SAN JOSE — The Plant, San Jose’s famed retail and restaurant hub, has been purchased for $95 million, a sign that investors remain enthusiastic about the property despite the current struggles of Bay Area retail properties.
Two real estate investment firms, Ark Capital Partners and Milan Capital Management, have partnered to acquire The Plant, according to documents filed Aug. 27 with the Santa Clara County Recorder.
Located just south of Downtown San Jose at the corner of Cartner Avenue and Monterey Road, The Plant is a well-known shopping center that is home to a number of well-known shops and restaurants.
The Plant deal signals the property’s low value and reflects the worsening woes of the Bay Area’s commercial real estate market.
The three parcels at The Plant, owned by Ark Capital and Milan Capital, are valued at $156 million as of January 2024, according to documents on file with the Santa Clara County Assessor’s Office.
This means that the $95 million purchase price was 39% lower than the appraised value of the parcels involved in the deal.
“We are pleased to collaborate with Milan to acquire The Plant, a property with deep roots in a vibrant community,” said Neville Rhone, co-founder of Ark Capital.
A decline in property values across the Bay Area and the South Bay could pose a major problem for localities, counties, public schools and governments whose budgets depend in large part on property tax revenue. When property values fall, property taxes for that parcel tend to fall as well.
Necessity Retail REIT acquired The Plant just two years ago in 2022, paying just under $175 million for the shopping center.
The Plant is located at 1 Curtner Ave. and will total 650,500 square feet, according to a real estate brochure.
The plant was built as part of a redevelopment of a longtime General Electric factory that had been located on the site. The development project left some of GE’s old buildings intact.
The plant is home to retailers including Target, Home Depot, Best Buy, Famous Dave’s, Panera Bread, Applebee’s Grill + Bar, Ross Dress for Less and Ulta Beauty. Target owns the store site, which was not included in the recently completed sale.
The parcels purchased by Milan Capital are primarily part of The Plant, which is located on Cartner Avenue between Monterey Highway and Little Orchard Street. Milan Capital also purchased the parcel, which includes the long-vacant site where Toys R Us and Babies R Us once operated.
“We are eager to attract a first-class tenant that will build on the center’s existing strengths and revitalize portions of the center that have been vacant for a long time,” said Chris Nichelson, president of Milan Capital.
Necessity Retail REIT held ownership of the site where Home Depot operates a hardware store, which is valued at $20 million, according to assessor’s office records.
Milan Capital, based in Orange County, advocates for a long-term view on real estate.
“Our mission is to identify and acquire unique, strategically located properties that can generate incremental cash flow over a three-to-five year period and increase value over the long term,” the company says on its website.
Milan Capital has said it aims to improve the properties it buys. It wasn’t immediately clear what its specific plans for The Plant were.
“We focus on properties that need leasing, renovation and stabilization,” Milan Capital says on its website.
Both Arc and Milan believe The Plant has plenty of room for long-term upside.
“The combination of a diverse tenant mix, a prime location and proximity to the region’s leading employers is well positioned for The Plant to achieve sustained success and continued growth,” said Rhone, co-founder of The Arc.
First published: August 28, 2024, 8:45 AM
