Value-Add Retail Demand to Supply Is 15 to 1

The demand for value-add retail investment in Orange County far exceeds the opportunities. In fact, there are as many as 15 active investors chasing every value-add retail deal. Merlone Geier Partners recently acquired the College Plaza Shopping Center—a deal described as a true value-add opportunity—for $30 million. This was a rare opportunity, largely because Orange County’s retail market has remained active and healthy this cycle.

“There is a tremendous amount of capital chasing value-add opportunities, and that capital has had a very challenging time finding enough deals to buy,” Geoff Tranchina, a broker at JLL that represented the seller in the deal. “For every opportunity like College Plaza, there are 10 to 15 active investors looking for these assets. There is no shortage of capital, but there is definitely a shortage of opportunities.”

This particular property was 73% occupied, and one of the anchor tenants, The Good Will, vacated an anchor space during the sale. The second anchor tenant, 99 Cent Store, has a lease due to expire. “The property had two anchor spaces with expiring leases, so you have a large block of space that could be repositioned or reimagined,” says Tranchina about why the property offered so much upside. “In addition, there hadn’t been a major investment to update the façade or to beatify the assets. It was an asset that had a quality location and as a result, there were a number of ways that investors could look at redeveloping or repositioning the asset. It is across from California State University, Fullerton, which is a major educational institution, and it is at a high-traffic intersection with properties around it that have recently been developed.”