, Be Smart
PCCP focuses on value-added and opportunistic real estate investments from Denver to Hawaii. Across all commercial property types, the 8-year-old company teams with experienced developer partners to buy well-located properties in need of some sort of turn around.
“We try to buy good real estate that has good potential and just execute at the site,” says Lindsay. “We try not to make macro bets on markets. We’ve never been momentum investors or anything like that.”
Recent investment transactions demonstrate PCCP’s agility and breadth of commercial real estate expertise. Last month, the company teamed with Brentwood Developments for the acquisition of McHenry Square Shopping Center, a 152,000-square-foot, grocery-anchored shopping center located in a major retail corridor in Modesto, California. The joint venture is planning a substantial repositioning of the 32-percent leased property. In Monrovia, California, PCCP has joined forces with Colorado Commons LLC to develop Colorado Commons at Old Town, a mixed-use project that will feature 68 residential condominiums and four commercial condo units. The company also partnered with Seattle-based Meriwether Partners LLC to acquire Southcenter Corporate Square, a 220,548-square-foot Class B office park in Tukwila, Washington.
Land of Opportunity
With its large geography and population, California will always be full of golden opportunities for real estate investors. The problem is that every competent player knows this already. Add to that the challenge of dealing with the state’s development density, especially in Southern California.
“People commonly think that the region is not that dense, it’s all sprawl, but I can show you some census numbers that say of the top 10 densest areas in the United States outside of Manhattan, eight of them are in the state of California,” says Lindsay. “If you can assemble an urban site that accommodates a retail development, you’ll have no trouble getting it leased, even at high rents. The reason is the demographics here have a much higher density.”
PCCP took into account the state’s housing shortage, rising land values and consumers’ desire for more integrated lives, while realizing that no area can boast the amount of real estate activity happening in Southern California’s 170 submarkets, which stretch from Ventura to Mexico and farther east of Los Angeles everyday. From that a plan was formed.
“In Southern California, focusing on infill investments has been a great strategy,” says Lindsay. “We raised a growth fund that focuses on low- and moderate-income census tracks and urban infill transactions, and that’s keeping us very busy. In the high-income census tracks, there’s plenty of demand; lots of capital goes there. Where we want to go is where the capital isn’t going because we’re looking for opportunity.”
According to Nick Colonna, founding partner of PCCP, the company has bought 30 “infill, excess real estate sites” throughout California in the last 2 years. The focus has been on the value of the infill site, not necessarily the speed with which to close the deal or avoiding capital risks.
“We just thought that there was a higher and better use than the industrial site that it was,” adds Colonna. “People aren’t really seeing that industrial land is absolutely scarce because [it makes sense to go with] higher and better uses at those prices.”
Comparing the region to the New York City of decades past, Lindsay says Southern California is just now starting the process of recycling its real estate according to the “highest and best use” theme. A big example of this is the downtown L.A. condo conversion trend. PCCP is ahead of this infill/conversion trend just like it’s ahead of the competition.
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