By Jon Peterson
New York City-based Ares Management has acquired its first transaction in the San Francisco Bay Area by paying $18 million or $183 per square foot to purchase the 98,000 square foot Downtown Novato Shopping Center in Novato, according to sources that track the sale of retail properties in the Bay Area.
A company representative of Ares did not return a phone call seeking comment for this story. This institutional investor acquired the property in a partnership with Newport Beach-based Citivest Commercial Investments. Citivest declined to comment on what it paid for the property. The buyers were represented in the sale of the property by Marcus & Millichap.
[contextly_sidebar id=”7WQD1qM7lIBfdsfiuLtw5RVC6YcDRlQ5″]The seller of the property was a family trust that had owned the asset for many years. They were represented in the transaction by the Michael Cisternino, a senior vice president in the Walnut Creek office of Transwestern. “I think that the property was attractive to many capital sources for several reasons. One is that it’s located in Marin County, which has built in growth restrictions as the region doesn’t allow any new developments. Another factor is that it’s a grocery-anchored property, which makes it almost recession proof. These kinds of properties in this region don’t come up for sale very often,” said Cisternino.
The cap rate on the sale of the property was 4.2 percent, as stated by sources that were aware of the transaction. This return is based on the property’s current net operating income. Ares acquired the property for one of the investment funds that it manages.
Downtown Novato is a shopping center that was first constructed in 1966 and then renovated in 1991. It has two big anchor tenants, the grocery store Lucky Supermarket and CVS. The pharmacy tenant occupies 21,500 square feet in the property, although there is a possibility that CVS might be reducing the size of its space by around 5,000 square or so in the future.
There is a chance to add some value to the property in the future by leasing the 25 percent of the empty space in the property. Another possibility down the road is an entire re-development of the asset. This would make sense as Ares is known more of a value investor and not a buyer of core assets.
The property that was bought by Ares and Citivest in Novato was part of a two-property transaction. The other asset was the Temecula Town Center in Temecula.