ALTO Real Estate Funds, managed by Mody Kidon and Yaniv Melamud, which invests in value added retail properties in the U.S, has closed a purchase of a 130,000 SF strip center in Chula Vista, California, the second largest city in the San Diego metropolis. Total consideration for the transaction is $26 million and it will be financed with equity of forty percent (40%) and a loan from the Silvergate Bank for sixty percent (60%).
ALTO plans to exercise existing building permits to expand the property, which had previously been a Target, to measure 130,000 SF. The property is exposed to a daily traffic count of over 170,000 vehicles, as it is situated near three main transportation arteries, including Highway 5, which stretches the entire west coast of the US, linking San Diego with Los Angeles and Northern California. The property is also located in a major shopping corridor near a large Walmart Supercenter with annual sales revenue of over $100 million.
ALTO has already received four signed letters of intent from leading chains that are interested in opening a first branch in the area. Upon execution of these leases, the Fund will renovate and re-divide the space in the main building, measuring 110,000 SF, into four medium-sized stores, as well as build two additional smaller stores in the parking area.
The City of Chula Vista has enjoyed population growth of over 40% in the past decade. The property is located within 1.5 miles of the new Chula Vista Bayfront master-planned development, a new mixed use project that will include residential, commercial and entertainment space, and which is expected to generate thousands of new jobs in the area.
Yaniv Melamud, ALTO's CEO, noted that the property is situated in an ideal area that is densely populated, is enjoying growth, and lacks available land for retail development or availability of existing big box stores. The confluence of these factors provides the opportunity for immense added-value to the project and high yields to ALTO's investors. ALTO’s CIO, Peter Auerbach, noted “ALTO looks for investments in locations with excellent demographics for growth and stability, and also looks for investments in special situations where there is potential for value. In this, case, we feel we have found an investment that succeeds in filling both criteria.”
ALTO Real Estate Funds invests in value-added retail properties in key growth cities throughout the US. Since its establishment in 2010, ALTO has invested in a total 16 properties, worth $355 million and comprising a total area of 2.2 million SF. To date, ALTO has disposed of 9 properties for a realized net IRR of 33%.
The fund has recently opened a new office in New York City, managed by Peter Auerbach, the fund's Chief Investment Officer. Peter was formerly a Director in Real Estate Acquisitions for Wexford Capital, a $4 billion dollar private equity and hedge fund, whose portfolio consisted of over $1 billion in property value. The primary functions of the New York office are devising a forward-looking macroeconomic strategy, sourcing and executing new deals, and providing administration of existing deals within the US.
ALTO is currently raising capital for its second fund, targeted at $100 million. In January the fund had its initial closing of $33 million, and expects a second closing within the next few weeks. The new fund, a Delaware registered limited partnership, will continue ALTO's focus by investing in value-added retail properties in the US. The second fund completed its first purchase in February, closing on a 300,000 SF open shopping center in Moreno Valley, CA. Last week's closing of the Chula Vista property marks second purchase of the fund. The fund currently has properties in Atlanta and Denver in the pipeline.
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