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REI building on lower State changes hands for $22M

By   /   Friday, April 10th, 2015  /   Comments Off on REI building on lower State changes hands for $22M

The center, located on lower State Street along Highway 101, represents the largest sale of retail property in downtown Santa Barbara in 13 years.

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Outdoor gear retailer REI is the anchor tenant at the downtown Santa Barbara retail property that recently traded hands for about $22 million. (Courtesy image)

Outdoor gear retailer REI is the anchor tenant at the downtown Santa Barbara retail property that recently traded hands for about $22 million. (Courtesy image)

 

REI and Sit ’n Sleep will soon hand their rent checks to a new landlord, as the property’s former owner closed escrow on March 31.

The property, located on lower State Street along Highway 101, had been listed at just under $22 million and traded within 3 to 4 percent of its asking price to an out-of-town buyer, said lead broker Austin Herlihy of Radius Commercial Real Estate Investments. Final terms of the deal were not disclosed.

The property, which includes 314-324 State St. and 319-321 Anacapa St., was previously purchased in at least two separate deals between 2005 and 2010 by 318 State Street LLC, which paid about $13 million.

The deal is the largest sale of purely retail property in downtown Santa Barbara since 721 State St., now part of Paseo Nuevo, sold in May 2002 for roughly $44.9 million.

“Interest in this offering was off the charts. We had 58 signed non-disclosure agreements alone and eight highly competitive offers, with numerous offers from all over North America and as far away as Asia,” Herlihy said. “With all the current development on lower State Street, this property now sits on the 50-yard line between the Wharf and Paseo Nuevo.”

Herlihy said the building’s strong fundamentals were attractive on a global scale, so the firm was very aggressive in its marketing approach. The company’s LoopNet listing generated more online activity than any previous Radius offering and at one point was the best performing listing among similar properties on the entire site, he said.

The 94,206-square-foot parcel includes 55,545 square feet of fully leased retail space and a large parking lot. The property was renovated in 2011 and REI opened in November of that year. REI occupies about 24,500 square feet. National retailer Sit ’n Sleep fills the next largest space, at about 8,500 square feet. Both companies hold long-term leases.

Radius Principal Steve Brown, who brokered the deal with Herlihy and fellow Radius agent Chris Parker, said the building had struggled with unstable vacancies prior to REI and it was not viewed as a strong retail location. The majority of the building was being used for industrial purposes.

The acquisition of the REI property continues a rise in local investment activity over the past several months, despite a limited supply of available property. In Radius’ 2014 year-end summary, released earlier this year, the company reported 103 sales of commercial properties along the South Coast, beating the previous record of 85 — set in both 2005 and 2012.

“Let’s just say it’s a very good time to own commercial property in Santa Barbara,” Herlihy said in a statement.

Bay Club buys in
The Bay Club Co., a San Francisco-based health club company, recently announced the acquisition of 11 Spectrum Athletic Clubs, including both facilities in Santa Barbara and one in Thousand Oaks. Terms of the deal weren’t disclosed.

The move follows the June 2014 acquisition of the The Bay Club Co. by management along with an investment group led by York Capital Management. The Bay Club’s president and CEO, Matthew Stevens, was the CEO of Spectrum until he joined his current company in 2008.

Spectrum sold 11 of its clubs to San Antonio-based Gold’s Gym in 2012 and had reportedly been looking for a buyer for the rest of its California clubs.

Bay Club said it plans to spend about $10 million improving its 11 new clubs.

The acquisition adds more than 33,000 members, but the number who will stick around once the cost of membership goes up remains to be seen. With monthly memberships at some Bay Club facilities ranging from $240 to $500, it’s likely some current members of the Santa Barbara facilities will get priced out. The cost of a Spectrum two-person membership in Santa Barbara is about $100 with a 12 month contract.

With the acquisition of Spectrum, Bay Club now operates 23 locations, clustered into 10 California “campuses.” The company’s growth plan calls for additional expansion both in and out of California.

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