Center Sheds for Nearly $26M in 1031 Exchange

CHINO HILLS, CA-A 1031-Exchange buyer paid $25.53 million for Crossroads Entertainment Center, a 90,879-square-foot regional retail center anchored by an 18-screen Harkins Theatres complex. Located at 3060-90 Chino Ave., the 10.54-acre property was completed in early 2007 and was being sold as part of a partnership dissolution.

The center, which has direct access from the 71 Freeway and “monument” signage visible to more than 190,000 cars per day, is 98% occupied. The tenant roster by a mix of regional and national tenants including Z Pizza and Kiku Sushi as well as the Harkins theater, the only similar new multiplex in a 10-mile radius. In addition to Chino Hills, the property serves the neighboring cities of Ontario, Diamond Bar, Chino and Montclair.

The buyer was GAS Distomo Inc. of Long Beach, CA, which was represented by Mitch Rosen of Commercial Real Estate Services. Donald MacLellan, senior managing director, and Nicholas Coo, managing director, of Faris Lee Investments in Irvine, CA, represented the Los Angeles-based seller, 26 Del Sur Crossroads I LLC.

According to MacLellan, one of the deal’s key components was sourcing a 1031 Exchange buyer with the $6.55 million of equity required to complete the transaction and the willingness and ability to assume an existing $18.98 million loan. The 10-year conduit loan, which comes due in 2016, has a fixed interest rate of 6.2%. It is interest only through 2011, at which point the loan begins to amortize. MacLellan, who says the loan’s terms give the buyer with attractive cash-on-cash return, reports Faris Lee Capital, an in-house team of financing specialists, assisted extensively with the loan assumption process.

“Our sophisticated finance team worked directly with the master loan servicer and special loan servicer providing market information, underwriting support along with sale and lease comparables to ensure the deal successfully closed,” says MacLellan. “We also worked directly with the property’s leasing agents to assist in retenanting a space that became vacant during escrow with a viable long-term lease. It’s critical to be able to handle the complexities of retail deals in today’s market and execute to meet client expectations, and that is what our team accomplished with this sale.”

Coo tells GlobeSt.com Faris Lee’s extensive data base of 1031 investors enabled him and MacLellan to identify and engage four prospective buyers, including a second private investor and two syndicators. “Our staff is geared up to finding these buyers,” he says. “Though it’s a lot of work to set up the data base, once it’s in place it’s easier to find a buyer than through the standard brokerage process, which is more of a shot in the dark. We’re able to match up capital and opportunity through our data base and network.”

The center is part of a larger development that features a medical office building, a Hampton Inn and Suites, a drive-through Starbucks, Buffalo Wild Wings Bar & Grill, a newly leased Circle-K Convenience Store & Gas Station and a Tutor Time early childhood education center. Within a five-mile radius there is a population or more 379,000 people with an average household income of more than $97,000 a year.