The barriers to entry in the Bay Area place those holding real estate assets here in an enviable position. A recent sale of the 95,000 square-foot building in Santa Clara located at 2435 Lafayette Street is one such example. The sale, which closed on June 24th for $25.5 million at an effective 5.33 cap rate, gave the sellers a very nice return in less than six years they had owned it.
“One of the big selling points is that it’s very difficult to find a 7.5 acre site in the region,” said Jacob Abusharkh, managing director and co-founder of SVN The Kase Group, which worked with the seller on the transaction. “There’s nowhere for Home Depot to relocate to if they wanted, and big box retail locations are very hard to get approved.”
Abusharkh heads up the company’s office in San Francisco. He confirmed the sales price and the motivation of Miracle Home Investment LLC, which purchased the asset in 2010, near the bottom of the cycle, for $15.5 million. One of Miracle’s reasons to sell was driven by where the market stands today and an opportunity to realize gains made since the purchase.
Home Depot has an existing lease on the building, which lasts another 3.5 years. The home building retailer expressed an interest in renewing the lease, but Mircale did not extend it prior to the sale. The new buyer, Wesco Properties, will have an opportunity to do that as well as investigate alternative uses for the location, if it choses. According to Abusharkh, the location is surrounded by industrial buildings, and may provide an opportunity for Wesco to explore that option. The buyer was represented by Beitler Commercial Realty Services. The efforts were led by Tony Dorn.
“You have a great tenant, but that’s almost secondary to the real estate, given the size and the location of the asset,” said Abusharkh. And even though one of the challenges in the transaction was the short term lease, the opportunity created by the intricacies of the Bay Area market make this transaction highly tenable.
