July 9, 2012 | By: Carrie Rossenfeld
SANTA ANA, CA – An Orange County-based private family partnership has purchased a 58,450square-foot Burlington Coat Factory here from a limited liability corporation for $12.1 million, or $207 per square foot. The site’s average daily traffic count exceeds 40,000 cars per day and is home to numerous national and regional tenants, including Walgreen’s, IHOP, Target, Trader Joe’s, In-N-Out Burger, Burger King, Taco Bell, Starbucks, and El Super.
Marcus & Millichap’s VP investments Paul Bitonti, from the rm’s Newport Beach, CA, once, represented the seller, while Mark Thiel, a senior associate in the firm’s San Diego once, represented the buyer, who paid all cash for the asset. “The property was marketed to a wide range of potential buyers, including institutions, REITs and private investors, both foreign and domestic,” Bitonti said in a prepared statement. “Investors were attracted to the excellent location and submitted multiple offers.”
He added that the property is a high-identity building with 385 lineal feet of frontage along the Bristol St. corridor.
“This absolute net-leased investment will provide the new owner with a rental increase of 2.7% in November 2013,” added Thiel. “There are also four five-year options to extend with 50-centper-square-foot rent increases every five years.”
The property, located at 2840 South Bristol St. at the northwest corner of Bristol and Segerstrom Ave., was completed in 2000 on 5.3 acres. The location is 1 mile north of South Coast Plaza, the largest shopping mall in California.
Bitonti tells GlobeSt.com that that there’s a lot of equity capital still out there, which is migrating from the corporate net-lease sector into the multi-tenant retail sector. “The OC is seeing a lot of buyers step back into the multi-tenant category of strip centers and shopping centers. Across the board, the fundamentals look strong and positive for all of retail in Orange County.”
Bitonti adds that Orange County retail vacancies have diminished somewhat—down to about 6%, which has tightened up in the past 24 months or so. “Retail is very much back in demand for investors. The problem is not a lot of inventory, and a lot of investors have had to readjust their expectations of what they could buy.”
With this particular transaction, Bitonti tells GlobeSt.com that the buyer was ultimately the right one, paying all cash and getting an 8.5% cap rate. The buyer was also not intimidated by the shorter lease terms many of today’s tenants are demanding.
GlobeSt.com reported in June that even though US employers added just 69,000 jobs in May (the weakest monthly total recorded since May 2011), the rise in employment, earnings and hours was enough to bolster consumer confidence, which clearly catalyzed retail sales performance, according to M&M’s recently released Research Brief blog written by Hessam Nadji, the rm’s managing director of research services. Sales receipts for department stores strengthened due to new strategies that included downsized formats, renovations, selective closings and repositioning, and property-sector fundamentals exhibited improvement nationally as well.
At that time, Nadji told GlobeSt.com that the retail sector continues to face challenges, but the worst is clearly behind us. “Retail sales have exceeded pre-recession levels by a wide margin, and while much of the gains have been at opposite ends of the consumer spectrum—luxury and discount retail—the gains have gone a long way toward stabilizing the performance of retailers.”