Faris Lee executes breakout strategy with oil wells near Long Beach for $ 28.3 million
SIGNAL HILL, California, May 11, 2021 / PRNewswire / – In one of COVID-19’s most complex retail transactions, Scott DeYoung and Jeff Conover of Faris Lee Investments completed the sale of Signal Hill Gateway in Long beach to four different buyers for a total of $ 28.3 million, which is a ceiling of 5.27% with a vacancy factor of 5%. All sales closed within 75 days from start to finish. The high-performance triple-net urban infill community center was repackaged to get an optimal price for the seller, Signal Hill Petroleum, which ultimately received 99.3% of Signal Hill Gateway’s list price despite the pandemic.
Signal Hill Petroleum will retain ownership of a one-acre parcel in the mall that contains active oil wells and drilling sites. The leading oil operator in its class will also remain responsible for maintaining the Signal Hill Gateway common area to ensure a smooth transition to new buyers. Faris Lee assisted buyers and seller with a Common Area Maintenance Sharing (CAM) agreement and changed the centre’s Covenants, Conditions and Restrictions (CC&R) to create efficiencies for several landowners in this fully occupied and 100% national shopping center.
Craig barto, CEO and Chairman of Signal Hill Petroleum, said: “Scott DeYoung and his team at Faris Lee did a great job creating and implementing a mall decommissioning strategy for the sale of our large mall in Signal hill. Scott walked us through this complex sale that involved a multi-year breakup of the Center, which made the sale of this large property even more profitable. Faris Lee worked exceptionally well with our Signal Hill Petroleum team in all facets of this complex transaction. It was an ongoing effort to close all four trades within 75 days from the first close to the last. “
Scott DeYoung, Managing Director of Faris Lee, who represented Signal Hill Petroleum, with Jeff Conover, explained: “Active oil wells are not common for sales in shopping malls. Southern california, but in Signal hill it is quite common. the Los Angeles Basin is one of the most prolific oil fields in the world, and the developer has found a unique way to successfully coexist oil production and dynamic retail development. This separation and re-parcelization strategy has helped the seller achieve the price they were looking for even during the COVID-19 pandemic, while the CAM management role will provide an additional source of revenue for the seller. “
While not your day-to-day transactions, Faris Lee has successfully overcome obstacles associated with the COVID-19 pandemic, the current retail environment, oil wells and easements by staying focused. on Signal Hill Gateway’s intrinsic real estate. the value and national composition of credit tenants. “Thanks to Scott’s guidance and the high quality management of Signal Hill Petroleum, we were able to complete four separate transactions with four separate buyers and maintain the management of the mall. I have known Scott personally for over 25 years and know that “he works extremely hard. and have the highest degree of honesty and integrity. I look forward to working with him and his team on future real estate opportunities!” said Barto. The four fences were with 1031 exchange buyers who were all located in Southern california.
“This center is on an irreplaceable site Southern california urban infill location near Highway 405 and Atlantic Boulevard. with a strong demographics, ”DeYoung said. By using Faris Lee’s national marketing platforms and educating buyers and their representatives on oil easements, we were able to overcome many challenges that helped the seller secure the favorable prices and terms Signal Hill Petroleum was able to. achieve it. About 79% of current renters had recently executed extension options at Signal Hill Gateway, a testament to the strength of the tenants and the commercial area. Signal Hill Gateway is anchored by Home Depot and also has a In-N-Out, which was not included in these sales as both tenants own their own property.
Located on Atlantic Boulevard and Highway 405 at Signal Hill, California which is an incorporated city adjacent to Long beach, the mall was divided into four product categories before it went on sale. These included large-box packages, a QSR and tape for daily needs, a sit-down restaurant, and a drive-thru fast food restaurant.
Details of each transaction follow.
Big Box package (Ross, Petco and Dollar Tree)
This box plot for three tenants generated several offers and closed at 99.2% of the sale price. This ultimately led to a ceiling rate of 6.05% for the seller and a future increase for the buyer, as two of the three tenants pay below market rent. The buyer has completed their 1031 exchange and entered into with an intermediary lender.
QSR & Daily Needs Strip (Starbucks drive-thru, Chipotle, T-Mobile, Bank of America ATM)
This parcel generated several offers and sold at a ceiling rate of 4.87%, or 99.5% of its list price. The escrow lasted less than 30 days and the buyer was able to complete the financing in time for their 1031 exchange. Despite an active oil well and pipeline easements on this parcel, the seller was able to complete a sale. at a price close to the catalog with short-term leases ranging from three to five years.
Sit-down restaurant (Applebee’s)
The sale hit a cap rate of 5.10%, which is one of the lowest cap rate sales in the country for a casual dining concept during COVID-19. This triple net absolute single tenant land lease is operated by an entity of Flynn Restaurant Group, Applebee’s largest franchisee in the U.S. It generated strong supply activity despite indoor restaurant closures in California.
Drive-through Fast Food Restaurant (Jack in the Box)
The Jack in the Box package generated several offers and closed at a cap rate of 4.38%. This Jack in the Box was a company operated and leased location with approximately less than 10 years remaining from the original lease term.
Press contact: Ingrid Vallon – 949-221-1836
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SOURCE Faris Lee Investments