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Pacific Coast Business Times: Investors happy to pay retail for prime shopping properties

December 06, 2013

Pacific Coast Business Times: Investors happy to pay retail for prime shopping properties

$14.3 Million for Marshalls Building
The building at 900 State St. in Santa Barbara recently sold for $14.3 million.
(Business Times Photo)
Santa Barbara, California – Published 12/6/2013
Pacific Coast Business Times
By Marlize van Romburgh, Commercial real estate

There were no Black Friday markdowns on prime retail buildings in the Tri-Counties. In recent weeks, two high-profile retail properties have changed hands in deals totaling more than $31 million. Here’s a closer look:

The Marshalls-occupied building at 900 State St. in downtown Santa Barbara has been sold for $14.3 million in an all-cash off-market deal, marking a 43 percent premium over the last time the property changed hands.

Radius Commercial Real Estate & Investments said the deal marks the largest sale of retail property in downtown Santa Barbara in recent years. The 38,000-square-foot building is located on the corner of State and Canon Perdido streets.

Austin Herlihy and Steve Brown of Radius represented the buyer, 900 State Street Associates LLC. The new owner is an undisclosed out-of-state investor with strong local ties and was involved in a 1031 tax deferred exchange, according to Radius.

“It’s no secret the investment market is on fire right now,” Herlihy said in a statement. “Demand for prime properties is high with inventory extremely tight, and cap rates and lease rates at levels we haven’t seen since before the recession hit. There is a ton of capital chasing yield in the marketplace right now.

Built in the 1960’s, the three-story building previously housed a bank and then a Borders bookstore. The property last sold in 2011 for $10 million after the exit of the now-defunct Borders. Marshalls, a discount apparel and home goods retailer, holds a long-term lease through 2015 with multiple options, Radius said.

“The owner has some long-term ideas about adding square footage and improving the look of the building exterior, but not while the Marshalls lease is in effect,” Herlihy said.

In another large retail property sale, the Smart & Final-anchored mall in Simi Valley has changed hands for $16.9 million, or about $170 per square foot. Milan Capital Management of Anaheim purchased the 99,662-square-foot shopping center.

Marcus & Millichap Real Estate Investment Services represented both buyer and seller in the deal. The firm also arranged interim refinancing of the seller’s existing conduit debt with a $7.5 million flexible bridge loan that permitted repayment without penalty, according to a press release. That mortgage was retired at closing with a new loan arranged by Milan Capital, providing leverage and construction money. The new owner is planning a complete renovation that includes an expansion as well as an extension of Smart & Final’s lease.

The Collection at RiverPark shopping center in Oxnard said women’s fashion brand White House/Black Market has signed a lease to join its lineup of soft goods retailers.

The shopping center, located in Oxnard next to Highway 101, officially opened in 2011 with anchor retailer Target. Since then, it has added a host of other retailers and restaurants and H&M, Whole Foods Market, REI and Yard House, among others, have opened during the last few months. Tenants signed and awaiting opening include Toby Keith’s I Love This Bar & Grill, Lazy Dog Restaurant & Bar and a 40,000-square-foot 24-Hour Fitness Super Sport.

Investor Manny Villasana recently purchased a seven-unit apartment property at 6418 Hummingbird St. in Ventura for $1.1 million.

Craig Lieberman and his Apartment Investment Specialists team represented the seller, Hummingbird Street Ventures, in the deal. Villasana was represented by Darwin Gomez-Escudero, a real estate agent with Keller Williams’ Oxnard office. The sale price reflects a per-unit price of $162,140 and a gross rent multiplier of 12.2, according to Lieberman’s team.

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