HAWTHORNE, CA—Hawthorne X LLC has purchased the Hawthorne Exchange property from Danros and Cal Select Properties for $25 million, with a 6.53% cap rate. The four-building property is a 60,352-square-foot retail center occupied by 14 triple-net lease tenants. The purchase included the assumption of a $16 million conduit loan.

“The buyer acquired a well-located center with freeway visibility and signage and incredible potential,” Ron Duong, VP of investments and director of the national retail group at Marcus & Millichap, tells GlobeSt.com. “There are multiple avenues to grow net operating income. In addition, the buyer also got a great discount for the property, as there was unattractive assumable financing of which expired in less than nine months. This area is poised for growth and the investor is poised to benefit greatly.” Duong represented the buyer in the transaction, while Brett O'Keefe of RE/MAX Commercial and Miguel Aguilo of TR Wealth Management represented the sellers.

The property received strong interest from potential buyers leading to some competition for the asset. To stay competitive, the buyer met with the city and Mayor to align their business interests and show their qualified business plan. “We uncovered several value-add components to the transaction that other groups did not understand allowing us to be more aggressive on the price,” says Duong. “Our buyer was also in a 1031 exchange from selling a large center in an adjacent city. The sale also required the assumption of a large conduit loan. We were able to demonstrate that the buyer had the qualifications that met or exceeded those of the existing high net worth partnership.”

In meeting with the city during the escrow process, the buyer set plans in motion to redevelop the property, although no approvals have been obtained yet. “The buyer has been in discussions with the city throughout escrow on a long-term redevelopment plan,” says Duong. “This includes bringing more evening restaurants to the area and improving the overall profile for area. There is an opportunity to add more square footage to the property as well as working with the city to generate more foot traffic to the area.” The property's tenant roster currently includes 24 Hour Fitness, Sprint, Starbucks, Quiznos and Sears Appliance. The property was constructed between 2004 and 2006.

The Hawthorne submarket is healthy, with increasing investor interest in well-located retail properties, like this one. “Hawthorne has incredible potential and the tenant activity is demonstrating this. The subject property is caddy corner to the Space X corporate headquarters as well as the launch site for Tesla that has generated international media attention. Target, Lowe's, and several new homes (most already sold) were recently constructed directly across the street from the subject property,” says Duong. “Hawthorne is also close to the Hollywood Park project & should benefit from the developments taking place with respect to the new NFL stadium project that's been approved by adjacent Inglewood.”