Investors Group to Buy Mall From O.C. Developer : Real estate: Investment trust will pay Dicker Warmington Properties of Fullerton $58 million in cash for Plaza at Puente Hills.


A San Diego-based real estate investment trust said Tuesday that it has agreed to purchase from an Orange County developer a La Puente shopping center for $58 million in cash--one of the largest single-property purchases made by an REIT.

Dicker Warmington Properties of Fullerton built the 775,000-square-foot Plaza at Puente Hills shopping center in 1986. Its tenants include an Ikea furniture store, AMC Theaters and a Miller's Outpost. The mall also features Home Depot and Toys R Us outlets, which are owned by the retailers.

The REIT, Burnham Pacific Properties Inc., said the transaction will be completed later this month. A REIT is a publicly held company that owns real estate or mortgages and is allowed by the tax laws to avoid corporate income tax.

"This is an outstanding property with future potential as well as existing potential," said Jerry Dicker, president of Dicker Warmington Properties. "We are very comfortable with the transaction, but we also would have been comfortable with holding on to the property."

An all-cash deal, however, could prove too good to pass up in today's capital-starved real estate market, said Mike Kirby, a principal of Green Street Advisors, a Newport Beach research firm that counsels institutions on real estate securities.

"REITs are one of the few entities with the funds to allow them to do some grave-dancing in California," Kirby said.

Indeed, the shopping center "would have fetched $70 million to $75 million" before the grueling real estate recession took its toll, said Louis J. Garday, president and chief executive officer of Burnham Pacific Properties.

"We are buying the property for an extremely attractive price," he said.

Garday said the shopping center should add $6 million a year to the REIT in net operating income--rents minus operating expenses--for a total of about $30 million in annual operating profits.

"The main attraction to this center is that 50% of the rents come from national, brand-name companies," Garday said. "They are very stable, triple-A-class tenants."

A year ago, Burnham Pacific bought the corporate headquarters of wholesale drug distributor Bergen Brunswig Corp. in Orange for $23.5 million.

In the next year, the REIT plans to concentrate on buying more so-called "power shopping centers"--which, like the Plaza at Puente Hills, are anchored by major discount retailers.

"We look at properties for cash flow and their ability to enhance our dividend program," Garday said. "The plaza does all those things and then some."

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