The Sobrato Organization — which rarely sells any of its vast real estate assets — has sold the first and only significant retail center it ever built from the ground up.
North Park Plaza, a 90,000-square-foot retail center at Oakland Road and Murphy Avenue in San Jose, sold last month to Retail Opportunity Investments Corp., the San Diego-based shopping center REIT. The price was not disclosed, but two sources with knowledge of the transaction said it traded for about $27 million.
Stuart Tanz, the CEO of ROIC, told me in a phone call today that a number of things attracted him to the center. The project, built in the mid-90s, is anchored by the Asian-themed SF Supermarket and includes national tenants such asStarbucks, McDonald’s, Panda Express,Jamba Juice, Panera Bread, Togo’s and FedEx Office.
“What attracted us to this asset was really the market, the quality and the location of the asset, and it’s got a very strong tenant mix,” Tanz said.
ROIC, which counts 55 shopping centers totaling about 5.5 million square feet, has been an active acquirer of properties in the Bay Area recently. It owns nine centers here, totaling about 800,000 square feet. Its holdings include the 125,000-square-foot, Nob Hill Foods-anchored Santa Teresa center at 7076 Santa Teresa Blvd. in San Jose.
The first-year initial yield, or cap rate, on this transaction is in the “low-6 percent” range, Tanz said. That is not a bad return given the compression in rates that has been an ongoing trend in Bay Area retail investments.
Tanz said the center doesn’t need much capital investment but that there would be some money spent on deferred maintenance.
“There’s some very minor things we’ll do,” he said.
With the sale, Sobrato now has one remaining retail project of significance: Cupertino’s Homestead Square, which the developer bought in 2010. Sobrato is finishing up a major renovation to the project, which has brought in the city’s first-ever Safeway.
Sobrato does not often sell its properties, though the conventional wisdom that the family-owned firm “never sells” is not strictly true. For instance, Sobrato in 2012 sold the 508-unit Willow Lake Apartments (one of its first apartment developments) to Essex Property Trust for $148 million.
Willow Lake is across the street from North Park Plaza. In fact, Sobrato built North Park Plaza partly to make the apartment community more attractive, so selling the retail complex might make sense following the sale of that asset.
“I think it’s just taking advantage of something they’ve owned a long time and moving the money on to do something else with it,” said veteran retail broker David Taxin with Meacham Oppenheimer CORFAC International, who was not involved in the deal. “They’re realizing where the market is right now. The market right now is so hot for investment properties, and even the older product is selling pretty easily.”
A Sobrato representative was not immediately available for comment.
“There are very few retail centers that trade, and the fact that it was developed by Sobrato, people know that they build really good product,” said Greg Cioth, managing director of the San Jose office of Eastdil Secured. He worked on the transaction with Eastdil’s Nate Jones. “People understand that’s the product that will stand the test of time.”
ROIC is actively looking for more deals in the region, Tanz said.
“Our pipeline continues to be very strong in terms of looking at external growth,” he said. “The Bay Area specifically is a very tight market. And there’s not a lot of supply in the market today.”