LOS ANGELES—Hong Kong-based investor LT Global has purchased the South Hills Plaza shopping center from an unnamed Los Angeles partnership for $20.7 million at a 6.8% cap rate. Sitting on 9.4 acres, the 120,598-square-foot property is anchored by a Marukai Market and 24 Hour Fitness.
“Timing was necessitated by the partnership's desire for liquidity. The market is strong and improving, and the partnership felt this was an optimal time to sell,” CBRE's Phil Voorhees tells GlobeSt.com. Voorhees represented the seller and the buyer in the transaction along with his CBRE colleagues Jimmy Slusher, Megan Read, Matt Burson, Brad Rable and John Read.
The sale generated exceptional interest from institutional investors and private national investors, and received a total of 23 offers after the brokerage team distributed nearly 400 marketing packages. LT Global was the only publicly traded bidder. “The buyer is a sophisticated, publicly-traded developer, owner and operator based in Hong Kong,” Voorhees says. “South Hills Plaza provided an excellent opportunity to enjoy strong current cash flow with immediate upside potential through leasing. Also, as all pads at the property were owned, the prospect of future vertical or higher density development at South Hills Plaza appealed to the buyer. This acquisition made sense at closing and will be a solid US cornerstone investment for the buyer.”
The property had a CMBS loan in place, and was marketed with the ability for the buyer to assume the loan. According to Voorhees, the buyer instead chose to prepay and defease the loan and obtain new financing at a lower interest rate. Similarly, the Tudor Plaza, a retail center in Rialto, CA, recently traded hands with a CMBS loan that needed to be defeased. The buyer in the transaction also chose to pay the penalty to defease the loan, which had a 5.6% interest rate, and take advantage of more appealing financing options.
Foreign investors have been buying properties throughout Southern California and across property sectors, and Voorhees says that the trend is only going to continue to grow. “This trend started in SoCal in residential properties in neighborhoods like Beverly Hills and Arcadia, and we expect it will continue with increasing velocity in the retail property category,” he says. “Retail is accessible and easy to understand for foreign investors, providing less management hassle than in multifamily investments. And, compared with single-tenant, net-leased properties, anchored-shopping centers, like South Hills Plaza, they provide a superior risk adjusted return.”
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Kelsi Maree Borland
