Exchange Buyer Acquires Three Retail Pads

The pad sites are located in Mission Viejo at 27785, 27845 and 27865 Santa Margarita Parkway, at the northwestern corner of Santa Margarita and Marguerite parkways. Tenants at the sites are Walgreens, Ramona Tire and Claim Jumper. The sites are a part of Trabuco Hills Shopping Center, Mission Viejo's premier neighborhood shopping center.

The $14.4 million sales price, or $594 per square foot, closed at a cap rate of 6.21%. Hook notes that the loan on the properties was one of the selling points of the deal. The terms of the loan, in addition its attractive 5.7% interest rate, included an interest-only fixed rate until 2016, with the buyer paying $5.1 million down.

Faris Lee Capital, an in-house team of senior financing experts, worked with the seller to arrange an in-place loan for the properties a year ago, which resulted in "immense value during the current sale," according to Faris Lee. This allowed the buyer to take advantage of below-market in-place debt with full-term interest only payments. Faris Lee Capital also managed the debt assumption process between the buyer, seller and lender.

Dennis Vaccaro, senior managing director, and Richard Walter, president, of Faris Lee Investments, represented the seller, Pacific Castle Props I LLC. The 1031 Exchange buyer was Trabuco Hills Pads LLC. "The pads at Trabuco Hills Shopping Center provided the investor with a unique opportunity to acquire single-tenant properties within an irreplaceable South Orange County retail property with an excellent tenant roster, below market assumable debt and long-term stability within a high income demographic area," Vaccaro says.

Walter says that the strategy of selling off retail pads at well-performing centers such as Trabuco Hills Shopping Center provides small- to mid-sized buyers with an opportunity to own a part of a larger, established center. "The buyer can now reap the large- scale synergy and increased foot traffic benefits of being located within a major retail hub," Walter says.

"Even though the retail market is still tough throughout the country, there is momentum for single-tenant pad sales," Walter adds. "Cap rates are still reasonable for pads."

Hook describes the net-leased pads as among "the premier properties in a coveted South Orange County submarket." He explains that the northwestern corner of Santa Margarita and Marguerite parkways provides excellent frontage and visibility from these two main thoroughfares.

The location is between State Highway 241, known as the Foothill Transportation Corridor, and Interstate 5, the San Diego Freeway, in Southern Orange County. Another selling point of the deal was the demographic profile, according to Hook, who notes that the population within a three-mile radius is greater than 134,000 and the average household income is in excess of $105,000.