November 9, 2023
CRC Enters California Retail Market With Acquisition Of The South Coast Collection In Costa Mesa
BALTIMORE, MD (November 9, 2023) – Continental Realty Corporation (CRC), a Baltimore-based real estate investment and management company active in 11 states with more than $3.7 billion Assets Under Management (AUM), has entered the Southern California retail real estate market with its acquisition of the South Coast Collection (SoCo) in Costa Mesa. SoCo is a 97 percent leased, 292,000 square foot luxury home furnishing and design lifestyle center, with a 60-store tenant mix featuring design, home furnishings, fashion, and culinary retailers. Christopher Hoffman, Managing Director, and Mark Damiani, Director of Eastdil Secured, L.L.C., represented the seller. CRC has now acquired nearly $720 million worth of retail real estate since the beginning of 2020.
SoCo was purchased with funds from Continental Realty Opportunistic Retail Fund I, LP (CRORF). CRORF is a closed-end fund for which $261 million has been raised since 2021, including $200 million in the Fund and $61 million in co-investment vehicles. Since the inception of CRORF, CRC has acquired 11 retail properties comprising approximately 2.7 million square feet of space. Since 2012, CRC has raised nearly $1 billion in equity for retail and multifamily investments across five real estate funds and multiple associated co-investments.
This is the second asset acquired by CRC on behalf of CRORF this year, following the $78 million purchase this summer of Lakeside Village, a nearly 460,000 square foot super-regional lifestyle center located just east of Tampa, Florida.
CRC owns and manages a diversified portfolio of more than 9,000 apartment homes, as well as retail centers and other commercial properties consisting of almost eight million square feet, serving the real estate needs of more than 1,100 tenants across 10 states. CRORF was formed as a vehicle to target and acquire a diversified portfolio of distressed, opportunistic, and value-add retail properties throughout the United States.
Constructed in 2007 and located at 3303-3323 Hyland Avenue in Orange County on a 20-acre site with 1,000 feet of frontage on the San Diego Freeway (Interstate 405), SoCo is anchored by COCO Republic, Design Within Reach, Roche Bobois, Pirch, and Paul Mitchell the School, with additional retailers including Brown Jordan, Natuzzi Italia, and Room & Board. Restaurants and food concepts include Arc Food and Libations, Butcher’s House, Greenleaf Kitchen & Cocktails, Moulin, Paragon, and Portola Coffee.
Contained within the property is The OC Mix, a 15,000 square foot shopping and dining experience featuring more than 20 distinct full-service sit-down restaurants, coffee shops, quick service restaurants, a fine cheese retailer and an art gallery. Many of the tenants offer tasting events, cooking classes and other events that draw unique visitors to the concept. The OC Mix is ranked in the top 10 percent nationally for foot traffic, according to Placer.ai, a market research company that reports on consumer behavior by tracking store visits.
Situated adjacent to SoCo is the corporate headquarters for Vans with 500 employees, with numerous high value properties nearby including the 640,000 square foot Anduril Industries corporate campus, one of the busiest Ikea stores in the country according to Placer.ai, and a site designated for the construction of more than 1,000 multifamily units. SoCo is also home to Orange County’s largest weekly Farmers Market, which regularly draws unique visitors to the lifestyle center.
More than 340,000 vehicles pass the site on an annual basis via Interstate 405. More than 200,000 people, including more than 65,000 households with an average household income exceeding $132,000, reside within a three-mile radius of SoCo. An additional 125,000 people work within a three-mile radius.
Irreplaceable Asset in Top Tier Infill Urban Market
“South Coast Collection is the only shopping venue of its kind in an extensive, high net worth trade area,” stated Josh Dinstein, Senior Vice President, Acquisitions for Continental Realty Corporation. “An irreplaceable asset strategically located in a top tier infill urban market, it features an attractive, customer-friendly layout and a synergistic tenant mix that includes some of the nation’s top home design and furniture stores. The OC Mix, a highly successful food and dining concept serves dual purposes as an amenity and a high-volume traffic driver on its own. The asset’s institutional quality and strong value-add potential, plus its location in the heart of Orange County, make SoCo the perfect acquisition for our entry into the southern California marketplace.
