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SCOTTSDALE, AZ-Armed with cash from the sale of several multifamily assets in Northern California, an investment group has completed a 1031 Exchange with the $11.2-million acquisition of Agua Caliente, a 48,650-sf retail center that traded at an 8% cap rate.

The group, led by Arnaldo Matos of San Jose, bought the 6900 E. Shea Blvd. property in Scottsdale from Agua Caliente Investments II and Manatee Investments II of Flagstaff, AZ. Jim Schaller of Schaller Real Estate represented the seller.

“The buyer was looking to get into Phoenix because of higher cap rates and they wanted to get into retail because it’s less management intensive,” says Lori Goad, the Phoenix sales associate for Marcus & Millichap who represented Matos’ group in the transaction. She tells that the investment group wanted a property in a good location with stability for the future. “They were looking for cash flow,” she says. “The buyer really saw the value in Agua Caliente’s future cash flow–they thought it would be easy tolease up space there.”

Agua Caliente’s location and design also were particularly attractive to the buyer. “They really liked the looks of the center and the area,” Goad says. The center is located at the intersection of 69th Street and Shea Boulevard, one of the best locations in Scottsdale. “It’s a very heavily traveled intersection,” she adds.

Built in 1987, Agua Caliente is 97% leased. According to Goad, the former owners worked hard to increase the occupancy of the center during escrow. Several five-year leases were signed with rates ranging from $10.50 per sf to $19 per sf. The two-story center houses a mix of office, retail and medical tenants including Sozzle Grill, which occupies 4,000 sf, and At Home Fitness, a new 5,000-sf tenant. Matos’ group obtained new financing for Agua Caliente from MidFirst Bank.

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