An artistâ€™s rendering of Phase 2 of the Marketplace at El Paso shopping center in northwest Fresno, with a Regal Cinema movie theater as its centerpiece. Source: Gryphon Capital.
At a cost of more than $24.4 million, you might expect that in the Valleyâ€™s most expensive real estate transaction of 2018, youâ€™d get to keep the building.
Not that thereâ€™s any building up yet on the 20-acre parcel slated to become Phase 2 of the Marketplace at El Paseo shopping center south of West Herndon Avenue and North Riverside Drive.
Currently thereâ€™s Phase 1 of the shopping center, which includes Target, Old Navy, Tillys and Burlington stores. Just to the south, off Riverside Drive, is a former fig grove, now barren, with workers driving heavy equipment along the dirt over the past three weeks to level out the land ahead of planned construction of an expansion to the Marketplace.
Owners of the property have lease agreements to locate businesses on the new site that include Hobby Lobby; Carterâ€™s, Inc.; Wayback Burgers; Que Pasa Mexican CafÃ© and the expansion of an undisclosed, locally-based Japanese restaurant.
And talks are underway to also lease space there as an added site for a local brew pub and restaurant, the name of which also hasnâ€™t been disclosed.
But the biggest lease agreement in Phase 2 is with Regal Entertainment Group for a planned 49,950-square-foot, 12-screen movie theater on the site.
But Regal will not build the new Regal Cinema theater. Instead, the developers of the shopping center â€” Manhattan Beach-based Gryphon Capital and Rich Development Enterprises, LLC, out of Santa Ana â€” have agreed to build the theater and lease it to Regal for the $24.4 million-plus lease price.
Chris Shane, managing partner for Gryphon, declined to disclose the length of the lease, confirming only that it would last multiple years. Efforts to contact officials representing Regal werenâ€™t successful.
While not an actual property purchase, the lease agreement, which was finalized in July 2018, still was the highest-valued commercial real estate transaction last year in Fresno, Kings, Tulare or Madera counties, according to The Business Journalâ€™s annual list of the Largest Commercial Real Estate Transactions.
Besides being in a prime retail space off busy Highway 99, â€œItâ€™s a build-to-suit with a very large national tenant. The building is very expensive, therefore the rent adjusts accordingly, Then you have a multi-year lease, so you have a high transaction number,â€ Lewis Smith, a leasing agent for Fresnoâ€™s Retail California, said of the deal he helped broker between the developers and Regal Entertainment, which operate the Regal Cinemas, United Artists Theatres and Edwards chains, which already have four theaters in Fresno and Clovis.
â€œThis has been about three years in the works,â€ he said of the negotiations.
Work to develop the Marketplace on 75 acres began in 2006 and continued through and after the Great Recession.
Northwest Fresno near the Highway 99 and Herndon intersection was chosen as the site in part because of the growing number of homes being developed in the area, its increasingly upscale demographics and its proximity to the freeway, Shane said.
He added that much of Fresnoâ€™s growth is occurring in the northwest part of the city, also making it a good spot to locate the Marketplace.
And along 99 there is no shopping center like it for at least 30 miles north or south, he said, adding that over the five years Phase 1 businesses have been open, operators have reported customers coming from farther distances to shop there.
Plans are to expand Phase 1 beyond its current 400,000 square feet of retail and restaurant spaces, with efforts underway to find tenants for three small retail or restaurant spaces to be built in current parking lot spaces off Herndon Avenue and Riverside Drive.
As for Phase 2, the plan is to build 200,000 square feet of leasable space there, and early on it was decided a movie theater would be included in the mix, said Shane, whose company developed the Trading Post shopping center in Clovis, which includes a Sprouts Farmers Market, Skechers USA and a Ross store.
â€œEven though we are from Southern California, we know the [Fresno] market very well,â€ he said. â€œNorthwest Fresno is underserved in terms of quality movie theaters.
â€œWe felt that the competition from the [retail] markets that access 99 didnâ€™t have theaters, either.â€
The theater, expected to open in the first quarter of 2020, would allow families to do things at the Marketplace beyond shopping and eating, Shane said.
â€œWeâ€™re going to have a nice mix of retail, restaurants and entertainment that people will drive to from pretty far away,â€ Smith added.
As for the theater, â€œItâ€™s just going to be the most state-of-the-art, nicest, most upscale theater in the Valley,â€ said Smith, citing that it will include gourmet food options, wine and beer sales, reclining seats and high-quality sound and visual systems, and it will be one of at least five prototypes for a new style of movie theaters Regal is developing.
Coming in at No. 2 in the real estate transactions list was the $11.6 million sale of a 191,341 square-foot commercial building at 200 W. Pontiac Way in Clovis.
Rounding out the top 3 was the sale of an 82,000 square-foot commercial building at 1177 Fulton St. in Fresno for $10.68 million.
This is the former Guarantee Savings building purchased by State Center Community College District.