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HANFORD, CA-Highland Development Co., a business founded last year by retail developer James Kessler and Marcus & Millichap chairman George Marcus, has acquired Hanford Towne Centre from the Berbarian Cos. of Modesto for $30.4 million. The 211,300-sf shopping center is 97.5% leased and anchored by Albertson’s, Orchard Supply Hardware and Staples.Kessler, Highland’s president, tells GlobeSt.com he plans to add 30,000 sf of space on three undeveloped parcels that are already entitled for the additional square footage. One of the parcels will hold a 5,000-sf stand-alone retail space for a single tenant, the second will hold a 10,000-sf multi-tenant retail building and the third will hold a 15,000-sf medical office building to complement a hospital that is located directly across the street from the shopping center. “Hanford is a solid central valley community in the Fresno MSA with strong growth and the Towne Centre is the best grocery location in the trade area,” says Kessler.Kessler is a former Grubb & Ellis broker who got into shopping center development in the 1980s with Sutter Hill Ltd. of Palo Alto and then ran the Western region for Federal Realty before going out on his own. With Federal Realty, he developed among other things two projects in the Portland, OR, region called Uptown Shopping Center and the Streets of Tanasbourne.Kessler says Highland got the inside track to acquire the Hanford property by submitting what he describes as “a clean, full-price offer” with a relatively short closing timeline just as the disposition brokers were getting ready to take it to the broader market. “We saw upside in what hadn’t been completed,” he says, “and basically none of it was built into the price.”Berbarian purchased the property, formerly Kings Mall, out of foreclosure and then brought in a development partner in 1994 to redevelop the property. “They never built out the final phase and at this point in time are no longer interested in ground-up development,” says Kessler. As well, Kessler says Berbarian didn’t think the expansion opportunity was large enough to warrant bringing in another development partner.Kessler estimates the going-in cap rate at about 7.26% and the post-expansion proforma cap rate at about 8.5%. He estimates the company’s hold at about three years. “Not that we wouldn’t hold for longer,” he says, “but in a situation like this, the greatest increase in value will happen right after we construct and lease the new space.” When all is said and done, Kessler says he expects to have about $33.5 million invested in a property that hopefully will re-trade for about $39 million.

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