Retail Property Appreciates 25% in 3 Years

BALDWIN PARK, CA—A 24,262-square-foot retail property has appreciated 25% in the three years due to the improving market. Gershman Properties purchased the 13-tenant site three years ago for $9.7 million, and has sold the property to Baldwin Park Plaza 11 for $12.7 million.

“This property was one of the most in demand properties in terms of total inquiries of all of the properties that we have listed this year,” Rick Chichester, president and CEO of Faris Lee Investments, tells Chichester represented the seller in the transaction along with his Faris Lee Investments colleagues Matt Mousavi and Tom ChichesterNewmark Grubb Knight Frank represented the buyer in the transaction.

The seller’s team received north of 140 inquiries on the property. In the end, they received six total offers, and chose Baldwin Park Plaza 11 because they were completing a 1031 exchangethat perfectly aligned with the purchase. “It really was an ideal situation for both the buyer and the seller. The buyer is a very sophisticated well-known real estate investor that knew the asset extremely well,” says Chichester. “In terms of the deal structure, the buyer was in a 1031 exchange and the terms matched up ideally with the ownership’s structure on debt and equity. The seller want to assume the existing debt because it matched their exchange debt, and the equity they brought to the transaction also matched their exchange equity requirement. It was almost a perfectly aligned transaction. We have experienced this before, but not often. To get the debt and equity structure on both the buyer and the seller sides to match up is rare.”

Chichester and his team counseled the seller to sell the property based on the market conditions and the strength of the real estate. They decided to take the property to the market unpriced. “We originally told them a price that was lower than the price we were able to achieve and that is because we included the fact that we thought it would be unlikely that we would find someone willing to assume the debt. The reality is that the expectations for the seller were far exceeded.” he explains. The closing cap rate was 5.9%.

Located at 14510 Baldwin Park Towne Center in Baldwin Hills, CA, the retail property sits on 1.12 acres and is 100% leased to 13 tenants, including VerizonAT&TGamestop and Fantastic Sams. “This is an extremely dense infill Los Angeles location. It is right off the 10 Freeway and you can see the property from the 10 Freeway, so it has exceptional identity,” says Chichester. “The location, the proximity to the freeway and the fact that it is Los Angeles creates a very compelling investment opportunity.” Some of these leases expire in the near future, but Chichester explains that the property has a good historical occupancy, and tenants are likely to remain at the property. The property is part of the larger Baldwin Park Towne Center, a larger regional retail development that is anchored by Home Depot along with other national tenants that include McDonald’sDenny’sStarbucks and Marriott Courtyard Hotel.

“The commercial real estate investment market is very robust now, and I think it bodes well too for the strength of the Southern California market,” says Chichester, who is an expert on the retail market and recently lent his expertise at the annual ICSC Western Division Conference. “In terms of retail, I think this shows extremely well in what values you can achieve for well-located and well-positioned retail properties, and the level of stability it can bring to an investor.”


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