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Pacific Coast Business Times: In the Zone: Investors cash out on redevelopment projects

December 13, 2013

Pacific Coast Business Times: In the Zone: Investors cash out on redevelopment projects

131 Anacapa St.
131 Anacapa St. in Santa Barbara recently sold for $11.7 million. It is one of three recent multimillion-dollar property sales and a burst of development in the city’s Funk Zone area. (Alex Drysdale / Business Times photos)
Santa Barbara, California – Published 12/13/2013
Pacific Coast Business Times
Pacific Coast Business Times: In the Zone: Investors cash out on redevelopment projects
By Marlize van Romburgh, Staff Writer

“There are a lot of people betting on the future of the Funk Zone,” Brad Frohling, a commercial real estate broker with Radius Commercial Real Estate & Investments who has done a number of deals in the area, told the Business Times earlier.

Three recent commercial property sales totaling $20 million cap several years of investment and a burst of development in Santa Barbara’s Funk Zone area. Real estate insiders are calling the neighborhood, which lies to the east of lower State Street near the waterfront, one of the hottest commercial property markets in the region.

Each of the properties was purchased several years ago by the same investor and has been flipped and sold for a hefty premium as the real estate market makes its rebound.

111 State St.
The long-vacant property at 111 State St., two blocks up from Santa Barbara’s waterfront, has been sold to the family behind Rusty’s Pizza for $2.2 million, property records show.

In the case of the 131 Anacapa St., the seller did a multimillion-dollar revamp of the former home of the Bay Café and the Santa Barbara Fish Market. The site is now anchored by The Lark restaurant and home to eight other businesses that opened their doors earlier this year. Property records show that the property previously changed hands in August 2011 for $3.5 million. On Sept. 23, it sold to a Santa Monica investment firm for $11.7 million, marking a 234 percent premium.

The 3,360-square-foot retail property at 528 Anacapa St. was sold on Sept. 24 for $3.3 million, property records show, up 57 percent from the $2.1 million it sold for in March 2012. The building was formerly home to WheelHouse Bikes but was redeveloped and now houses the French Press coffee shop and its onsite roasting facilities. The property also includes entitlements to develop an additional 3,200 square feet of retail space, according to Studley National Retail Services Group, which represented the seller in all three deals.

Santa Barbara County property records show that the seller was Eastern Real Estate LLC, a firm based in Boston and Montecito. The company is headed up by Brian Kelly, a well-known South Coast real estate investor and the owner of The Hanger, a private car collector’s storage facility in Santa Barbara. Messages left for Kelly at the firm’s Massachusetts and Montecito offices were not returned.

“A lot of time, effort and vision was invested into each of these properties on the part of the seller,” Kyle Miller, corporate managing director for Studley, told the Business Times. “The improvements were really to complement and drive what’s going on in that area, the Funk Zone, and to help transition it into one of the hottest, coolest, hippest areas on the Central Coast.”
Miller confirmed that the seller was a Boston-area firm.

528 Anacapa St.
The property at 528 Anacapa St., home to the French Press coffee shop, was sold to Goleta investors for $3.3 million in September, county records show.

The third deal was for the long-vacant parcel at 111 State St. The property sold on Nov. 14 for $2.2 million. County records show that the buyer of the site, which many years ago was a drive-in BeBop Burger, was J. Carol Duncan, one of the founders of the Rusty’s Pizza chain in Santa Barbara. A message left for Rusty’s CEO Tyler Duncan was not returned, but Studley noted in a release that “the buyer, who plans to completely rehab the building, owns and operates several successful restaurants in Santa Barbara County.”

The State Street property is lodged between the boutique Hotel Indigo and the much-anticipated La Entrada hotel project, which was purchased and brought out of dormancy by Los Angeles developer Michael Rosenfeld in 2010. Rosenfeld alone has invested more than $30 million in the lower State Street area between La Entrada and the mixed-use Chapala One project, which he purchased last year.

La Entrada and a host of new tasting rooms and craft brewers and distillers have been at the center of the revival of Santa Barbara’s downtown waterfront. “There are a lot of people betting on the future of the Funk Zone,” Brad Frohling, a commercial real estate broker with Radius Commercial Real Estate & Investments who has done a number of deals in the area, told the Business Times earlier. “In addition, you have wineries collaborating to draw tourists down there.”

The Funk Zone started moving away from its grittier roots in the early 2000s, when the first wineries opened along what has since been dubbed the Urban Wine Trail. Twenty-three wineries now make up the trail, up seven from a year ago.

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