Carthay-based Reliable Properties has purchased a roughly 137,000-square-foot retail center near downtown known as Washington Plaza for $44.8 million.
The property, at 408-530 E. Washington Blvd., was sold by Huntington Beach-based Eagles Nest Property.
Washington Plaza, which was 98% leased at the time of the sale, is anchored by 99 Cents Only and Rite Aid. Other tenants at the center include Davita Dialysis, Ace Cash Express, Dunkin’ Donuts, Baskin Robbins, Waba Grill, El Pollo Loco, T-Mobile, Panda Express and Boost Mobile.
Marcus & Millichap’s Orbel Ovaness and Ara Rostamian represented the buyer and seller in the transaction.
“This property traded for the second time in history,” Ovaness said. “It was owned by a family office … since the early ‘80s and it encompasses an entire city block.”
And despite the Covid-19 pandemic, the center has continued to do well.
“Historically this center has been occupied at 98%, and even during Covid they sustained one small vacancy and all the tenants paid and stayed in operation,” Ovaness said.
The buyer, he said, viewed Washington Plaza as a great long-term hold.
“It has so many different avenues of creating value,” Ovaness said. “You have the value-add component through the existing shopping center and their leases and you have an incredible redevelopment opportunity here.”
Ovaness said roughly 1,000 multifamily units could be built on the site, which is near public transit and sits on 5.6 acres.
The buyer “looked at it as a trophy, generational investment from the low in place rents with an existing tenancy that is there. They saw the opportunity to increase rents over time and in the next 15 or 20 years consider redeveloping this site into a mega-complex with a retail and residential component,” according to Ovaness.
The seller, Ovaness added, is looking to do a 1031 exchange with the money from the sale. In a 1031 exchange, sellers avoid paying capital gains taxes by reinvesting sale proceeds in a specific time frame, or vice versa in a reverse exchange.
“The seller had reaped the rewards from their bases and wanted to simplify their lives and go into a less management-intensive replacement property,” Ovaness said.
The seller, who Marcus & Millichap is continuing to represent, is looking at trading into multiple, single-tenant, net-leased assets throughout the country. Ovaness said these properties would allow the seller to “retire with a steady flow of income coming in.”
“Single-tenant assets across the board are some of the hottest-ticket items in the retail sector,” he said, especially when leased on an absolute triple net basis with a long-term lease in place. “It simplifies life and secures their equity … with zero management involvement.”
In a true triple net lease, the tenant is responsible for everything from maintenance to property taxes. Ovaness said he was seeing other investors interested in exchanging into low-management, heavy triple net leased properties as well.