Dornin Investment Group (“DIG”) disposed of the two smallest assets in its portfolio of Vegas office buildings during the first quarter of 2017. Tenaya Quail East, a 54,101 SF three-building office/retail/flex property, was a REO acquired in a 2012 distressed sale thru Auction.com. Located along the 215 freeway near Rainbow Road, the buildings were 45% occupied when they were acquired with much of the vacancy in shell condition. DIG repositioned the asset reaching 100% occupancy with a diverse group of tenants. DIG sold the asset for $7.5MM to a local private buyer. Marnell Corporate Center 6, a 14,831 SF single-story NNN building, was acquired in early 2014 as part of a three-building portfolio within the Marnell Corporate Center (“MCC 6”) for around $200 PSF. DIG executed a seven-day escrow and sale to an all cash private exchange buyer for $4.75MM ($320 PSF). The property was also 100% occupied at the time of the sale.
Charles Moore and Marlene Fujita of CBRE represented DIG in both sale transactions. “Tenaya Quail represented one of the few opportunities for investors to jump in and own a fully-stabilized piece of real estate along the 215 beltway at a price well below replacement cost. What sticks out in my mind is the fact that not only was this asset 100% occupied at time of sale, but ownership built great relationships with the tenants whereby they went to him when their leases were expiring and asked if they could extend, not the other way around. Ask any owner how often this happens and they’d be fooling you if they told you it did. This is indicative of good management, quality construction and maintenance but also a highly sought-after location. Owning a retail/office/industrial asset that can accommodate roughly any product type and providing 215 visibility, while keeping rates in line with market, may never be seen again as the market continues to heat up! The new owner should be very proud as I believe their property is poised to benefit from rent increases that they likely didn’t anticipate receiving.”
“MCC 6 is a true gem that any private investor would enjoy owning. With only three tenants and a beautifully constructed, Class A building, this asset stands out to anyone that drives by the property. It’s truly beautiful and features spectacular build-outs. Perhaps one of the best qualities, other than the beautiful architecture, is the location, which cannot be duplicated. All traffic is now being pushed to the 215 Beltway and this property is right in the middle of it all with Town Square just two minutes away. For tenants, they never need to leave this location as it’s ideally situated in the valley for employees and for those tenants that are active on the Las Vegas Strip or at McCarran International Airport, it’s as close as they come. The new owner of this property was looking for quality, straightforward real estate that would stand the test of time” says Marlene Fujita
The Las Vegas office market fundamentals continue to strengthen with decreasing vacancy rates over the past two years, twelve consecutive quarters of positive net absorption and rising rental rates. Class-A office vacancy dropped 2% from 2nd quarter 2016 to the end of 1st quarter 2017, and now stands at 15.6%. Since the beginning of 2016, DIG has executed 55,600 SF of leases with a diverse set of companies from the technology, insurance, financial, engineering, employment, legal and healthcare industries driving a 10% occupancy increase in its portfolio. In addition to strong absorption, DIG has seen concessions tightening up and experienced an average 8%+ increase in rental rates across its portfolio.
“We continue to see waves of strong leasing activity in the airport, southwest, and Summerlin submarkets both from existing Las Vegas companies expanding and national businesses relocating to or adding a local office presence here,” says Andrew Kurzeka, Director of Investments and Asset Management at DIG. “What’s most positive is the majority of these firms have not been gaming, hospitality or residential real estate related, which fueled much of the run up in the last cycle, making Las Vegas more diverse and resilient to future downturns.” Andrew noted that DIG is looking to continue to expand its office holdings in Las Vegas given the positive momentum in the market.
Cushman & Wakefield leasing brokers represent DIG for each of its assets here, Jayne Cayton at Breakthrough Way and Marnell Corporate Center 3&4, and Bob Hawkins at City Centre. “The Las Vegas office market continues its steady recovery as we close the second quarter of 2017. While the recovery has not been extremely rapid, the market has shown constant growth and absorption after the significant losses of the Great Recession. The first quarter of 2017 marked the 12th consecutive quarter of positive absorption in the Las Vegas office market, and asking rents have steadily increased to reflect this trend” says Jayne Cayton.
Cushman & Wakefield also recently relocated its Las Vegas office into one of the DIG properties and completed a state of the art collaborative layout. Jayne goes on to say “Cushman & Wakefield Commerce sought centrally located high image office space with convenient freeway access to allow its brokers to easily travel to their listings and appointments throughout the valley. Marnell Corporate Center’s surrounding amenities including Town Square and Panevino Restaurant were particularly appealing to us. DIG's willingness to work hand in hand with the tenant regarding their specific build out needs and corporate branding was key to winning the deal.”
About Dornin Investment Group
Dornin Investment Group is a real estate investment and asset management firm that invests in commercial and residential real estate in partnership with a broad base of institutional and private investors. The firm specializes in distressed, opportunistic, and value-add real estate investments in all major property types with a focus on office, flex, industrial, multifamily and hospitality properties. The company offers a full-service investment platform providing property management, leasing, construction management, and finance through its wholly owned affiliate Dornin Realty Advisors (“DRA”). For more information, visit www.dorningroup.com.