Retail Developer Pays Big for Land Site

The land site is 30,000 square feet.

SANTA MONICA—Developer Cadence California has acquired a former Bank of America building in Santa Monica for its land value. The developer purchased the 30,000-square-foot site for $1,400 per square foot, or a total of $13.5 million, from a joint venture between UDR and a local developer. It plans to redevelop the property into a retail center with onsite parking, a rare amenity in Santa Monica. “The buyer saw this as a great opportunity to buy arguably one of the last retail properties that has ample parking, particularly on Wilshire Blvd,” Alex Kozakov , a broker at CBRE , tells GlobeSt.com. “With the movement of retailers and investors wanting to be in the dense urban high-street markets that are flooded with discretionary income, this fit all of the check marks.” Kozakov represented the buyer and the seller in the transaction along with his colleague Patrick Wade . The seller, also a developer, purchased the site in 2011 to develop a mixed-use property, but was never able to get the project through approvals. “They felt it was the right time in the market to divest from the asset and take some risk off of the table,” says Kozakov. “They have a number of other developments across the Westside and in Downtown. They felt, where the market is today, that they could make a healthy return on their asset.” The sales team brought the property to market unpriced as a redevelopment opportunity, and received ample interest from residential, mixed-use and retail developers as well as owner-users that wanted to convert the 9,370-square-foot bank building into a creative office. While they ended with a high price-per-square-foot, Kozakov says that it is consistent with the market. “It really comes down to supply and demand,” he adds. “There is not a lot of supply on the market and the demand is vast from really around the globe. We had a number of offers and we did go through a managed bid process that I think created some value at the end of the day for the sellers.” While development can be difficult, retail development, especially with parking, is better received by the community. The market has a sub 3% vacancy rate , making this a great opportunity for the developer, as well. “This is one of the most desirable markets to develop and invest because they have all of the things that people want: it is near the beach, a ton of amenities, a lot of businesses and direct access to the 405 and several freeways,” says Kozakov. “The challenge that you always run into in Santa Monica is getting things passed.  The city and local residents want things to stay the same, so it can be a difficult place to develop in.” The buyers have not yet drawn plans for the new space, but Kozakov imagines that the space will include restaurant tenants, which are popular in the area.