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

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The $1,368-per-square-foot sale was the site of a7,800-square-foot Walgreens that is under construction in Hollywoodand sold for $10.71 million, according to senior associate MarkThiel of the San Diego office of Marcus & Millichap, whorepresented the buyer. The $720-per-square-foot sale was a5,789-square-foot shopping center known as Town Center Plaza at18503 Yorba Linda Blvd. in Yorba Linda, according to senior vicepresident Jeremy S. McChesney of Irvine-based Hanley InvestmentGroup Real Estate Advisors, who represented the seller.

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Thiel tells GlobeSt.com that the price paid for the Hollywoodproperty, which is at 1050 N. Highland Ave., is the highest priceper square foot for a single-tenant net-leased drugstore in the USin 2010, according to CoStar and Real Capital Analytics. Despitethe high price per square foot, Thiel tells GlobeSt.com that thesale is a cap rate-based deal calculated on the new Walgeens'projected first-year sales of $15 million. The buyer, a SanFrancisco Bay Area-based private investor, acquired the propertyfrom Santa Monica Highland Partners LP, an experienced Walgreensdeveloper, which was represented by Jonathan Selznick and ChrisRodriguez of Pacific Commercial in Orange County.

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Thiel says that one reason the buyer won the deal was awillingness to close the sale before the new Walgreens iscompleted―a risk that many if not most bidders wereunwilling to assume. He says the buyer was willing to take the riskbecause of the high quality of the tenant and the seller'sexperience as a developer of other Walgreens sites. In addition,Thiel comments, “The property is located on a prime Hollywoodcorner, the site of a Del Taco that was scraped, at the highlytraveled intersection of Santa Monica Boulevard and HighlandAvenue." The new Walgreens is due to be completed in the spring of2011.

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

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The $720-per-square-foot sale of the Yorba Linda center is themost paid for a multi-tenant retail center in Southern Californiain 2010, according to McChesney, who cited CoStar records. Thepurchase price of $4.17 million "is a testimony to the fact thatwell-situated strip shopping centers in Orange County are in highdemand," McChesney said. The center is situated at the signalizedintersection of Yorba Linda Boulevard and Lakeview Avenue, with atenant roster including Coffee Bean & Tea Leaf, GameStop, PandaExpress and AT&T. The property was built in 2005 and was 100%occupied at the time of sale.

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"We received a great deal of interest and multiple all-cashoffers," McChesney said. The buyer, Tony Nam, was represented byDavid Sternberg of Roessler Investment Group based in SanFrancisco. The seller was Festival Cos. of Los Angeles.

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Said McChesney: “I think a lot of investors will look at thissale as a barometer of well-located stable retail assets. Buyersare returning to basic fundamentals when evaluating the acquisitionof a property, and location continues to remain one of the mostimportant factors in their decision making."

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