Macerich Cashes Out Small Fry to Focus on Big Malls

Real Estate
by Danny King

Macerich Co. just had bigger fish to fry. So goes one school of thought behind the Santa Monica-based real estate investment trust's sale of Villa Marina Marketplace. Despite a recent flood of residential development and limited prospects for competing centers in the area, the Marina del Rey shopping center, which includes anchor tenants Gelson's and Sport Chalet, was sold to San Francisco-based M & A; Realty Partners for $99 million on Dec. 26.

"The company has been narrowing its focus in terms of its property type and focusing on larger, regional malls," said Prudential Securities Inc. Managing Director Jim Sullivan, who classified Villa Marina as a "community center."

At 448,000 square feet, Villa Marina was one of the smallest properties in Macerich's portfolio of 46 malls, which includes Westside Pavilion and Santa Monica Place and averages more than 800,000 square feet.

Over the next few months, the company is expected to invest $250 million in the expansion of the Queens Center in New York, in addition to upgrading Boulder, Colo.'s 570,000 square foot Crossroads Mall.

"They looked at this (sale) as a source of capital to fund this project," said Sullivan. "They were able to take advantage of a good opportunity."

But despite Macerich's claim that the property, which it bought in 1996, appreciated by $24 million, its best days may lie ahead.

"All reasons would indicate that it would be a good hold," said Joseph Gabbaian, senior vice president at Grubb & Ellis Co., who alluded to current residential developments by Trammell Crow Residential, as well as the Playa Vista project. "The blueprint is for small retail areas dispersed within the area. It's almost guaranteed that that center will not have competition in the near future."

Back for School

Santa Monica Community College's plans for operations "east of the border" soon will become a reality with its purchase of the 10-acre BAE SYSTEMS Controls site in West Los Angeles.

In what's believed to be the largest transaction of Westside land in recent years, SMC paid $30 million for the property, which sits adjacent to Santa Monica Airport but is technically in the City of Los Angeles. Its four buildings, which total 200,000 square feet, will be used as a satellite campus, its 500 spaces will be used for student parking.

"It's somewhat counterintuitive that Santa Monica (College) would want it for a satellite campus in the city of Los Angeles, but it works," said Matthew Miller, a principal at CRESA Partners who represented London-based BAE in the deal.

SMC officials estimate that moving its Workforce and Economic Development division and ending a lease with Santa Monica Airport for parking spaces will result in a cost savings of $500,000 annually.

SMC plans to finance the purchase with funds from a $160 million bond offering expected to be approved by Santa Monica and Malibu voters in March.

BAE had begun marketing the property during the second quarter of 2001. It had been occupied by either BAE or Lear Astronics, which was bought out by the defense giant, for over 40 years.

"We're operating out of four buildings and multiple floors. It's really not the most efficient layout for what we do," said Larry Stone, manager of communications at BAE SYSTEMS Controls, who added that the sale "offered us a chance to realize significant appreciation" on the property.

As part of the deal, BAE will lease back the site from SMC for 18 months at an undisclosed amount while it looks for a new site, which is expected to be about 150,000 square feet and within a 20-mile radius of the current location.

Close to Home

Disney Concert Hall has Frank Gehry, LACMA recently nabbed Rem Koolhaas, but not to be left out is the Japanese American Cultural and Community Center in Little Tokyo, which has signed Japanese architect Toyo Ito for its upcoming renovation and expansion.

"The primary purpose was to create a dwelling that would be comparable to the other construction going on," said JACCC Chairman Thomas Iino. "But more importantly, we wanted a design that would enhance our operations and integrate the entire campus."

The $15 million renovation will include a 24,000 square foot expansion, and is scheduled for completion for the center's 25th anniversary in 2005.

Ito is best known for Tokyo's Tower of the Winds and the Sendai Mediatheque in Sendai, Japan. He, along with Koolhaas, also participated in the new Museum of Modern Art design competition in New York in 1997.

Industrial Dealing

New industrial properties in the Carson area continue to generate demand. FDL Inc. has signed a lease for a 127,000 space at the Dominguez Technology Center. Total consideration for the five-year deal is $5 million.

Officials for the Kokomo, Ind.-based furniture manufacturer cite the building's security, location and design as reasons for the move from its Santa Fe Springs distribution center. The space makes up about 60 percent of a newly completed building at 1650 Charles Willard St. in the 438-acre campus, which was developed by Carson Cos.

The deal comes on the heels of recent activity at Hewson Co. and Watson Land Co. developments in the area. It also illustrates a reversal of sorts for the South Bay industrial market, whose market had been gradually softening over the course of 2001. At 66 cents a foot, the rent easily exceeds the third quarter 2001 average of 55 cents a foot.

FDL Inc. was represented by Bill Rippberger at Cushman & Wakefield Inc., while John Shumacher, Jeffrey Morgan and Barry Hill of CB Richard Ellis represented the landlord in the deal.

The San Gabriel Valley continues to hold its own, as St. Louis-based broadband communications giant Charter Communications Inc. completed its $20 million purchase of a two-building, build-to-suit campus in the Irwindale Business Center.

The site includes offices for administrative and technical staff and a call center and totals 210,000 square feet.

Josef Farrar, David Kluth and Brian Fennelly of Julien J. Studley Inc. represented Charter while the developer, Trammell Crow Co., was represented in-house by Phil Lombardo.



Staff reporter Danny King can be reached at (323) 549-5225 ext. 230 or at dking@labusinessjournal.com.

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