LOS ANGELES-A $720-per-square-foot retail deal in Orange County looked pretty pricey until a drugstore in Hollywood sold for $1,368 per square foot. The two recently closed deals represent some of the retail action taking place in Southern California as deal flow accelerates and buyers are willing to pay for quality and location, according to brokers in the sales.

The $1,368-per-square-foot sale was the site of a 7,800-square-foot Walgreens that is under construction in Hollywood and sold for $10.71 million, according to senior associate Mark Thiel of the San Diego office of Marcus & Millichap, who represented the buyer. The $720-per-square-foot sale was a 5,789-square-foot shopping center known as Town Center Plaza at 18503 Yorba Linda Blvd. in Yorba Linda, according to senior vice president Jeremy S. McChesney of Irvine-based Hanley Investment Group Real Estate Advisors, who represented the seller.

Thiel tells GlobeSt.com that the price paid for the Hollywood property, which is at 1050 N. Highland Ave., is the highest price per square foot for a single-tenant net-leased drugstore in the US in 2010, according to CoStar and Real Capital Analytics. Despite the high price per square foot, Thiel tells GlobeSt.com that the sale is a cap rate-based deal calculated on the new Walgeens' projected first-year sales of $15 million. The buyer, a San Francisco Bay Area-based private investor, acquired the property from Santa Monica Highland Partners LP, an experienced Walgreens developer, which was represented by Jonathan Selznick and Chris Rodriguez of Pacific Commercial in Orange County.

Thiel says that one reason the buyer won the deal was a willingness to close the sale before the new Walgreens is completed―a risk that many if not most bidders were unwilling to assume. He says the buyer was willing to take the risk because of the high quality of the tenant and the seller's experience as a developer of other Walgreens sites. In addition, Thiel comments, “The property is located on a prime Hollywood corner, the site of a Del Taco that was scraped, at the highly traveled intersection of Santa Monica Boulevard and Highland Avenue." The new Walgreens is due to be completed in the spring of 2011.

Thiel notes that the $1,368 per square foot is not the highest price per square foot paid for a Hollywood retail property this year. Other properties, at prime locations with top-tier tenants, have sold for above $2,000 per square foot, he says. He adds that a unique feature of the new Walgreens is that it will have a basement of 5,500 that will be used for storage.

The $720-per-square-foot sale of the Yorba Linda center is the most paid for a multi-tenant retail center in Southern California in 2010, according to McChesney, who cited CoStar records. The purchase price of $4.17 million "is a testimony to the fact that well-situated strip shopping centers in Orange County are in high demand," McChesney said. The center is situated at the signalized intersection of Yorba Linda Boulevard and Lakeview Avenue, with a tenant roster including Coffee Bean & Tea Leaf, GameStop, Panda Express and AT&T. The property was built in 2005 and was 100% occupied at the time of sale.

"We received a great deal of interest and multiple all-cash offers," McChesney said. The buyer, Tony Nam, was represented by David Sternberg of Roessler Investment Group based in San Francisco. The seller was Festival Cos. of Los Angeles.

Said McChesney: “I think a lot of investors will look at this sale as a barometer of well-located stable retail assets. Buyers are returning to basic fundamentals when evaluating the acquisition of a property, and location continues to remain one of the most important factors in their decision making."