According to director of advisory services Dennis Vaccaro of Faris Lee, who represented seller Island Property Partners LLC of Orange County, the property is a non-traditional two-story retail project in the middle of the 15-million-sf Carlsbad Research Center office and R&D development. "The non-traditional nature of the property lent itself to some marketing challenges," says Vaccaro. He adds that the largest building in the center, a 6,000-sf restaurant space, had been vacant for about one year. Faris Lee developed a plan that the buyer intends to implement to transform the vacant space into a multi-tenant building, Vaccaro says.

Vaccaro notes that the property, at 5814 Van Allen Way in the 560-acre business park, is the only retail service center located within the Carlsbad Research Center. The buyer was Los Angeles-based Sero Properties, which was in a 1031 exchange.

Built in 2000, the Island @ Carlsbad features a Caribbean aquatic theme, open food court area, central fountain, pool and fireplace area. The sold portion of the center includes tenants such as Carl's Jr., US Healthworks, TD Waterhouse, First Future Credit Union, Randstad US and the Islands Oasis Food Court.

The property generated multiple offers and sold at $590 per sf, the highest price paid for a retail product comparable in size in San Diego County for the past two years, according to Vaccaro. The buyer assumed an existing loan at an interest rate of 5.06% that was fixed until September 2015 and was based on a 30-year amortization schedule.

The only two properties in the Island retail center that were not included in the 40,000-sf sale were two other buildings in the center occupied by US Bank and a 7-Eleven totaling 7,276 sf. Both of those were sold in January 2007 in deals brokered by Faris Lee.

The Island retail center and another deal that Vaccaro closed recently illustrate that some transactions are still setting records despite changing economic conditions. The other deal was the $5.5-million ground lease sale of Orange County Fast Food & Convenience Plaza at 700 to 750 E. Dyer Rd. in Santa Ana. The 5.1% cap rate set a record for the lowest cap for a stabilized Orange County retail center in its price range, according to Vaccaro.

The five-building property on 2.83 acres is 100% occupied by 76 Gas & Carwash, Circle K, Subway, Jack in the Box, 76 Express Lube and Wienerschnitzel. Vaccaro represented seller Sanderson J Ray Development from Irvine; buyer Western Asset Management LLC of Buena Park was represented by Sam Kim of Century 21 Sunny Hills.

The property was on the market for just three weeks and garnered five offers. The well-maintained center offered the buyer a property in a high-density, infill area that includes credit tenants with long-term leases and structured rent increases, Vaccaro notes.

Built in stages from 2000 to 2003, the center consists of five buildings on three individually parceled ground leases. Faris Lee's financing arm, Faris Lee Capital, placed the loan for the buyer with one of its preferred lenders.

Vaccaro explains the low cap rate and some of the factors that drove the deal:"The Orange County retail market was tight in 2007 as very few new retail projects were built and retail property owners were comfortable in their investments with no real appealing alternatives in which to transfer their money," he says. "Orange County is rapidly becoming an infill area, and one of the country's strongest retail marketplaces."