Westside Market Matures, But Remains Hot

Connect Westside Los Angeles is tomorrow, Nov. 27th, at the Luxe Sunset. Registration is now open and you can find out more about the conference on this link.

The Westside market is one of the hottest in SoCal, and presents a host of opportunities for commercial real estate investors, landlords and developers. Connect Media spoke with one of our panelists, Madison Realty Capital’s Bradley Ross, who shared insights about the market in our latest 3 CRE Q&A.

Q: What do you see when you take a 30,000-foot view of the Westside market?
A: The Westside is an incredibly strong market. We’re seeing a flight to quality. There’s pricing compression on cap rates, as well as on loan spreads for borrowers and lenders alike. The influence of Playa is being positively felt across the Westside in large new mixed-use projects.

Q: What are some of the larger trends you are tracking on the Westside?
A: We are continuing to see construction costs increasing, due to labor shortages and cost of materials. Investors are modeling historically high rents, and leave little room for error or market correction in their underwriting assumptions. That said, West L.A. is one of the highest barriers to entry markets in the country, if not the world, and can be a safe haven for well-positioned capital that has the ability to hold through market cycles. The operators we finance tend to be opportunistic on the buy, and create value through sweat equity and hands-on asset management.

We are now in a mature market cycle, where projects are coming online en masse. We believe overall market fundamentals will remain strong, even if increased supply negatively impacts some short-term investors.

Q: What are some transactions you’ve seen that reflect those trends or factors?
A: The West L.A. deals we recently closed include senior secured bridge and construction loans of $80 million, $110 million, and $140 million. The common thread amongst each deal was value-creation resulting from the Sponsor extracting additional value out of their assets through re-entitlement and/or re-purposing.

New West L.A. deals currently under review include financing the acquisition of a large value-add multifamily portfolio, as well as other bridge and construction financing opportunities where Madison Realty Capital can serve as a one-stop capital source, providing certainty of execution, customization, and speed to our borrowers.

For comments, questions or concerns, please contact Dennis Kaiser