January 13, 2015

Pricing That Has Little To Do With Starbucks?

Take a Class-A strip center in an affluent San Diego suburb. Add a Starbucks, and wallah! You have a sub-6% cap investment. But as one top retail investment broker tells Bisnow, Starbucks isn't necessarily the key ingredient for low caps.

Faris Lee's Nick Coo says Starbucks is a high-quality brand to bring into any retail center, but that the coffee shop doesn't play into underwriting that much. Nick just helped sell Breeze Hill Commercial Center, a nearly 18k SF shopping center for a little more than $10M to LA-based Gershman Properties. That translated into a 5.35% cap, healthy by any standards. 

Nick says the real driver for valuation in 2015 is the perfect storm: a lack of supply and a tsunami of capital (both foreign and domestic) whetted from both continued low interest rates and the safety the US provides (having a Starbucks in a center certainly doesn't hurt). Aside from Starbucks, Breeze Hill at Hacienda and Melrose drives (here) also is home to FedEx, Jersey Mike's and Rubio's, as well as other regional tenants. The center is walking distance from the San Diego Superior Courthouse, which helps feed the customer base. 

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Rexford Industrial CEO Sees This Investment 15% Below Rental Market

Rexford Industrial's co-CEO Howard Schwimmer (with co-CEO Michael Frankel) sees rents at Kearney Mesa Business Park about 15% off peak market rents and rising quickly. And that's the investment key for this value-add buy, he says. Rexford purchased the 13-building, 188k SF industrial portfolio off Convoy Court recently for $32.3M, or $172/SF in an off-market transaction. The park is 98% occupied with little immediate rollover. But when those leases come due, Howard sees a rent rate boost. Rexford is no stranger to San Diego's industrial market, with about 1.4M SF in its portfolio in light industrial and flex space. After having spent $400M this past year, Howard says his firm is still shopping – including for more possible San Diego properties. 

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W Hotel Gets Refi Package

The iconic pie wedge just got an infusion of new capital. The owners of the W Hotel in Downtown San Diego got a $31.2M senior refi loan from PCCP. The 258-room hotel, near the San Diego Convention Center and the Gaslamp district, was developed in 2002, and features the Kelvin restaurant, The Rooftop Bar and 16k SF of meeting space. Rockpoint Group and SCS Advisors purchased the hotel in 2011 and have put the building through a number of capital improvements, including renovated guest rooms. The refi gives the owners more wiggle room to "create additional value," says PCCP's Mike Johnson. 

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Zagat Reveals Most Anticipated Restaurants
of 2015

Sovereign. Oceana Coastal Kitchen. The Backyard. Cannonball. These are just a few of the most anticipated 2015 restaurant openings that Zagat previews this week. The top eatery reporter focuses on a lot of the ethnic restaurants coming to the area, such as Rakiraki Little Italy, Chef Junya Watanabe's second location that will offer dishes like ramen burgers and Japenese curry, and Café Gratitude, the LA-based vegan eatery that's expanding to San Diego (with its dish here that kinda looks like parrot crackers to us), Zagat reports.  

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Denny's Sees San Diego Among Top US Markets

How important is San Diego to fast casual eatery Denny's? Important enough to be considered one of the chain's top 10 markets in the US. We got our hands on a Denny's 2015 investor presentation that lists San Diego eighth on the list of its 10 largest markets, with 39 restaurants, including this one at Pacific Beach. LA tops the chain's rankings with 188 stores. 

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