“Our team was able to execute this transaction based on our reputation and long-term relationships,” Dinstein added. “We are confident in our ability to generate additional value by leasing the remaining vacancies and implementing our proven property management protocols to realize operational efficiencies.”
Enduring Fundamentals of Costa Mesa Attracting Jobs and Fueling Long-Term Growth
According to the Orange County Workforce and Economic Department, the region is among the most densely populated counties in California, with nearly 3.2 million residents and an employment sector fueled by the construction, tourism, and healthcare industries. The Orange County Business Council describes the county as a “microcosm of all great things about California – multi-culturalism, beaches, sunny weather and an educated workforce that drives a powerful economy.”
Featuring a labor force of more than 1.6 million workers, Orange County supports nearly 170,000 business establishments and contains nearly 1.1 million households. The median household income is projected to grow by approximately 11 percent over the next three years and, in 2021, Orange County saw the largest growth of tech talent in the United States. More than 50 million people visit the county annually. Fortune 200 companies with a presence in the county include Amazon, Blizzard Entertainment, Broadcom, and Google.
SoCo is less than three miles north of South Coast Plaza, which is considered to be among the most valuable malls in the United States, with more than $2 billion in annual sales. SoCo is positioned four miles from John Wayne Airport and is approximately 35 miles from Los Angeles and Los Angeles International Airport. Its position off Interstate 405 provides convenient connections to the entire state via Highway 5.
Summary of CRORF acquisition activity
In addition to its recent entry into California, CRC entered the suburban trade areas of Chicago, Illinois and Troy, Michigan in 2021. Key acquisitions included Banks Crossing, a 255,101 square foot regional shopping center in Fayetteville, Georgia; Lakeside Village in Tampa; The Shoppes at Webb Gin, a 330,000 square foot lifestyle center in Greater Atlanta; a portfolio of five shopping centers comprising more than 900,000 square feet of space in Cicero, Mount Prospect, Naperville, and Palatine, Illinois; and Oakland Plaza and Oakland Square, shopping centers located in Troy, Michigan consisting of nearly 392,000 square feet of space.
CRORF targets neighborhood, grocery-anchored, lifestyle and power centers situated within the U.S.’s top 50 Metropolitan Statistical Areas (MSA), as well as select secondary markets.
“Consumers have returned to traditional brick-and-mortar retail stores and restaurants as the growth of ecommerce has subsided and, by leveraging our extensive relationships and relentless market analysis, we are continuing to pursue additional shopping center opportunities on a national level,” explained CRC’s CEO JM Schapiro. “We believe in the enduring strength of the Southern California marketplace, and we are confident that the unique ecosystem at SoCo, low sub-market vacancy, and lack of new supply are key factors that will enable us to execute our strategic plan to add value and deliver a solid risk-adjusted yield to our investor group. Orange County’s stable consumer population, thriving tourism sector and low unemployment rate make this section of the country extremely attractive. The low overall 4.3% vacancy rate for retail space, year-over-year rent growth of 4.6 percent, and the $110,000 median income are prime indicators of the market’s current and long-term strength.
“Our experienced team benefitted from our vertically integrated platform by leveraging cutting-edge technology, and advanced data sources, to uncovering emerging acquisition opportunities,” Schapiro added. “CRC’s ready capital and strong track record of certainty to close make us a preferred and proven counterparty to sellers of retail real estate.”
Headquartered in Baltimore, Maryland and founded in 1960, Continental Realty Corporation is a full-service commercial real estate and investment company focused on acquiring and operating retail and multifamily properties. The privately held firm owns and manages a diversified portfolio of retail centers consisting of almost eight million square feet of commercial space and over 9,000 apartment homes across 11 states, with a portfolio value exceeding $3.7 billion. For additional information, visit www.crcrealty.com.
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