New York-based real estate investment trust Brixmor Property Group has paid nearly $86 million for a shopping center in Brea, marking the largest reported retail transaction in Orange County in over a year.
The $7.8 billion-valued REIT (NYSE: BRX), which counts a nationwide portfolio of nearly 400 community and neighborhood shopping centers, this month closed on the purchase of Brea Gateway, a 182,000-square-foot, Ralphs-anchored community shopping center along Imperial Highway, near the local operations of Mercury Insurance.
The deal works out to a price around $473 per square foot for the 18-acre site. Santa Monica-based Watt Cos. was the seller, according to property records.
Other larger tenants at the center include a Cost Plus World Market, HomeGoods and Rite Aid.
The site has “substantial value creation opportunities through leasing, anchor repositioning, and operational enhancements,” the REIT said this month, when it disclosed the purchase as part of its update to investors about its fourth-quarter transaction activity.
Acquisitions for the REIT in the last quarter of 2021 totaled nearly $260 million, not counting the Brea deal that subsequently closed in January. None of the other recent buys for Brixmore were in Southern California.
Deals the REIT’s been making of late have been seeing capitalization rates in the 5% range, officials told analysts following Brixmor’s most-recent earnings call. Outdoor shopping centers that it invests in have been outperforming the larger retail sector in terms of occupancy and lease rates, it said.
Local Base
The Brea property is located “within 15 minutes of multiple Brixmor assets in the Los Angeles market and expands the company’s footprint in the market to approximately 1.9 million square feet,” the REIT said.
Other properties it owns in OC include a pair of centers in San Clemente, and one in Santa Ana, according to its latest annual report.
Those sites, the Ralphs-anchored Ocean View Plaza, the Stater Bros.-anchored Plaza by the Sea, and the Trader Joe’s-anchored Bristol Plaza, total about 330,000 square feet.
Deals Picking Up
The $85.7 million sale of Brea Gateway is the priciest reported retail deal in OC since September 2020, when San Diego-based REIT Realty Income Corp. (NYSE: O) paid $86 million for the 286,000-square-foot Fullerton Crossings site, a property along Placentia Avenue in Fullerton that counts a Home Depot and Sam’s Club. It traded hands for around $300 per square foot.
Larger-sized retail deals have been few and far between since, though local dealmaking picked up near the end of 2021 with several notable trades of open-air shopping centers.
Gateway Center, a nine-building, 79,000-square-foot retail center along Alicia Parkway in Mission Viejo, was recently snapped up by San Jose’s DJM Capital Partners for what property records indicate was about $39.5 million, or roughly $500 per square foot.
The Business Journal was first to report on that sale, in the Jan. 17 print edition.
Katella Gateway, a nearly 90,000-square-foot shopping center along Katella Avenue in Garden Grove, recently traded hands for $33.5 million, or nearly $375 per square foot, property records indicate.
The Garden Grove center is anchored by vocational school UEI College and a Gold’s Gym; it was bought by a Long Beach affiliate of Golden Star Trading, a supplier of food products including Jasmine rice, and canned fruits and vegetables.
A few miles outside OC, the Long Beach Exchange, the 26-acre outdoor shopping center that opened a few years ago next to the Long Beach Airport, sold around the end of last year.
The Business Journal earlier this month was first to report on the sale of the LBX by Newport Beach’s Burnham Ward Properties, in a deal that property records put at around $157 million.
By total price, that deal is tops among regional retail center sales since the onset of the pandemic.
At nearly $600 per square foot, it’s also a record-setter in terms of PSF price for large local retail properties in recent years.
DJM took over the Long Beach center in a venture with institutional investor PGIM.
The recent spate of sales represents “a resurgence of investor interest in retail in general and shop space in particular,” said JLL’s Gleb Lvovich, who was part of the investment sales and advisory team for the Gateway Center and Brea Gateway deals.
“People ultimately want to gather, socialize and support retailers in their community,” said Lvovich, who helped broker the Mission Viejo deal with colleagues Bryan Ley, Geoff Tranchina and Daniel Tyner.
Gateway Center is “a prime example that strong, well-located neighborhood strip centers are only getting better,” added JLL’s Ley.
Challenged Malls
Among area enclosed malls, the biggest disclosed transaction announced the past two years was made in late 2020, when homebuilder Taylor Morrison Home Corp. inked a deal to pay north of $160 million for a 43-acre portion of Westminster Mall, with plans for a major residential development.
Since that deal was struck, the mall’s owner, Columbus-based REIT Washington Prime Group, filed for bankruptcy and was taken private.
An update on the redevelopment plan for the Westminster site hasn’t been disclosed by the homebuilder or the city.
Chipotle’s Strength
Brixmor officials said late last year that among its tenant base, centers anchored by a Target, Marshalls, HomeSense, Burlington, Ross, Ulta and Five Below, as well as specialty grocers such as Whole Foods, Sprouts and Aldi, have been doing particularly well.
Among smaller-sized tenants, the REIT cited Newport Beach’s Chipotle Mexican Grill among those seeing the best activity at its centers.
