By Lilly Riddle
The Courtyard at Palm Springs, a sprawling mixed-use property occupying a full city block in the heart of downtown Palm Springs, has recently been sold by an entity affiliated with Ocean Properties Development Corp. for $24.48 million — roughly $168 per square foot. The transaction closed on May 10, according to a release from CBRE, and the initial asking price was $27.54 million, or $188 per square foot. Information about the buyer has not yet been released.
The building occupies 0.94 acres at 789 E. Tahquitz Canyon Way and 146,110 square feet of gross leasable area. Currently 90 percent occupied by a diverse mix of businesses, with the majority of leases signed or renewed post-pandemic, the property’s tenants include Regal Cinemas Palm Springs, Palm Springs Podiatry and Pacific Western Bank.
The Courtyard also has future development potential. A portion of the asset presents a redevelopment opportunity, according to public marketing documents, with the potential for multi-family or condo development at heights of up to 100 feet. Alternatively, re-tenanting the theater space could yield rental increases of up to $7.50 per square foot. Additionally, a ground lease currently paying $0.40 per square foot is set to expire, offering further flexibility for future development.
These factors, combined with the property’s location in the downtown Palm Springs business district, have fueled projections of $1.1 million in net operating income growth over the next five years, according to the property’s market listing. The property initially had a below replacement cost of $188 per square foot, which included a $14 million parking structure.
The new owners also inherit a $13.4 million assumable loan with a 6.6 percent interest-only rate, covering 75 percent of the project. This financing structure, coupled with a 6 percent cap rate on the existing income, made the Courtyard a potentially appealing opportunity for the buyer.
The sale of the Courtyard at Palm Springs is in line with the ongoing revitalization of downtown Palm Springs and the growing demand for mixed-use properties with redevelopment potential. Palm Springs, a city in the Sonoran Desert of southern California, is known for its hot springs, hotels, golf courses and spas. It’s also noted for its many examples of mid century-modern architecture. The Palm Springs housing market is somewhat competitive, according to Redfin, with the average Palm Springs house price was $770,000 last month.
Vanessa Haddad of CBRE led the marketing efforts for this property.
