In a deal that has presented multiple complexities, Faris Lee is nearing completion of the sale of Plaza El Paseo at Rancho Santa Margarita Town Center in South Orange County. The pride-of-ownership asset totals approximately 107,000 square feet of buildings on 10.56 acres of land, includes Bed, Bath & Beyond, Wood Ranch BBQ and BevMo as anchors, and is adjacent to Kohl’s and the Rancho Santa Margarita City Offices. Centrally located within the one million-square-foot Santa Margarita Town Center, the property boasts best-in-class construction, high-performing retail and prime placement in the heart of one of Orange County’s most affluent communities.
There were serious challenges to completing a sale, particularly from a financing perspective. The property is currently encumbered by a $32 million conduit loan locked in with an above-market interest rate, eliminating a large number of potential institutional and non-institutional buyers. Additionally, because of the required assumption of the existing loan, the down payment requirement for the buyer was significantly more equity than would typically be required by similar assets open to new financing.
In order to overcome this challenge, Faris Lee created a comprehensive business plan around Plaza El Paseo. The plan provided a strategic vision that focused on creating value through upgrading tenancy to appeal to the area’s higher end demographic as current leases expired. Faris Lee advised on the hiring of a new leasing team to market to potential new tenants, and also advised on the hiring of a new property management group to further implement the business plan. These efforts have helped the buyer maintain tremendous leasing momentum during the escrow period, proving the viability of the business plan.
While many saw the likely buyer for the property as institutional, Faris Lee believed it could appeal most to the right private buyer and marketed heavily to its proprietary database of high net worth individuals, family offices and exchange buyers. The campaign garnered significant interest and a private buyer was identified and qualified. He saw the new vision for the center, and was willing to assume the loan. The next challenge to overcome was the fact that the buyer’s equity was tied up in multiple multifamily investments throughout Southern California. Working closely with both buyer and seller, Faris Lee created a complex, yet effective escrow structure that enabled the buyer to secure the necessary equity to close by selling several apartment assets during escrow. The apartment proceeds were then used to effectuate a 1031 exchange. The transaction is scheduled to close in early September.
Bringing a deal of this size and complexity to fruition requires the highest degree of cooperation, creativity and communication, and Faris Lee has built a solid reputation for its ability to successfully close complicated deals that other firms could not. This particularly complex transaction was taken on in a creatively thoughtful, yet methodical manner, with an unwavering commitment to solving complexities and maximizing value. The firm’s retail expertise and commitment to going above and beyond to deliver for clients has proven that a culture of collaboration creates ideal results.