The Anaheim GardenWalk traded hands for $80 million last week, a significant discount-to-replace price tag on a value-add play with strong upside opportunity. The 430,000-square-foot property was built a decade ago for $284 million, and houses ample experience- and entertainment-focused tenants, like Bowlmor Bowling Center, AMC Theatres, 24 Hour Fitness, Cheesecake Factory, P.F. Chang's, and California Pizza Kitchen, as well as the House of Blues, which recently relocated to the property.

“Buying well-positioned real estate inside the Anaheim Resort District at a substantial discount to replacement cost is prudent,” Jimmy Slusher, a VP at CBRE National Retail Partners West, tells GlobeSt.com. “GardenWalk was originally built in 2007-2008 at a cost of nearly $284 million. Now that House of Blues has relocated to the property, AMC Theatres is set to open soon and the JW Marriott is vertical with construction, the opportunity to continue improving the site and further capitalize on the leasing momentum could not have been better timed.”

Slusher, along with Kirk Brummer, Sean Heitzler and Philip D. Voorhees, represented the seller, a JV including New York-based Arcturus, in the deal. For Arcturus, the sale was the completion of its five-year business plan. Once the property came to market, it received significant interest from the gamut of capital sources. “Interest in the offering came from a broad range of investors. Prospective groups ranged from local hotel operators to private high-net-worth family offices,” says Slusher.

While retail investors came to the table, they were not competitive enough to win the bid. Ultimately, the property went to STC Management, which acquired the property on behalf of local and Taiwanese investors. “Traditional lifestyle and entertainment center operators were in the bidder mix but, ultimately, were not as competitive as the final participating groups, who had tracked the property, were more in touch with local tenants and understood the property's relationship to the Resort District,” adds Slusher.

This deal could serve as a post marker for the retail sector and the properties that are winning investor attention. “Investors are still focused on infill, long-term viable locations, especially those with potential upside,” says Slusher. “Regardless of potential costs to lease-up the available square footage at GardenWalk, most interested groups were attracted to its Disney-adjacent location, heavy infrastructure and walkability to the Anaheim Convention Center. GardenWalk featured many internet-resistant tenant offerings, increasing customer traffic from nearby hotel projects—1,200 keys under construction within a half mile—and was available at a steep discount to replacement cost.”

In Orange County in particular—a market with healthy retail activity, despite the rise of ecommerce—this value-add play was a particularly rare opportunity. “Rarely do assets of this physical size with enormous upside become available within Orange County,” explains Slusher. “This was evident by the wide range of investors, many with backgrounds in commercial assets other than retail who appreciated the site's location, infrastructure and future potential within the Anaheim Resort District.”