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Investor Takes Big Risk on State Street Buy

SANTA BARBARA, CA—A private investor buys a 46,813-square-foot retail store at a 5% cap rate and a tenant lease that rolls in three years for the high-barrier-to-entry State Street location, GlobeSt.com reports EXCLUSIVELY.

By Kelsi Maree Borland | Updated on December 21, 2015

SANTA BARBARA, CA—A private investor operating under the name Hollywood Western LLC has purchased a 46,813-square-foot retail property on State Street in Santa Barbara from State Street Properties LLC, GlobeSt.com reports exclusively. An Off Saks 5th Avenue currently occupies the property, but has a lease that rolls in three years. Because the property is located in the high-barrier-to-entry State Street area, the investor took the risk, paying $15.5 million at a 5% cap rate.

“This was a 5% cap rate on in-place NOI, and the term of the lease had three years remaining. There is some risk to the buyer, and yet they were still willing to pay a 5% cap rate,” Clarice Clarke, the president of Lee & Associates Santa Barbara, tells GlobeSt.com, adding that State Street has extremely high barriers to entry. The buyer wanted to be in this location and was willing to take a 5% cap rate and potential re-tenanting risk to be there. Clarke represented the seller in the transaction, along with Lee & Associates’ principal Stephen Leider.

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