Retail Shopping Center

Stabilized Retail Center
Barstow, California

  • Managed by professional retail center operators
  • Preferred return on capital paid before operators
  • Strategic value add positioning
  • Conservative financial assumptions
  • Strong market characteristics
  • Acquisition at below replacement cost
  • 8%+ projected Average Cash Flow Return
  • 1%+ projected Average Annual Return

Property Summary

Barstow Retail Center, a Class B Retail Center comprised of 117,000+ leasable square feet across 11 acres and is located In Barstow, CA, in an area well-known for its location that serves as the main corridor between Los Angeles and Las Vegas, as a major transportation hub in San Bernardino and has a traffic count of over 30,000 vehicles daily. The property is currently 89% occupied and stabilized across 19 tenants, with only 1 vacancy and is anchored by large long term renters such as Vons and 99 cent stores with no significant leasing challenges.

Investment Snapshot

Opportunity TypeStabilized Retail Center
Purchase Price$8,700,000
Projected Total Return for Investors 14.1% Average Annualized
Projected Cash Flow for Investors 8.8% Average Annualized
Preferred Return 8%
Expected Term 5-10+ Years
Minimum Investment $25,000
Current Occupancy 89% Occupied
Manager Co-Investment 10%

Area Description

The City of Barstow is currently spending millions of dollars to upgrade its roads and infrastructure in an attempt to attract even more business and people to the Barstow area while Walmart and other major retailers in the area are also expanding.

Investment Hilights

Highly Occupied and Stabilized With Well-Known Anchor Tenants and a Diversified Tenant Base in a Captive and Stable Market – The Barstow Retail Center is currently a 89% occupied and stabilized property that includes 19 tenants with only 1 vacancy. The property is anchored by Vons (Safeway), 99 Cents Only Store, and Big 5 Sporting Goods. Vons recently renewed its lease for another 10 year term after 50 years at the property and spent over $1 Million in upgrades to its store when it renewed its lease in 2013. Many of the tenants have occupied the property for a long time and had no significant challenges during the previous recession, which is a testament to the stability provided by this captive market. In addition, the City of Barstow is currently spending millions of dollars to upgrade its roads and infrastructure in an attempt to attract more business and people to the Barstow area.

Strategically Located Within 2 blocks Off the Exit of the 15 Freeway and Within 4 Block Off the Exit of the 40 Freeway With Many Well-Known Retailers in the Immediate Area – The property is located on E Main Street within 2 blocks off the exit of the 15 Freeway and within 4 blocks off the exit of the 40 Freeway with traffic counts of over 30,000 vehicles per day.

Projected 14.4% Total Average Annualized Return For Investors and Projected 8.8% Average Annualized Cash Flows For Investors (Based on 10 Year Projections) – The Managers project investors will receive an average annualized cash flow return of 11% (via monthly distributions) and a total average annualized return of 18% via an 8% preferred return and 70/30 profit split (in favour of investors).

Favorable Purchase Price With Little Deferred Maintenance Due To Recent Upgrades –The Managers are acquiring the property for roughly $8.7 Million at a 7.8% Cap Rate, which the Managers believe is a favorable Cap Rate compared to their estimated 6.50-7.25% Cap Rate range for similar properties in this market. The property is being acquired for approximately $73 per square foot, which is more than 50% below the Manager’s estimated replacement cost of $150 per square foot. The Managers also believe that the property will have only minimal deferred maintenance costs in the short-term, as the majority of the roofs were replaced over the last 5-6 years and the current owner spent $300k+ resurfacing the parking lots last year.

Conservative Assumptions in the Pro Forma, the Managers included conservative assumptions in the Pro Forma.  For example, the projected rent rates for new and renewed leases are 20% below current market rates. Also, the possibility of revenue from the addition of a pad site was not included in the projections.

