Hayward, California

 

Background

Jackson Square is a 113,000 square foot grocery and drug anchored shopping center located in the City of Hayward. The center benefits from a strong location along a main thoroughfare leading to the San Mateo Bridge. At the time Capital and Counties U.S.A. purchased the center in early 1996, tenant occupancy and sales volumes were well below the market average. The seller was a homebuilder whose staff lacked expertise in managing commercial property. Trees and vegetation impaired the visibility of the shops and the center was in disrepair. Safeway, the grocery anchor, was experiencing poor sales and had threatened to vacate the center. Further complicating the investment, a vacant, former gas station out-parcel had significant contamination issues which required remediation. Capital and Counties U.S.A. was alerted to the opportunity though a brokerage relationship and negotiated a price of $93 per square foot.

 

Investment Strategy

Capital and Counties U.S.A. believed there was an opportunity to rejuvenate Jackson Square through aggressive management and re-leasing. Community leaders were enacting measures to improve the City of Hayward and the investment represented an opportunity to capitalize on this upward trend. The investment strategy included re-landscaping the center to increase street visibility and redesigning the parking lot to facilitate traffic circulation. By implementing measures to revitalize the center, Capital and Counties U.S.A. intended to persuade Safeway to upgrade its store. Additionally, as leases expired Capital and Counties U.S.A. planned to implement a focused effort to upgrade the quality and credit of the tenant roster.

 

Results

Immediately after acquiring the property, Capital and Counties U.S.A. began implementing a $1.7 million revitalization program which quickly produced results. Environmental issues on the former gas station parcel were mitigated. New tenants were secured, including 24 Hour Fitness and Starbuck’s; and the out-parcel was ground leased to Taco Bell. An additional pad was developed and leased to Hollywood Video. Capital and Counties U.S.A. worked closely with the City of Hayward and gained approval to re-landscape the property and to redesign parking areas which significantly improved street visibility and facilitated better vehicular access.

 

An aggressive leasing and re-tenanting effort substantially upgraded the quality of the in-line tenants. Improvements to the center and Capital and Counties U.S.A.’s skillful handling of negotiations with Safeway persuaded the grocery anchor to refurbish its store. Jackson Square achieved 95% occupancy and Capital and Counties U.S.A. was awarded the Good Citizens Award from the City of Hayward. In July 2002, Capital and Counties U.S.A. sold the Property to an institutional investor for $18.5 million resulting in a net profit of $6.3 million.