Paseo Colorado Sale Seen Near as TrizecHahn Divests
Real Estate
by Danny King
TrizecHahn Corp., which has announced a years-long plan to exit the retail property business, is looking at a faster exit for one of its local developments.
The Toronto-based developer has begun talks with prospective buyers for Paseo Colorado, less than half a year after the Pasadena mall’s September opening. Excluded from the offering is the 155,000-square-foot Macy’s anchor store, which is connected to, but separate from, the 410,000 square-foot project.
“We are already out there discussing the property with potential buyers,” said TrizecHahn spokesman Rick Matthews, who declined to specify which companies had been contacted. “The property is ready to be marketed we could be working a deal shortly.”
The company announced two weeks ago it was taking a $285 million write down in asset value for a number of properties. Some $217 million of the write-down was attributed to its Hollywood & Highland project, which faced cost overruns and now, a drop-off in tourism.
But Paseo Colorado is a different story. “They appear to be getting off to a fairly decent start in a fairly weak retail environment,” said Richard Giss, partner at Deloitte & Touche LLP’s retail services group.
“The tenants have all opened very strong,” said Colliers Seeley International Inc. Senior Vice President Bill Bauman, who, along with a number of other retail brokers, estimated the lease-up rate at well above 90 percent.
Paseo Colorado has yet to benefit from an adjoining residential development, which will deliver its first units next month and should be complete in April. The 387-unit complex, which is about 10 percent preleased, was developed and is owned by Atlanta-based Post Properties Inc., and is not part of the package offered by TrizecHahn.
The company did not adjust the asset value of Paseo Colorado as part of the broader write down. “We did not need to write that down,” said Matthews, who added, “it’s not going take the amount of time (that Hollywood & Highland will) to fully stabilize.”
But making back the $110 million it spent on construction of its 410,000 square foot portion of the center could prove difficult. The $268 per square foot figure required to break even would exceed the dollars-per-square-foot figures in recent sales of centers like Santa Monica Place, which sold for $232 a foot in 1999, and Westside Pavilion, which sold for $226 a foot in 1998. It would trail the $365 a foot reportedly paid for the Century City Shopping Center in 1999.
Steve Sakwa, first vice president of Merrill Lynch and Co. said that if a deal were in the works, TrizecHahn would be selling at a premium. “If they were getting ready to sell it (at a loss), they would’ve had to have taken a charge,” he said.
Lee Heads East
Mid-Wilshire’s biggest landlord appears to be headed east.
Jamison Properties Inc. is in escrow to buy Hertz Investment Group’s 150,000 square-foot Popular Center at 354 S. Spring St. The building was listed at $8 million, according to Jamison Properties’ president, David Lee.
“We’re negotiating right now,” said Lee, who expected the deal to be finalized sometime this week.
The purchase would be the first downtown for Jamison Properties, which owns 7 million square feet in the Mid-Wilshire area.
Chris Runyen, vice president at Grubb & Ellis Co., said the Popular Center, which is located at the eastern edge of the Central Business District and whose offices are considered Class-B and Class-C space, is a likely target for an investor making his first foray into downtown.
“It’s a good start,” said Runyen, who alluded to the number of loft conversions taking place in the immediate area. “No one knows where that area’s going to be in two years, but it certainly has good upside potential.”
The property, which was purchased by Hertz Investment Group in 1998, is about 65 percent leased. Its primary tenants include California Redevelopment Agency, which leases 65,000 square feet, and Banco Popular, which has 6,000 square feet on the ground floor. Lease rates range from $1.25 to $1.45 per foot per month, according to Lee, who said Jamison Properties will continue to expand its presence downtown.
West Valley Relief
Two Warner Center leases totaling 48,000 square feet provided a bit of relief for a West Valley office market beset by negative absorption and rising vacancies during the latter half of last year.
Book publisher Glencoe/McGraw-Hill renewed its lease for five years for 20,000 square feet and took an additional 8,000 square feet at 21600 Oxnard St. in a six-year deal. Total consideration for the two deals was $4.2 million.
Meanwhile, medical device producer St. Jude Medical S.C. Inc. moved its Sylmar offices to a 20,000 square-foot space at 21700 Oxnard St. in a five-year deal worth $3.1 million.
That two “old economy” companies went against the current trend of tenants signing short (two to three years) extensions spoke well for the market, according to Dave Solomon, senior associate at CB Richard Ellis.
“They both made long term commitments,” said Solomon. “They are certainly not dot-com or tech.”
Much of last year’s market softening in the West Valley was attributed to the failure of technology-related firms. Fourth quarter vacancy rates were 17 percent, up from 10 percent for the year-earlier quarter, according to Grubb & Ellis Co., while 279,000 square feet of space was put back on the market during the third and fourth quarters combined.
Insignia/ESG Inc.’s Todd Doney, Armando Nunez and Nico Vilgiate represented Glencoe/McGraw Hill on its deal, while Grubb & Ellis’ Jim Lindvall, Jim Linn and Todd Lorber represented St. Jude Medical. Solomon and CB Richard Ellis’ Don Hudson represented the landlord, Warner Center Properties, on the deals.
Alschuler Clarification
Carol Roth, senior vice president at Staubach Co., was omitted from last weeks’ item on Alschuler Grossman Stein & Kahan LLP’s sublease deal with Turner Broadcasting at Santa Monica’s Water Garden. Roth represented Turner on the deal.
Staff reporter Danny King can be reached at (323) 549-5225 ext. 230 or at
[email protected].
