LOS ANGELES—James Campbell Co. has sold the Puente Hills East Shopping Center for $36.7 million to an unnamed investor. The shopping center has a rare ground lease with Target, which helped to attract ample interest across investment classes and generated 16 offers. James Campbell Co. sold the property after completing a significant renovation and signing four retail anchor tenants, including Old Navy, Ulta Beauty, Ross and Target.
“The interesting thing was that the property attracted all buyer classes: individuals, REITS, institutional buyers and quasi-institutional funds. We had 16 offers with at least one representative from every one of those categories,” Dixie Walker, a broker on DTZ's retail investment team, tells GlobeSt.com. “The buyer knew the area and was looking to buy properties in the area, so he came in with a short due diligence period and hard money.” Walker represented the seller in the transaction, along with Charley Simpson and Andrew Milne. Ryan Swanson and Kurt Bruggeman of Lee & Associates Irvine represented the buyer, who plans to hold the property in the long term.
Target owns the majority of its real estate, so finding a shopping center with a Target ground lease is rare and no doubt helped to fuel the major interest in the property. “Target was included in the income stream on a ground lease, which is rare because nine times out of ten, Target owns its own space,” says Walker. “Plus, the ground lease was set up on a 10% value of the land. Land values in that particular area have grown at a higher rate than other land values in the City of Industry area. So, there is the opportunity 10 years out to capture some long-term upside.”
Located at 17603 - 17799 Colima Road in the City of Industry, the property is currently fully leased. In addition to those mentioned above, the property is also home to a PetSmart, Wells Fargo and Macaroni Grill. Prior to the renovation, a Mervyns served as the anchor tenant before going out of business. The sellers converted the Mervyns box space into four anchor spaces with resulting leases that produced significantly higher rents than the single Mervyns had.
In addition to the Target ground lease, the property is also located in a submarket with a low supply of retail product. “There is such a lack of true quality product that when the true quality product shows up, there is an attack and a very aggressive response,” says Walker. Very few retail properties trade hands in this neck of the woods. Nearly a year ago, a shopping center nearby, but on the other side of the 60 freeway, sold for $43 million. That property was also fully occupied, but targeted an Asian demographic with localized restaurants and shops.
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