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SAN FRANCISCO-There is very little retail changing hands these days, and when something does sell it’s almost always a single-tenant, net-lease type deal like a Home Depot, Best Buy or Walgreens. Get beyond that retail asset type, however, and the gap between buyer and seller sometimes feels more like the Grand Canyon.

So when a grocery-anchored, multi-tenant shopping center does change hands –even when it’s a small one–it attracts attention. As was the case with Glen Cove Shopping Center, a 66,000 square-foot development at Glen Cove Road and Interstate 780 in the North Bay community of Vallejo. Dan Wald’s team at Terranomics Retail Services had the disposition assignment.”I did a $115-million deal in October and received two calls about it,” Wald tells GlobeSt.com. “I’ve had six calls on this one.”

Everyone wants to know the details because everyone is trying to mark the market. Sellers are concerned about selling during a market low; buyers are concerned we haven’t hit the bottom. With several transactions on pace to close in the coming months, an answer might be emerging as to where buyers’ and sellers’ expectations will match up.Kimco Realty Corp. of New York and co-investor Prudential Real Estate Investors sold Glen Cove to Yacoel Properties of Newport Beach, CA. It marks the first grocery-anchored center to come to market and change hands in Northern California in the first half of 2009, a period during which 15 or 20 centers typically would have traded.

The purchase price was $12.9 million or $195 per square foot. The cap rate, based on current NOI, is 7.71%. The initial asking price was $13.25 million. Twenty-two investors submitted offers.

Glen Cove is anchored by the region’s dominant grocer, Safeway, and it sits at the entrance to the Glen Cove master planned community. “You can’t say they have a monopoly but it’s a very strategic location,” Wald says. “To go in and out of Glen Cove you have to pass by this center; you could drive elsewhere to shop but why would you?”

From that standpoint some might conclude it doesn’t mark the market because it’s not a typical center. And the cap rate might appear to be a little low for buyers’ tastes in an unstable market.

What got this deal to the finish line, however, was more than quality or cap rate; it was cash-on-cash return. Kimco had a $10-million assumable loan with an interest rate that was below market, creating a very attractive leverage yield–a cash-on-cash return in the double digits. That’s the real story, that’s the real market, Wald says.

While one deal does not a trend make, Wald has the disposition assignment for several centers right now, some still being marketed and some under contract. So he believes he has a pretty good feel of how things are shaping up.

“The market is demanding a cash yield at or above 10%, across all quality,” Wald says.

Wald says there will be four or five more comps in the next several months that will back that up. For institutions, which conduct quarterly appraisals and write their assets up or down accordingly, it’s both a blessing and a curse, for them and the market.

“Once those comps are in it will cause appraised values to decline further and those decreases in value will have to be recognized [by the institutions],” Wald says. “And once the full write downs are taken, perhaps they can afford to sell them.”

The sale is one of four North Bay retail centers Kimco has been actively marketing and among 50 “noncore” properties nationwide that it is looking to sell. The other North Bay assets are Novato Fair Shopping Center in Novato, Park Place in Vallejo and Ukiah Crossroads in Ukiah. Wald has the listings.

“I’m hearing that institutions have been writing down the value [of their real estate assets] every quarter by about 10%,” Wald says. “A couple of more quarters and we’re there. When that happens, we will discover that core real estate in 2009 is selling at or above an 8% cap rate.”

Novato Fair, a 133,000-square-foot development anchored by Safeway, Rite Aid and Big Lots, also has an assumable loan, has been attracting plenty of offers, and has an identified buyer, Wald says. Ukiah Crossroads, a 106,000-square-foot grocery-anchored center, is already under contract.

“Despite complaints about a lack of equity, there’s plenty of money around when the yield matches buyers’ expectations,” Wald says.

Terranomics is the retail division of NAI/BT Commercial. Wald’s marketing team for Glen Cove included Dave Nord, Steve Holm, Mark Koenig and John Schaefer.

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