Part of Puente Hills Center Commands $44M

CITY OF INDUSTRY, CA-Los Angeles-based JSL Plaza at Puente Hills has acquired a 178,000-sf portion of the Plaza at Puente Hills retail center for $44 million as part of a marketing strategy of breaking up the retail center into parcels to maximize return. President Richard Walter of Irvine-based Faris Lee Investments, which engineered the deal, says that seller SCI Real Estate Investments of Los Angeles realized a strong return on its investment after a relatively short hold while the buyer acquired a property for a price below replacement cost but with upside in bringing rents to market.

Walter and Donald MacLellan, a Faris Lee managing director, represented the seller, with Faris Lee director Patrick Kent representing the buyer. The portion of the center that sold is at 17877–18271 Gale Ave. and sits on a parcel of 13.65 acres.

Walter notes that the property generated multiple offers and closed at a 6.3% cap rate with the space 94% occupied by national credit tenants such as Office Depot, Smart & Final, Sam Ash, Shoe City and others at the close of escrow. The Faris Lee president calls the deal “a prime example of how a breakup strategy can be profitable even after a re-sale.”

Walter explains that in late 2005 SCI Real Estate Investments bought a three-parcel property at the Plaza at Puente Hills from a joint venture of New York-based Coventry Real Estate Advisors, Ohio-based Developers Diversified Realty and New Jersey-based Prudential Real Estate Investors. The portion that SCI bought was in turn a part of a masterplanned eight-parcel breakup strategy crafted by Faris Lee at the time.

Walter says that the key to success in a breakup approach is “to structure the original breakup strategy properly, with good operating association documentation.” He says that Faris Lee aggressively marketed the center to private and institutional buyers with a particular focus on local retail property owners, with the winning bid coming from a firm that “is an experienced investor that owns other property in the trade area.”

MacLellan adds that part of the appeal of the Plaza at Puente Hills to investors was the center’s location in a trade area with high barriers to entry with no available large sites for development. Built in 1988, the entire Plaza at Puente Hills totals 477,000 sf and is situated on 17.7 acres. Other major tenants at the center that were not included in the sale are Home Depot, Toys “R” Us and Sam’s Club.

The property is located along Gale Avenue and is visible on the Pomona Freeway (State Highway 60) with traffic counts of 218,000 cars per day. The population within a five-mile radius of the center is 374,841, with an average household annual income of more than $70,000.