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DALY CITY, CA-A neglected shopping center in Daly City will undergo major cosmetic surgery thanks as a result of the center’s $80-million acquisition by publicly traded Kimco Realty Corp.

The property is Westlake Shopping Center, a 562,000-sf center built in the 1950s and located at 285 West Merced Blvd. and anchored by Safeway, Burlington Coat Factory, Walgreen’s and Trader Joe’s. Vacancies total about 125,000 sf. The seller, Westlake Development Company, accepted DownREIT units in Kimco in lieu of cash that may be redeemed at any time during the next decade.

According to Grubb & Ellis SVP Michael Federle, who represented all parties in the deal, Kimco will invest an additional $12 million to upgrade and improve the shopping center, taking it in the direction of a mainstream retail property. Federle worked with SVP Dixie Walker, also of Grubb & Ellis. All of the major tenants will increase and improve their existing space, says Federle, and the new owner plans to immediately market any additional space to potential tenants.

According to Kimco, the retail property is well suited for redevelopment due to its infill location and current tenant mix. The center’s demographics, over 500,000 people living within five miles of the site and few retail alternatives, present an opportunity for the company to create value. Kimco says that retail sales at the site are strong with several current tenants reporting annual sales in excess of $700 per sf.

According to Federle, the center attracted 125 investors and 24 made offers on the property. The highest offer was $83 million but Citibank Trust Group, which orchestrated the sale on behalf of Westlake, wanted to accept shares as currency and chose Kimco because of share values. Sources say several brokerage firms appraised the property in the $45 to $60 million range.

Federle attributes the massive interest in the property to a combination of factors: the oversupply of office space, the undersupply of retail space, the demographics of the area, and the opportunity to increase value at the center.

Daly City sales are “unbelievable,” he says, explaining that Target is currently pulling in about $85 million in sales and grocery stores in the area are grossing about $1250 per sf in sales. Investors reviewed the numbers, saw the outdated appearance of the shopping center and saw tremendous opportunity, says Federle.

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