Capstone Continues to Expand in Phoenix
The investor trades out of a San Diego property to expand its retail portfolio in Phoenix.
“We are focused on two primary product types in Phoenix, retail and multi-tenant flex-industrial. This is our fifth current project in that market,” Alex Zikakis, president and founder of Capstone Advisors, tells GlobeSt.com. “We generally either buy value-add assets or core-plus assets and our recent acquisition is a solid core-plus asset. The center is 100% occupied, was built by a top regional developer, is very well managed by the developer in partnership with an institutional owner, has a strong tenant mix and is anchored by one of the greatest retailers in the U.S., Walmart. We are confident Walmart will continue to do very well in this location and will continue to drive a strong supply of customers to our tenants.”
The market is the major opportunity here. The shopping center is located in one of Phoenix’s fastest-growing submarkets. “This shopping center is located near the final segment of the Loop 202 freeway that will be completed within the next few months,” adds Zikakis. “This major infrastructure investment is already causing extremely strong household and job growth in the immediate area. While this isn’t a particularly large acquisition for us, we believe it will deliver excellent cash-on-cash returns with solid income growth. We expect to hold this asset for 10 or more years.”
Capstone is an active buyer in Phoenix and is planning to continue to grow its portfolio in the market. “We are bullish on the Phoenix market. We like the business community—the city has a proactive and business-friendly environment,” says Zikakis. “State tax rates are attractive and the cost of housing is reasonable. Phoenix has great schools that foster a talented and educated labor market. The city also had the largest population growth of any large city in the U.S. last year and we think this population growth trend is likely to continue.”
From a pricing perspective, Capstone is also finding some great opportunities in retail to capitalize on the growth. “Cap rates are more generous than we see in our home market, which provides strong operating cash flow,” says Zikakis. “We are able to achieve very good investment returns in Southern California so we plan to continue our investment activities closer to home while simultaneously increasing our presence in Phoenix.”