From sddt.com:
A unit of Hartford-based Cornerstone Real Estate Advisors has paid $58 million for the 111,403-square-foot Bressi Ranch Village Center along Gateway Road in Carlsbad.
The center was purchased by Cornerstone’s Regency Bressi LLC Partnership, and handled out of that firm’s Santa Monica offices.
The center, developed by LNR Property LLC’s Commercial Property Group (LNR) in 2008-09, is anchored by Stater Brothers, Trader Joes, Unleashed by Petco, Souplantation Express, Chase Bank and Rubios. The property was seven years in the planning before it was constructed.
Stewart Keith and Bill Thaxton of Flocke & Avoyer were the local market leasing representatives for the team.
Thaxton said there was so much interest in the center, which is 96 percent leased, the selling price ended up being around what it might have sold for at the peak of the market in 2006 or 2007.
“The price would have been very close to this,” said Thaxton. “You have a grocery-anchored center in an affluent community. It will be the only grocery-anchored center in the whole (Bressi Ranch) community and the closest Trader Joe’s is in Oceanside or Encinitas.”
Thaxton said the center is close to a large community park that helps bring people in as well.
The fact that Bressi Ranch Village was able to lease up right in the middle of a downturn also bodes well for the center.
Wow…it’s certainly reassuring to know that it’s possible to even near the prices at the market high. This is the first time I’ve heard about anything even close.
The combination of base and percentage rents generated by these tenants must be phenomenal. Anyone know the cap rate on this sale?
I’m surprised to see a supermarket and a Trader Joe’s in the same center. Usually the supermarket anchors have restrictive non-compete clauses in their leases.
If I owned (perhaps through purchasing out of foreclosure) a bunch of retail space in a particular locale, I’d consider offering Trader Joe’s a free 20 year lease to move in. They’d generate the customer traffic that would make the rest of the space viable.
This would be especially true in the (many) places in the US that don’t have much of a Trader Joe presence yet.
The cap rate on this sale is pretty low. It was reported at 5.5%. It also looks like a cash deal, but they could have gotten none traditional financing.
Of course there’s not much in the way of comps for this particular property. Poinsettia Village on Avenida Encinas recently sold at $394/sf with a cap rate of 8.50% but it’s a much smaller property.
Del Mar Plaza on Camino Del Mar is about the same size and it sold for $557/SF in May of 2010, so this new sale is comparable to that one, but these big centers just don’t change hands very often so it’s tough to identify it as a trend.
@Another Investor
That thought has always crossed my mind about TJs and Stater Bros existing in the same shopping center. A few years ago in Thousand Oaks, TJs was trying to gain a foothold in a run down shopping center that used to have an Albertson’s. It took TJs a long time (years) to finally get a store open because Albertson’s would road block them at every opportunity. The unofficial reason at the time was that TJs is non-union and Albertson’s is union. Maybe Stater Brothers is a non-union grocery store?
For what it is worth, my family does its food shopping at Ralph’s, Costco, and Trader Joe’s.
That center leased up significantly in the past 12 months but was a ghost town for the prior years.
The buyer paid all cash, but will likely finance post closing. Typically buyers like this will acquire a block of properties for $X hundred million then finance them post closing in bulk.
While the cap rate is low, the lack of competition (current and future) in the area is the key driver here.
Looks like the small tenants in this property have approx 5 year leases in the neighborhood of $40/SF/Yr and most were signed in late 2010. I assume the anchor tenants probably have a slightly longer term and better rates.
@livingincali – I had inquired about space in 2009 and was shocked at the high lease rates considering their vacancy.
I come from the grocery anchored center investment world and never had rents like that in our nice centers.
Good for them…I just wonder how the mom/pop tenants are going to survive at those rates…must be some serious incentives and early term free rent/ti’s baked into those numbers to get them up and running
We had an LOI in on the Yogurt space, but felt the space was too large and that yogurt was saturating–rents were in the $40/sf range (plug CAM) and the center was nearly vacant at the time. They had offered us 6 months rental concessions and some TI money given the vacancy and the amount of TI work required. Not sure how the yogurt shop is doing, but that space is huge with a tons of dead space–ie: hallway to bathroom.
LB – figured that was the case with free rent/ti $$. I just had their frozen yogurt today with the kids. My guess is that it is doing OK…always a steady flow of people…seemed to notice their prices creeping up lately too..
Fascinated by the commercial side of RE. Less emotional, more analytical. How about some videos of spider-filled warehouses? 🙂
Jakob – you are spot on….if residential is more art than science, commercial is more science than art….however, it is much more important to be connected, via experience and years of hard work, as there is essentially zero public data available to make decisions. And if you think residential is filled with ruthless characters, commercial is 100x more cutthroat….but can also be 100x more profitable too!!!!
@clearfund, yeah that’s some impressive rent, but the other centers around there are also asking for those kind of rates.
Plaza Paseo Real at the 6900 block of El Camino Real is asking $42
Westfield bluff across the street is asking $35.50.
Then you look at something like Village Faire at the end of Carlsbad Village Dr in downtown Carlsbad, right in the heart of a tourist area and they are asking $25.50
@livinincali – guess the income in the area justifies it. Being more of an industrial property guy these days with rents in SD County in the $7-$15 range has skewed my vision.
I get $25/sf as that is basically $2/mo but pushing $4/mo plus NNN seems very difficult to justify as a % of the shopkeepers gross income…which is what really matters to make a thriving center.
Yeah, I guess. 2010 average income in a 3 mile radius around there is about $120K. I guess if you setup successful shop in those areas you plan to have top notch quality service and become part of the community so you can charge higher prices. Or you just market space to Multi-Millionaire wife who’s bored and wants to open a trendy boutique. Millionaire just looks at it as a tax write off and a way to keep the wife happy.
When I was in the retail business, I had a vendor who used to say, “In Retail, there is NOTHING more expensive that cheap rent.” It held true almost always–our most successful location was the most expensive rent(The Hotel Del Coronado) between base rent and % rent we paid over $400/sf (220sf shop), but we averaged close to $3000/sf in sales. Rent and advertising needs to be grouped into one. Locations that are higher rent usually provide the little guy with foot traffic (hopefully eligible foot traffic) and the retailer does little to no advertising. Average around 15% between rent and advertising and the retailer should do fine (or need a larger margin).