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PHOENIX-A retail tenant in the shopping center at the southeast corner of 32nd Street and McDowell Road has purchased the property for $8.9 million in an off-market transaction. The buyer acquired the 63,987-sf, grocery-anchored center from CHAI LLC of Colorado Springs, CO.

Buyer Young Lee opened his apparel shop, Clothing Depot, in 9,700 sf in November 2004 in the 1940s-era center, according to Sean Bishop, an associate broker with Eagle Commercial Realty Services. “I did the Clothing Depot lease and Lee came to me and said that he had some 1031 exchange money to invest and was interested in buying the center,” Bishop tells GlobeSt.com. “At the same time, the owner, which is a partnership of three siblings, decided it was time to sell. The siblings had inherited the center from their parents, who had owned the center since the 1950s.” The center is known simply as the 32nd and McDowell shopping center.

Bishop says Lee paid a “fair value” for the center, which traded at a 7.4% cap rate. “There’s a lot of deferred maintenance to take care of,” Bishop adds. “Some of the HVAC systems have been there for more than 30 years.” But, he says, the center still offers a steady cash flow.

“The center has been 100% occupied for the past few years,” Bishop says, “and most of the leases expire between 2006 and 2009.” The anchor tenant is Southwest Supermarket, which occupies 15,048 sf. Other tenants include Payless Shoe Source, H&R Block and RadioShack. The average rental rate is $10.50 per sf, triple net.

Lee, who traded out of land in the Valley, obtained an acquisition loan from Central Bank in Colton, CA. The buyer also paid $450,000 in defeasance for an existing conduit loan against the property, according to Bishop, who represented the seller. JD Schlueter with the JD Group in Phoenix brokered terms for the buyer.

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