Retail Deal Volume Drops 35%
More than a dozen offers came in for the sale of the Broadway Plaza in the rapidly growing Chula Vista market in one of the rare quality retail deals to hit the market this year.
“Year-to-date retail investment activity in San Diego County has been extremely limited with just under $262 million in total volume, inclusive of Broadway Plaza. That is a 35% drop in activity year-over-year,” Glenn Rudy, a senior managing director at Newmark Knight Frank, tells GlobeSt.com. “With only $300 million across seven offerings above $15 million on the market currently, quality retail product in San Diego County remains scarce. This trend is a consistent theme across the Western United States. Though capital remains abundant, the retail investment community is extremely disciplined in its deployment. Quality assets like Broadway Plaza with sound real estate fundamentals, creditworthiness and sales performance will remain the focus from investors starved for quality.”
Rudy represented the seller in the sale of Broadway Plaza, along with his NKF colleagues vice chairman Pete Bethea and senior managing director Rob Ippolito. Walmart and Costco anchor the asset, which traded hands between Kimco Realty and Protea Properties LLC. The strong tenant mix and size made it especially popular for investors. “Broadway Plaza was truly a rare investment opportunity in that it delivered all the priorities of today’s active retail investor—quality real estate, dynamic submarket, density, credit, tenant performance and durability,” explains Rudy. “The fact that both Walmart and Costco were included in the sale made it especially unique as most often these two industry-leading retailers are not a part of the collateral being offered for sale. Moreover, all buildings within the project are contained on their own parcel thereby providing flexible long term strategies.”
Chula Vista is a rapidly growing submarket. It has seen an increase in multifamily and residential construction in recent years as well as a growing population. Retail space, however, remains limited. “Chula Vista as a whole is growing at an incredibly fast pace in part due to the development of two of the largest master-planned communities in San Diego County—Otay Ranch and Eastlake—as well as the smaller communities of Rancho del Rey, Rolling Hills Ranch, San Miguel Ranch and Sunbow,” says Rudy. “Broadway Plaza itself is one of four primary retail centers in the immediate trade area, which boasts a 99% occupancy rate across nearly 1.2 million square feet. Just as in the investment world, there remains a flight to quality among retailers.”
Rudy could not comment on why Kimco Realty decided to dispose of the property, however, there is a growing trend of REITs restructuring retail portfolios. “Most all REITs and institutional owners and operators of retail today are committed to continuing to prune their non-core assets,” he says. “Whether that be determined by geography, asset profile, tenancy or growth profile is determined on a case-by-case basis. In the case of Broadway Plaza, it would most likely be attributable to the limited contractual growth profile.”