Potential Value Added Upside Due To Under Market Rents and the Possibility of Adding a Pad Site – The Managers believe that average rents are currently 20-25% below market rates and plan to increase rents towards market rates over time. In addition, the Managers have already been in discussions with the city planning department and various retailers to add a pad site to the property. While neither of these initiatives was included in the Pro Forma revenues to be conservative, they both present the possibility of value added upside for the property.

Current Owner Will Invest $250k-$500k as a Passive Investor in This Opportunity Due To Their Strong Belief in the Property’s Future – The property is being acquired from a mother/son who are friends of the Managers and who need to liquidate their holdings after the death of their husband/father who had originally built the center 50 years ago. Due to their strong belief in the property’s future performance, the current owners will be co-investing $250k-$500k of the equity as a passive investor in this opportunity.

Investment Description Acquire Barstow Shopping Center a 117,236 square foot shopping center located in San Bernardino County, California and anchored by Vons, Big 5, 99 Cents Only Store and Radio Shack.

Investor Returns Projected 1st year cash flow of approximately 7.49% + to investors and projected stabilized average annual cash flow of over 8.8% to investors (based on 10 year projections).

We intend to obtain mortgage financing in the amount of approximately $6,660,000 (approximately 68% of total project cost) at an interest rate not to exceed 4.85% for a term of 10 years with a 30 year amortization.

reason no. 1

Vons, Big5, 99 Cent Only and Radio Shack

Anchored Center
  • Dominate Grocery Anchored Center in the Trade Area
  • Von’s recently renewed its lease for 10 years
  • Von’s has operated at site for 50 years
  • New Big 5 Sporting Goods store with sales exceeding budget expectations

reason no. 2

Value Add Opportunity

  • Purchase Price is based on 7.8% CAO on in-place income
  • One 13,312 square foot vacancy
  • Potential Pad Site in Front of Vons Parcel
  • Many shops have below market rents

reason no. 3

Projected 9.36% Year 1 Cash Flow to Investors, 11% Average Annual Cash Flow to Investors, and Total Average Annual Return of approximately 18% to Investors (based on 10 year projections)

reason no. 4

Below market anchor rents create downside protection as Safeway is only paying $0.59 PSF/Month, Big 5 is paying $0.60 PSF/Month and 99 Cents Only Store is only paying $0.71 PSF/Month

reason no. 5

Strong daily car traffic with over 30,000 cars per day on E. Main Street

reason no. 6

Close proximity to interstate 15 freeway with 80,000+ cars per day

reason no. 7

Dominant Grocery Anchored Center in the Trade Area

reason no. 8

Purchase Price is less then $75 PSF (well below replacement cost approaching $150 PSF)

reason no. 9

Von’s parcel potentially can be sold separately at a very favorable CAP rate

reason no. 10

Population of over 25,000 in a captive market area

Investment Description

Acquire Barstow Shopping Center a 117,236 square foot shopping center located in San Bernardino County, California and anchored by Vons, Big 5, 99 Cents Only Store and Radio Shack.

Investor Returns

Projected 1st year cash flow of approximately 9.36% + to investors and projected stabilized average annual cash flow of over 11% to investors (based on 10 year projections). Projected total average annual returns of approximately 18% to investors (based on 10 year projections).

Capital Breakdown

Uses:

$8,701,460 – Purchase Price
$85,000 – Closing Costs & Legal
$116,666 – Lender and Financing Costs
$165,000 – Equity Costs
$87,015 – Acquisition Fees
$475,000 – Building & Tenant Improvements & Leasing Commissions
$179,925 – Reserves and Miscellaneous


$9,819,000 – Total Uses

 

Sources:

$6,660,000 – 1st Trust Deed
$3,150,000 – Equity


$9,810,000 – Total Sources

Financing

We intend to obtain mortgage financing in the amount of approximate $6,660,000 (approximately 68% of total project cost) at an intereste rate not to exceed 4.85% for a term of 10 years with a 30 year amortization.

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