Retail Center Lands Lease During Escrow

BREA, CA-A 17,713-sf retail building at the Birch Street Promenade here went on the market with a vacancy of approximately 5,000 sf that complicated both the marketing and the financing of the property. But the empty space filled by the close of escrow in a lease that added immediate upside to the deal, according to Irvine-based Faris Lee. The property, at 375 W. Birch St., sold for $6.25 million, with Shaun Riley of Faris Lee representing buyer MM Brea LLC.

The Newport Beach-based buyer acquired the property from West Los Angeles-based Bryan & Janet Inc., which was represented by Mark Hong of CB Richard Ellis. Riley explains that an important part of the marketing of the property was making the buyer "confident that the vacant space could be leased in a timely manner."

During escrow, the Melting Pot restaurant signed a 5,000-sf lease, "immediately adding upside to the purchase," Riley says. Additionally, the buyer, who owns other parcels within Birch Street Promenade, "plans to re-tenant the building with a high end martini lounge," Riley says.

Riley adds that financing for the deal included a $4.9 million conduit loan that was a challenge in light of the building being 30% vacant before the Melting Pot signed its lease, but Faris Lee relied on a lending relationship to gain a maximum loan value with limited reserves. Built in 2000, the building is occupied by a tenant roster that includes Octopus Sushi, Zen N Fit Yoga, Bellisima Day Spa and Star Nails.

The Birch Street Promenade is a retail center of more than 350,000 sf of shops, dining and entertainment that includes Regal Cinemas, Chicos, White House Black Market, YardHouse, Old Navy, Eddie Bauer, Ann Taylor Loft and Lucy & J Jill as well as 65 loft apartments. The sale of the Birch Street building was one of two deals closed recently by Faris Lee.

In the second sale, a Newport Beach-based 1031 exchange buyer named First American Exchange bought a Starbucks at 1241 E. Washington Blvd. in Colton for $1.94 million. Jeff Conover of Faris Lee, who represented both the buyer and Redlands-based seller Ebenezzar Scrooge LLC, notes that it was an all-cash deal at a 5% cap rate and a price of $1,109 per sf.

Part of what made the deal work at that cap rate and price per sf was that Starbucks recently signed a 10-year triple-net lease with two five-year options totaling 20 years, Conover points out. Also, he adds, the property is ideally located on a major retail thoroughfare with easy access to Interstate 215 with a population of more than 71,000 within a three-mile radius.