The transaction, on the heels of a record shattering 2014, marks the largest sale of retail property in downtown Santa Barbara since 2002. “The interest in this asset was as intense as I’ve ever seen,” said Austin Herlihy, Senior Vice President of Radius Commercial Real Estate & Investments who brokered the deal along with his partner Steve Brown.
Another prime Santa Barbara commercial property has been snatched up after generating a frenzy of interest from potential domestic and international buyers.
The high profile center located at State Street and Highway 101—anchored by outdoor gear retailer REI—closed escrow on March 31st and was purchased by an undisclosed U.S. LLC.
The property had been listed at $21,950,000 and traded “within 3-4% of asking price to an out- of-town buyer,” according to lead broker Austin Herlihy of Radius Commercial Real Estate Investments who was not at liberty to discuss the final terms. He said the deal represents the largest sale of pure retail property in downtown Santa Barbara since 721 State Street sold in May, 2002 for roughly $44.9 million.
“As we anticipated, interest in this offering was off the charts. We had 58 signed non disclosure agreements alone and eight highly competitive offers, with numerous offers from all over North America and as far away as Asia,” said Herlihy.
“With all the current development on lower State Street, this property now sits on the 50 yard line between the Wharf and Paseo Nuevo,” he said. “We knew its strong fundamentals would be attractive on a global scale, so we were very aggressive in our marketing approach.”
Herlihy noted that the company’s LoopNet listing not only generated more online activity than any previous Radius offering, but at one point it performed better than 100% of all similar listings on that website, which is largely considered the number one online resource used by commercial real estate professionals and investors around the globe.
The 94,206-square-foot parcel, bordered by Highway 101 and State and Anacapa Streets, includes 55,545 square feet of fully leased retail space with storefront on both streets and a large parking lot in front of REI facing Anacapa.
The property was renovated in 2011 with REI opening in November of that year. The company, which operates more than 100 stores across the country and named its Santa Barbara location “Store of the Year” in 2013, occupies the largest portion of the space at about 24,500 square feet. National retailer Sit ’n Sleep fills the next largest space at about 8,500 square feet. Both companies hold long-term leases.
According to Radius Principal Steve Brown, who brokered the deal with Herlihy and fellow Radius agent Chris Parker, the building had struggled with unstable vacancy prior to REI and was not viewed as a strong retail location with the majority of it being used for industrial purposes.
“This is a prime example of a local investor taking an otherwise under-utilized but well-located commercial property and transforming it into a destination center,” Brown said.
The acquisition of the REI property continues a streak of local investment activity over the past several months, despite a very limited supply of available property. In the 2014 year-end summary released by Radius earlier this year, the company reported a record 103 sales of commercial properties in the South Coast, easily crushing the previous record of 85 set in both 2005 and 2012. “Let’s just say it’s a very good time to own commercial property in Santa Barbara,” Herlihy said.
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