By Jon Peterson
The 300,000 plus square foot Village Oaks shopping center located at the corner of Highway 85 and Cottle Road in San Jose South will fetch a sales price of at least $100 million, according to sources who are aware that the property is now on the market for sale.
“We anticipate very strong pricing for several reasons. Large retail centers, particularly high quality new construction, rarely trade in the Bay Area. The combination Safeway, Target shadow [anchor], and perhaps the most dynamic quick serve food line-up out there fits very well into a growing and already strong trade area that is currently underserved for retail. There also is a great deal of institutional capital that is looking for core assets,” says Will Connors, a managing director with JLL. He and Erik Doyle, another managing director with JLL, are representing the sellers of the property.
The shopping center is currently owned in a joint venture with Cupertino-based Hunter Properties and Los Angeles-based PCCP.
The sale of the property is projected to produce a strong cap rate and IRR. “I would think that the trade of the asset would bring a 6 percent IRR and cap rate +/- 5 percent,” said Connors.
Whoever the buyer is will be acquiring 175,000 square feet of retail space. The Target store will act as a shadow anchor as this tenant owns its own space. Target opened its location in Village Oaks earlier this year. The grocery store anchor in this property is Safeway, which has signed a 20-year lease. This tenant will be open for business in December.
There is approximately 35,000 square feet of shop space in Village Oaks. The quick service food operations in the property include the likes of Five Guys, Chipotle and Panera Bread.
The shopping center is located within the Blossom Hill corridor of San Jose. “I think that the demographics of the property are very strong. Within one-mile of the property the average household income is $95,514. There is a daytime population of 22,402 in the same distance,” says James Chung, a senior managing director/principal with Terranomics in San Jose. He is involved in the leasing of the center.
The area around the property has very strong economic growth potential. There are 3,000 businesses within two miles of the property. There is also strong housing growth in the region with a total plan for 2,900 housing units and around 2,000 are under construction in the Hitachi transit area.