Midwest investor pays $103M for two shopping centers in Lafayette

An Ohio investor has paid $103.2 million for two shopping centers in Lafayette to a local developer who used the cash to buy a manufacturing building in San Jose.

Affiliates of SITE Centers, an Ohio-based real estate investment trust that invests in shopping centers, bought La Fiesta Square and Lafayette Mercantile located in the heart of the East Bay city in Contra Costa County in an all-cash deal, the San Jose Mercury News reported.

The sellers were affiliates controlled by Stephen Cortese and Ann Cortese, executives with Cortese Properties, a local developer that renovated or developed both downtown properties.

A day after selling the Lafayette retail center, the Cortese-controlled affiliates bought a nearly 200,000-square-foot manufacturing building in North San Jose leased by solid-state battery startup QuantumScape, according to the newspaper.

The Cortese firm paid $103.8 million for the San Jose site at 1710 Automation Parkway and obtained a $45 million Wells Fargo Bank loan to finance the purchase of the building.

La Fiesta Square, at 21 Lafayette Cir., contains 74,300 square feet and has five retail buildings containing upscale shops and restaurants, was bought by SITE Centers for $60.7 million.

Lafayette Mercantile, at 3585 through 3597 Mt. Diablo Blvd., a 56,600-square- foot retail and office complex, was bought for $42.6 million.

Both properties are within walking distance of the Lafayette BART station, and next to State Route 24, the freeway that links Oakland and Walnut Creek.

Brokers Nicholas Bicardo and Steven Golubchik with Newmark arranged the deal.

“This portfolio represented a once-in-a-generation opportunity to gain immediate scale through acquiring the dominant retail asset and best mixed-use property two blocks apart from each other in one of the Bay Area’s most affluent neighborhoods,” said Bicardo, a Newmark vice chairman.

For the Corteses, the sale may have been bittersweet.

In the mid-1990s, Stephan Cortese bought the rundown La Fiesta Square and redeveloped it into “something of exceptional quality. It has become one of our more popular destinations,” Niroop Srivatsa, now city manager of Lafayette, told the San Francisco Business Times in 2005.

“The beauty is in the small details. It’s simple things like the oak motif in the planter, the little water feature next to Chico’s, the wrought iron benches,” Srivatsa said. “It’s more than architecture, it’s the jewelry that sets him apart.”

Cortese moved his company, founded by his father in the mid 1970s, to the revamped shopping center from Walnut Creek. He then built Lafayette Mercantile from the ground up, spending $15 million to develop the Class-A mixed-use project.

Early this month, the Corteses bought what appears to have been a turnkey advanced manufacturing plant in north San Jose.

The building was leased in December by QuantumScape, a solid state battery startup which manufactures lightweight lithium-metal batteries. The company lease is set to expire in September 2032.

QuantumScape, founded in 2010, has more than 600 employees and $2 billion in capital investment. It initiated a public offering in November 2020 that raised $680 million and placed a value on the company at $3.3 billion.

[San Jose Mercury News] – Dana Bartholomew

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