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Real Estate Trends: North County

Capstone moving out of residential land into commercial

The improving residential real estate market is yielding benefits for more than just home buyers, sellers and agents.

Diversified investment, development and asset management firms like Capstone Advisors are well-positioned to capitalize on the pent-up demand for developable residential land.

"We're now doing what I call our 'great rotation,' rotating out of our residential land holdings and investing into our income-producing, commercial real estate portfolio," said Alex Zikakis, president of Carlsbad-based Capstone.

"Our strategy the next couple of years is to continue to sell that off. Business definitely seems like it's picking up. We're feeling generally optimistic about 2014 across the board."

He said the company has focused on different investment strategies since he founded it in 1996. Originally it was retail, which was mostly sold off by the decade's end.

In 2000, Capstone became an investor in equity and land development, eventually becoming one of biggest equity investors in California in those spaces.

"We did that through 2005, then sold it all down and started buying residential land as a principal in 2008," Zikakis said. "We built a portfolio of finished and partially finished lots in Southern California, primarily in Riverside County. Since 2011, we've been back buying commercial real estate again.

Alex Zikakis of Capstone Advisors is rotating the Carlsbad firm out of its residential land holdings and investing into its income-producing commercial real estate portfolio. Photo by Glenn Grant

"We're definitely starting off the year with more acquisitions," he said. "We're feeling like we're seeing more opportunity from the buy side, although it is extremely, extremely competitive to buy assets. There's a lot of money out there chasing anything for sale. And it's pushed up the pricing.

"The occupancies are still somewhat suppressed, but it's a good time to buy. It's definitely a bullish market on acquisitions. People are bullish that there's a stronger recovery coming down the road," he said.

Based on such confidence, Zikakis has added staff and is reaching out to the investment sales brokerage community to find more residential land assets to acquire.

"I'm a believer that all the headwinds we've been facing dissipated," he said. "I think that GDP growth has more upside potential than downside potential, and that we could be pleasantly surprised at the end of the year."

Learn more about these communities:
* Vista
* San Marcos
* Carlsbad
* Oceanside
* Murrieta
* Temecula

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