Equity One Buys San Carlos Marketplace for $97MM at 5 Cap

Equity One San Carlos Marketplace San Carlos Sacramento Fulcrum Bay Area Pleasanton Plaza Pleasanton REIT Serramonte Center Daly City

By Jon Peterson

New York City-based Equity One has acquired the 153,510 square foot San Carlos Marketplace shopping center in San Carlos for $97 million, as stated by the real estate investment trust for its 2016 third quarter earnings report.

This property was acquired from the developer of the property, Sacramento-based Fulcrum.

[contextly_sidebar id=”D7Ir2AImTR1qouBjdM6CIJqlQvlJp900″]The cap rate on this transaction was five percent, as stated by Equity One during its third quarter earning conference call. This return is based on the property’s current net operating income. The investor paid $3.4 million for the prepayment penalty on the existing mortgage loan encumbering the property that was not assumed in the acquisition. The property is 100 percent leased and anchored by TJMaxx/HomeGoods, Best Buy, PetSmart and Bassett Furniture. In connection with this transaction, Equity One is drawing the remaining $75 million under its $300 million delayed draw term loan facility.

The shopping center was first developed in 2007. It has always been 100 percent lease since it opened.

The new owner is taking a long-term view on the property. Equity One stated in the earning conference call that all of the current leases in the shopping center will be expiring over the next 16 years. This will give the buyer a chance for a re-development of the property going forward.

Equity One has already made a couple of investments in the Bay Area and knows the region well. In November 2013 it purchased the 163,469 square foot Pleasanton Plaza shopping center in Pleasanton located at 5500-5548 Stoneridge Mall Road. The publicly traded REIT acquired the property with a combination of equity and debt. At the time the buyer assumed a $20 million mortgage that matured in June 2015. The shopping center was 96 percent occupied at the time of the acquisition. The major anchors in the property are a 67,000 square foot JC Penney Home Store, 24,000 square foot OfficeMax and an 18,000 square foot Cost Plus World Market.

More recently, the company announced in February of 2015 that it is planning a redevelopment of the Serramonte Center retail project in Daly City that is likely to cost between $80 million and $100 million, according to the company’s 2014 fourth quarter results conference call. The redevelopment plan called for a significant amount of new space to be added to the property. “Our plan is to redevelop the mall and develop the perimeter land for a net additional 200,000 square feet. This would represent a 20 percent increase in the property size. A successful completion of the redevelopment would likely increase the full property net operating income by 40 percent,” said David Lukes, chief executive officer for Equity One during the conference call at the time.

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