Puente Hills, Del Amo Malls Sold
Investors out shopping for shopping malls have swept up two major retail centers in the Los Angeles area.
Passco Real Estate Enterprises Inc. in Santa Ana, Calif., purchased its first major regional shopping center, the Puente Hills Mall in City of Industry, Calif., for approximately $148 million in mid-May, said William Winn, Passco’s chief operating officer.
The purchase covers 750,000 square feet of the 1.2 million-square-foot mall. Anchor tenants Robinsons-May and Sears, Roebuck & Co. own the rest of the center. Other mall tenants include Burlington Coat Factory, Ross Dress For Less and CompUSA.
The Krausz Cos., a real estate investment firm in South San Francisco, Calif., previously owned the mall.
Earlier in May, it was announced that The Mills Corp., a real estate investment trust based in Arlington, Va., would purchase the region’s largest shopping center, Del Amo Fashion Center in Torrance, Calif., for $440 million.
The 3 million-square-foot mall has been owned for years by The Torrance Co. It is second in size only to the Mall of America in Bloomington, Minn., a behemoth retail outlet that measures 4.2 million square feet and contains a roller coaster and a Ferris wheel.
The Mills Corp. will be making improvements but hasn’t announced specific plans yet.
With a shaky stock market and record-low interest rates, investors have been flocking to acquire real estate, which has been appreciating rapidly in Southern California.
Passco Real Estate, in conjunction with 30 other investors, bought the Puente Hills Mall with the idea of aggressively marketing and leasing the center, which is 88 percent occupied. The group will spend nearly $8 million to improve the property.
“One of the challenges is to increase mall traffic, which is up to about 9.5 million visitors a year,” Winn said. “We’d like to increase that to 12 million to 13 million.”
Winn noted that Circuit City will be moving into the mall later this year, which will increase the occupancy level to 93 percent.
Retail sales at the mall are slightly less than $300 per square foot a year, Winn added, which is below normal.
Ernest W. Hahn, Inc., a national mall developer, constructed Puente Hills Mall in three phases between 1974 and 1975.
The Krausz Cos. purchased the ailing mall in 1996 and gave it a make-over in 1998. Catering to the predominantly Chinese community in the San Gabriel Valley, the new owner had a feng shui master analyze the center court. The expert said the carousel dominating the court was moving in the wrong direction and driving money out of the mall. So Krausz replaced the carousel with a koi pond to create a more serene environment. The company also added a 20- screen AMC Theatres complex.
Passco is offering Puente Hills Mall as an investment product to property owners seeking “tenant-incommon” opportunities under Section 1031 of the federal tax code. Under the code, owners can swap investment property for similar property without having to pay capital gains taxes immediately. When the property sells, owners can cash out or complete another exchange.
Passco joined 30 small investors to amass $56 million in equity and then received a $92 million loan from Greenwich Capital.
Passco previously invested in smaller shopping centers anchored by grocery stores, such as the Rolling Ridge Plaza in Chino Hills, Calif., and the Pavilions Shopping Center in Redlands, Calif.
