A new Anaheim office built for CKE Restaurants Inc. has traded hands in one of the larger sales in North County of late.
Corona-based investor and developer Watermarke Properties Inc. bought the fully leased office, on the campus of Carpinteria-based CKE Restaurants’ Carl’s Jr.
The 90,000-square-foot office, at 1325 N. Anaheim Blvd., traded hands for $20 million, or about $221 per square foot.
That puts the capitalization rate—the expected initial return from rents—at about 7.5%, according to brokers with the Newport Beach office of CB Richard Ellis Group Inc., which represented the buyer and seller in the deal.
The three-story building is one of the larger office projects in years to break ground in the Anaheim area, where the office market totals about 7.4 million square feet.
Construction of the CKE building, which runs alongside the Riverside (91) Freeway and Harbor Boulevard, was completed in late 2008. It is on a 17-acre plot of land that’s been home to CKE’s Carl’s Jr. operations for the past 30 years.
The building was sold by developer Karcher General Partners LLC, which is run by the family of the fast food company’s late founder, Carl Karcher.
CKE, which moved its corporate headquarters in 2002 from Anaheim to the Santa Barbara area, had leased the building from the Karcher family.
The company pays about $1.9 million annually, which puts monthly rents close to $1.80 per square foot.
Rents are set to increase about 5% every two years during the 15-year lease.
The fast food company, which also runs the Hardee’s, Green Burrito and La Salsa chains, has the option to extend the lease for two additional five-year terms.
It was Karcher General Partners’ intention to sell after the office was built, according to CB Richard Ellis’ Pat Scruggs.
Stable Tenant
Watermarke was attracted to the office due to its good cash flow and stable tenant, according to Peter DiLello, who heads up acquisitions for the investor.
CKE “isn’t going away for the foreseeable future,” DiLello said.
The company closed on the deal in 15 days and paid cash for the property, according to DiLello.
It’s the second major Orange County acquisition in the past year for Watermarke, which has been looking to diversify its investments.
In June, Watermarke paid $62.3 million for the Saddleback Business Park, a 388,224-square-foot industrial complex in Laguna Hills. That was the biggest industrial sale in the county in 2009.
The Anaheim building is the first office building Watermarke has bought here.
Until last year, the company—which was born out of now defunct Santa Rosa Developers Ltd., a homebuilder also based in Corona—had focused on apartment deals.
The sale is a rarity of late for OC’s office market, which has been dominated by distressed asset sales, bank-driven sales and a handful of bankruptcies.
Stable, well-located buildings still are getting strong interest from investors, according to CB Richard Ellis’ Gary Stache, who worked on the deal along with Scruggs, Anthony DeLorenso, John Read and Mark Friend.
The Karcher property wasn’t distressed, but it likely didn’t get the price the family expected when it first listed it for sale in early 2009.
The building counts a replacement cost of about $30.3 million, according to CB Richard Ellis.
Land, construction and tenant improvement costs reportedly ended up at about $23.8 million.
