A Dozen Offers, 346 Confidentiality Agreements

FOLSOM, CA—As GlobeSt.com previously reported, Phillips Edison - ARC trust has purchased a 141,310 square-foot grocery store-anchored shopping center here. Phillips Edison - ARC Grocery Center REIT II, Inc., says Commonwealth Square, its first California acquisition adding the first property in California to the company's portfolio. The seller was a Los Angeles-based family partnership.

In an update to that article, GlobeSt.com chats with CBRE senior vice president Philip D. Voorhees, who notes that "Demand for grocery anchored shopping centers in the west continues to outpace supply, and by a wide margin.”

Voorhees and the National Retail Investment Group – West (NRIG-West) team completed the sale of the shopping center that is anchored Raley's Fine Markets, along with a complementary mix of pad and shop tenants including Starbucks, Smash Burger, Heritage Community Credit Union and H&R Block. The sale price was $19.4 million. The property was approximately 85% occupied at the time of sale.

Voorhees exclusively tells GlobeSt.com that "In just a few weeks of marketing we produced nearly a dozen offers and executed 346 confidentiality agreements. The buyer pool for Commonwealth Square was split approximately in thirds between institutional investors (REITs and advisors), well-heeled private investors and 1031 investors seeking replacement properties.”

Well-located, seasoned shopping centers continue to produce cash-on-cash yields two to three times greater than the 10-Year Treasury, the benchmark for risk-free return, Voorhees tells GlobeSt.com. “During the peak of the last cycle in 2007, the Treasury Yield was +/-5%, and cap rates for 'A/Core' centers were about 5.50% in the west, a spread of only 50 basis points. That spread is currently 200-250 basis points, so there may be additional cap rate compression to come.”