Record square-foot price for retail center
The sale of a small shopping center in Reno at a record-high price per square foot might be a harbinger of a recovery in the market for retail properties in the region.
Or the transaction might prove to be a one-time event that reflects some special factors in the property itself.
But the fact remains: The 9,000-square-foot building at Kietzke Lane and South McCarran Boulevard, expanded and heavily renovated to become the home to restaurants Five Guys Burgers and Fries and Chipotle Mexican Grill among other tenants, sold late last month for $5.7 million.
That translates into a price of $630 a square foot in a market in which strip centers have been selling in the $300-a-foot range. The square-foot price is the highest paid for a strip center in the Reno area in at least the past decade — and probably ever, says the broker who handled the transaction.
Washoe County records show the property was purchased by an Arcadia, Calif., investor from a company overseen by Stephen Thorne, founder and president of Pacific Dental Services of Irvine, Calif.
Aiman Noursoultanova, senior vice president in the investment properties group at CBRE in Reno, represented both the buyer and the seller.
She said last week that the transaction reflected strengths of the property, previously the home of one failed restaurant after another:
• The high-traffic corner is close to major employment centers and convenient to well-heeled residential markets. Within a three-mile radius, nearly 20 percent of the households report incomes of more than $100,000.
• The tenants in the property — Pacific Dental, a chiropractic franchise known as The Joint and the two restaurants — all signed 10-year leases at above-market rates to get themselves into that location. “They’re paying pretty healthy lease rates that we haven’t seen in this market,” Noursoultanova says.
• With those leases, the center is 100 percent occupied with top-quality tenants.
The property’s previous owners bought it for $2.6 million in August 2012. That reflected a price of $386.73 a square foot.
Through the course of the past year, Miles Construction completed a 3,000-square-foot expansion and complete renovation of the building, which had been dark since the closure of the Brew House Pub & Grill at the busy corner.
The city building permit showed a $574,000 value for the building shell in the expansion.
Noursoultanova says the transaction closed only 60 days after CBRE began its marketing.
“Within a week, we had multiple offers,” she says.
The price amounts to a 6.1 capitalization rate — the property’s first-year net investment income divided by its selling price.
Noursoultanova says realty investors in California are beginning to look to northern Nevada for better returns than those available in the picked-over markets in their home state.
Plus, she says, investors in commercial properties in Nevada don’t face the same increase in property-tax valuations that automatically accompany a sale in California.
“If you’re going to produce roughly 80,000 ounces (of gold) a year at $800 an ounce … and gold is at $1,900 or $2,000 per ounce, that’s going to create a tremendous amount of cash flow.”