American Realty Buys North San Jose Retail, Residential Revolution

By Jon Peterson

Glendale, Calif., -based American Realty Advisors has paid $46.55 million for the @First shopping center at Highway 237 and 4180 N. First St., in San Jose’s rapidly evolving North First Street corridor.

The real estate investment manager and consultant to institutional buyers acquired the 84,000 square feet with a rent roll of long-term leases and predominantly national tenants.

The acquisition includes ground leases with a CVS/pharmacy store, a Fresh & Easy Neighborhood Market and a Chick-fil-A restaurant, said Michael Maffia, senior managing director for Newmark Knight Frank Cornish & Carey Commercial in its San Francisco office. Maffia represented the seller, Cupertino-based Hunter Storm Properties.

“This is a core asset where we have seen values return to 2006-2007 levels, which is mainly attributable to more buyers, fewer sellers and greater availability of favorable financing. The asset traded at a competitive yield and reflects today’s competitive capital-market environment,” Maffia said.

The property was developed and completed by Hunter Storm in the fourth quarter of last year and is 93 percent leased. It sits on 10.3 acres of a 39-acre site once envisioned by handheld computer maker Palm Inc. as a corporate campus. In September 2006, Palm reached a deal to sell the land for $70 million to Hunter Storm.

Hunter Storm sold roughly half the site to Target Brands Inc. for a store and to Brocade Communications Systems Inc. for a 561,000 square-foot headquarters. There is also a 160-room Hyatt house hotel, where rooms on an upcoming Thursday night cost from $189 to $269.

The CVS/pharmacy includes a drive-through window in a not-quite 15,000 square-foot pad building. The lease was one of several that Hunter Storm signed throughout 2011, including a 5,000 square-foot space that was leased to Fidelity Brokerage Services LLC last summer and a not-quite 5,000 square-foot restaurant pad leased to Pasta Pomodoro. Other restaurants include Panera Bread, Panda Express Gourmet Chinese Food, Souplantation & Sweet Tomatoes, Five Guys Burgers and Fries, Chipotle Mexican Grill and Premier Pizza. Chase Bank is also a tenant.

After the dot-com bust, the city of San Jose reconceived the planning for a 5,000-acre area along North First Street to introduce more than 30,000 new high-density housing units and 1.7 million square feet of retail to a traditionally industrial region that was suffering. It also approved more than 26 million square feet of offices and research and development space.

Apartment construction, after stalling in the bust, has resumed. The Irvine Co. Apartment Communities, based in Newport Beach, has bet big on the area. It is building 1,750 units at its Crescent Village (pictured) development nearby and already owns the 62-acre North Park Apartments, which has six communities, seven fitness centers and thousands of additional homes.

American Realty’s main core investment entity is the open-ended American Core Realty Fund, which had a gross asset value of $2.5 billion on Nov. 30, according to a report issued last month by the Orange County Employees Retirement System. The cash yield for fund assets last year was 6 percent. The occupancy on the entire portfolio was 85 percent, and the leverage ratio was 21 percent.

American Realty as a company had total assets under management of $4.5 billion through the end of 2011. Most of its portfolio is made up of office, industrial, retail and apartment properties. American Realty did not respond to calls seeking comment.

West Coast Commercial Real Estate News