Broker: Valley Shopping Center May Sell Below 5 Percent Yield

By Jon Peterson

A Mountain View shopping center developed in 2006 that is a stone’s throw from Google Inc.’s campus may trade based on a yield of 5 percent or less.

The 133,000-square-foot Charleston Plaza, now up for sale, is fully leased to a collection of national tenants, all of which committed to their space before the center’s completion and none of whom secured rent concessions.

“Based on the fact that other deals like this have sold at mid-5 percent cap rates or lower, I would think Charleston Plaza would be in that range as well,” said Jay Gomez, a senior vice president with Colliers International in San Francisco.

Gomez is one of three brokers in Colliers’ San Francisco office listing the property. The others are senior vice presidents Kevin Van Voorhis and James Kaye. Local market experts are Dave Buchholz and John Kovaleski.

The property is fully leased and has current in-place annual net operating income of more than $4.5 million, the brokers said. Tenants include Bed Bath & Beyond, Best Buy, REI, Petsmart as well as Chipotle and Starbucks.

Both Phoenix-based Petsmart Inc. and New Jersey-based Bed Bath & Beyond Inc. have reported increases in year-over-year sales in their most recent quarters, according to public filings with the U.S. Securities and Exchange Commission. Bed Bath & Beyond’s operating profit rose from $288.9 million a year ago in the quarter ended May 28 compared to more than $313 million in the 2012 quarter ended May 26.

REI, which stands for Recreational Equipment Inc., is a consumer cooperative whose members share in its profits, according to the company. In March, it reported operating income of $116.2 million for 2011, down slightly from $116.6 million in 2010. Net income of $30.2 million was nearly the same both years.

Minnesota-based Best Buy Co. Inc. reported falling operating income and net earnings year over year at the close of its most recent quarter, May 5. A year ago, the company reported $460 million in operating income; this year, it had fallen to $262 million. Net income for the quarter was $158 million this year and $212 million in the same quarter last year.

“The leases are all staggered so no two tenants have their leases ending in the same year,” Gomez said. The first significant lease expires in 2016.

Within a three-mile radius of the property the median household income is $150,000. More than 188,000 vehicles pass the site daily. The daytime work population within a five-mile radius is 188,303.

The property is located near large Silicon Valley employers including Google, Microsoft Corp., Intuit Inc. and Symantec Corp. It serves the communities of Menlo Park, Palo Alto, Los Altos, Mountain View and portions of Sunnyvale and Cupertino.

In 2006, the property was the first new traditional community retail center to be built in the previous 15 years within a 10-mile radius.

The seller is Redwood City’s Dollinger Properties, a privately owned real estate company that holds a Silicon Valley portfolio of retail, research and development and industrial properties along with financial partners. The firm did not respond to phone calls.

“I would think that with all of the institutional capital that is looking for core properties in a prime market like the Silicon Valley, that this would be the kind of buyer to purchase the property,” Van Voorhis said.

The property is being marketed without a listing price and is expected to sell later this summer.

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