Porter Ranch, Other Centers Commanding High Prices Real Estate by Shelly Garcia Dwindling consumer confidence, the threat of war and a seemingly intractable bear market do not seem to have shaken the retail sector of the San Fernando Valley real estate market. A neighborhood shopping center in Porter Ranch was just listed at an 8.1-percent cap rate, continuing a trend that began in 2000. (Market capitalization rates, or cap rates, are calculated by dividing the annual net operating income from a property by the asking sales price. The lower the cap rate, the more expensive the property.) This particular property, Porter Ranch Shopping Center on Rinaldi Street, consists of 54,644 square feet of space on 4.74 acres. Anchored by Whole Foods, the other tenants include Citicorp Savings Bank, Bank of America and Kaiser Permanente Pharmacy. It has been listed for sale at $15.9 million. “Overall, it’s a very strong seller’s market, probably the strongest we’ve seen in a while,” said Gregory Brown, senior investment associate at Marcus & Millichap in Newport Beach, who, along with M & M;’s Edward Hanley, is marketing the shopping center. Granted, Brown’s got good reasons, grounded in self-interest, to say that. But the fact is that the dynamics in the retail market are not unlike those in the office or multi-family segment, where there are also far more buyers than sellers. Like the other real estate sectors, would-be retail investors do not have many choices on where to place their money. Because the pickings are slim, those who own retail properties are reluctant to let go, fearing they will not find another property to invest in. And interest rates at historic lows give buyers more buying power. Another reason for the high purchase price is the demographics in the area. The average household income within a one-mile radius is $150,000, and, while there are only about 14,000 people living within one mile of Porter Ranch Shopping Center, just under 100,000 people live within three miles of the property. Add to that the fact that neighborhood centers, especially those like Porter Ranch, which are anchored by grocery stores, are particularly recession-proof. “Neighborhood centers are the bellwether,” said Chris Wilson, president of Wilson Associates, which specializes in retail properties. “As a consumer, you go to a grocery store every week. If the economy is weak, you start slowing spending in discretionary items, but the supermarkets always are the darlings of a bad economy.” The Porter Ranch center, which was put on the market by Doerkin Properties, investors that recently completed the renovation of Encino Courtyard on Ventura Boulevard, does not come with its shopping center anchor Whole Foods. That property is separately owned. But that matters little to other retailers attracted to the site because of the supermarket, nor is it likely to matter to potential buyers of the shopping center. Vacancies at Porter Ranch Shopping Center are running at a mere 6 percent. Market capitalization rates for the Los Angeles North area, which includes the San Fernando Valley, have dropped from highs in the 10-percent range in 1999, according to a mid-year report just issued by Lee & Associates. As of the second quarter of this year, Lee reported cap rates in the area averaged in the 9.2-percent range. But the Lee data includes all types of retail properties, including regional and super regional centers, which do not command the same prices as strong neighborhood centers anchored by groceries. “They lead the market in pricing,” Wilson said. Northridge Sale Northridge Marketplace, perhaps the only retail property in the area that has not been refurbished since the earthquake, has been sold to Irvine-based investors with plans to finally renovate the center. Northridge Marketplace, a 120,000-square-foot center at 19510-30 Nordhoff St., fetched more than $8 million following an unsolicited offer. The center is only about 55-percent occupied with a tenant roster that includes Good Earth Restaurant, Coldwell Banker and Aveda Salon and Spa. The new owners intend to change the name of the shopping center to Northridge Promenade and put several hundred thousand dollars into a facelift. Sylvia MacAller and Lee Anne Sichel of TOLD Partners, who represented the sellers, Northridge Holdings Inc., will also be marketing the property. The new owners, Northridge Promenade LLC, were represented by Doug Thordenson, an independent broker, in the sale. Canoga Park Sale A 23,000-square-foot office and retail building in Canoga Park was sold for $1.7 million. The building, Van Owen Plaza, is located at 22015 Van Owen St. Jeff Albee, Dan Wakamoto, Dan Powers and Tom McBride at TOLD Partners represented the buyer, Jay Visconti, who is acquiring the building as a leased investment. It is nearly fully occupied. Sylvia MacAller and George MacAller represented the seller, Howard C. Smith Testimentary Trust. Multi-family Listing Sonterra Apartments, a 161-unit complex in Van Nuys, has been listed for sale for $14.5 million. Rental rates at the complex, which was renovated this year, range from $510 per month for a studio apartment to $1,505 for a three-bedroom, three-bath unit. Common area amenities include a pool and recreation room. Greg Harris and Ron Harris at Marcus & Millichap are marketing the property. Warner Center Sale Red Sea Group U.S. acquired a 102,000-square-foot office building in Warner Center for $20 million. The two-story building at 6129 DeSoto Ave. houses Wella Corporation USA. The company will remain at the site. Senior reporter Shelly Garcia can be reached at (818) 676-1750, ext. 14, or by e-mail at [email protected].