Gardena Marketplace

GARDENA, CA-Affiliates of New York City-based Glenmont Capital Management and locally based Cal-Coast Cos. have recapitalized the 98,595 square-foot Gardena Marketplace, a grocery-anchored center that has consistently maintained close to 100% occupancy, for $11.7 million. Lawrence A. Kestin, managing principal of Glenmont, said the acquisition of the center “represented a unique opportunity to acquire an in-fill, 100%-occupied, high-quality retail center on an off-market, opportunistic basis—a rare scenario for core assets.”

The shopping center, which opened in 2002, is situated on approximately 10.5 acres at the high-traffic intersection of Artesia Boulevard and Western Avenue, near interstates 110 and 405. It houses retail, service, and professional tenants, such as Albertsons, Starbucks, Burger King, Quiznos Subs, Baskin Robbins, GNC, Blockbuster Video and Papa John’s Pizza, among others.

Kestin noted that the sale of the property “was partly driven by tax considerations and coincided with the 93% year-over-year increase in investment sales during the last quarter of 2010 resulting, in part, from the expiration of the California tax credits.”

The Glenmont/Cal-Coast venture will pursue what the partners describe as “a multifaceted strategy for maximum investment value.” Continuing to renew leases as they expire, the venture “will also evaluate potential value-added exit strategies that are alternatives to a typical institutional sale,” according to an announcement regarding the deal.

The venture will also continue to evaluate the feasibility of converting portions within the shopping center into separate condominium units, selling each unit to either existing tenants or individual investors, which is anticipated to generate sales of approximately $650 per square foot--a sellout that is nearly double the venture’s cost basis.

Joseph Smith, principal of Glenmont Capital, explained: “We hope to maximize sales proceeds using a retail-condo exit strategy. Given the demand for small, well-located commercial real estate investment opportunities in the Los Angeles area, the sale of the Gardena Marketplace in portions should increase the depth of the buyer pool as a result of the more modest amount of capital required to buy the individual condo interests.” In addition, Smith pointed out, “The presence of low-cost debt in the marketplace makes acquisitions affordable. These dynamics are expected to ultimately increase sales proceeds.”

Ed Miller, CEO of Cal-Coast, said the partnership with Glenmont Capital “allows us the flexibility to pursue and expand upon an innovative disposition strategy utilizing retail and office condominium and parcel exits.”