Faris Lee Arranges Intricate Retail Deal in OC

Rancho Santa Margarita retail property called for a complicated escrow structure.

Irvine, Calif.—A retail property in Rancho Santa Margarita, Calif. was recently sold for a total of $56.6 million. Buyer Plaza El Paseo Center LLC worked with a Faris Lee Investments team that consisted of Rick Chichester, Nicholas Coo and Chris DePierro. The team also represented seller K&G El Paseo 1 & 2 LLC.

Plaza El Paseo

Plaza El Paseo

Located at 22205-22372 El Paseo, Plaza El Paseo at Rancho Santa Margarita Town Center, the retail facility offers a total of 107,000 square feet of space. The center is anchored by Bed, Bath & Beyond, BevMo, and Wood Ranch BBQ. Part of the one million-square-foot Santa Margarita Town Center, the retail center is adjacent to Kohl’s and the Rancho Santa Margarita City Offices.

According to DePierro, “our strategy involved having the buyer assume the existing loan – thus saving the seller more than $6 million in defeasance penalties,” while also noting that it required $24 million in cash to the existing loan, which is substantially more than normal. The transaction process required Faris Lee Investments to create an escrow structure that allows the buyer to secure the necessary equity by selling a number of its multifamily assets during the process. As a result, the proceeds “infused the equity into Plaza El Paseo as the upleg in a 1031 exchange,” Coo noted in prepared remarks.

Transaction specifics on the Plaza El Paseo deal generated a cap rate of 5.4 percent, a cash-on-cash yield of 3.7 percent, and a per-square-foot price of $550.

Image courtesy of Faris Lee Investments