Stockbridge Looks East for Latest Buy

Pinole Valley Shopping Center The Registry real estate

By Jon Peterson

San Francisco-based Stockbridge Capital Group has paid $38 million, or $578 a square foot, to acquire the Trader Joe’s anchored Pinole Valley Shopping Center at 2702 Pinole Valley Road in Pinole.

[contextly_sidebar id=”1f4344a2472e56e1548e605149eb1717″]The investor underwrote the purchase to achieve a 6.7 percent unleveraged internal rate of return over a 10-year period, according to public records from the Santa Barbara County Employees’ Retirement System. The 65,800-square-foot property in the north East Bay city was acquired for cash.

“We are not seeing a lot of shopping centers of this caliber on the market right now, certainly not with the kind of freeway access and visibility this one has,” Garrick Brown, director of research for Cassidy Turley Commercial Real Estate Services, said in an email response to a reporter’s query. “Many owners are holding onto the high-quality properties.”

What have sold are lesser-quality centers where buyers hope to make upgrades and to do redevelopment, Brown said. “These transactions hinge on the ability to acquire the property at a price low enough to still be able to sink a fair amount of capital into upgrades and still make everything pencil at the end of the day,” he said.

The 1959 center is on the southwest corner of Interstate 80 and Pinole Valley Road. It underwent an $18 million renovation from 2007 to 2009. Besides Trader Joe’s, the shopping center’s main tenants are Walgreens, Peet’s Coffee & Tea, Chipotle and Jamba Juice. The average per capita income within a one-mile radius of the property is $30,927, and the population within a one-mile radius is 12,040, according to Cassidy Turley. The center was 92 percent occupied when the deal was completed.

Stockbridge did not respond to phone calls or e-mails.

Stockbridge acquired the Pinole center for its open-ended commingled fund, the Stockbridge Smart Markets Fund, which has an investment strategy to acquire low-risk, or “core,” properties. The fund’s structure allows the manager to accept new capital at any time. According to the Santa Barbara County documents, the fund had a gross real estate value of $355.6 million at the end of March. The pension fund, which contributed $10 million in March 2012 and again in November 2012, has placed a value of $21.9 million on its investment.

Stockbridge plans to buy a mix of office, industrial, retail, apartments and mixed-use properties nationally for the Smart Markets Fund, focusing on small and medium-sized assets. At present, 37 percent of the commingled fund’s existing real estate portfolio is located in California, Oregon and the state of Washington.

Map courtesy of Google Maps

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