The difference between selling a vacant and tenanted supermarket center? Apparently, it’s about $17 million.
Paragon Commercial Group and Canyon Partners Real Estate made $16.6 million in profit when they sold the fully-leased Hawthorne Plaza retail center last month to a wealthy individual for $43 million. The partnership acquired the property in Hawthorne for only $26.4 million in Nov. 2014.
The center is anchored by Superior Grocers, which occupies 53 percent of the space. When the Paragon partnership acquired the property, the grocery store had been vacated by Albertson’s. The retenanting of the property at a higher rent won the partnership a price much higher than what it paid, said Bryan Ley of HFF, who represented the sellers along with CJ Osbrink and John Crump of the same firm and Geoff Tranchina of JLL.
The buyer, an individual attached to a family trust, paid $440 a square foot for the 95,619-square-foot center, which is made up of four buildings on 8.2 acres of land at 12620-12770 Hawthorne Boulevard. The sale price was slightly higher than the $351 a square foot average for the Hawthorne/Gardena area over the past year, according to CoStar Group.
Ley said the price was on par with the more competitive retail properties in the area. He also said that Hawthorne is a market that may be primed for some changes. Tesla has a design studio there and SpaceX is headquartered there. The expansions of those companies could affect the overall real estate climate.
Robert Hovsepian of Re/Max represented the buyer. He said the high net worth individual liked the location and cap rate, which was reported at 5.1 percent. The buyer viewed the center as a good long-term investment to add to his portfolio, Hovsepian said.
The sale marks the first disposition in Paragon’s joint venture with Canyon under the Canyon Catalyst Fund. That fund, a CalPERS real estate emerging manager platform managed by Canyon, has partnered with four California-headquartered real estate firms to make opportunistic real estate investments throughout California. Its partnership with Paragon was formed specifically to target urban retail properties.