Two Pavilion Parcels Trade for $14M

Faris Lee marketed the properties in a break-up strategy designed to maximize the property values, according to Richard Walter, president of the Irvine-based firm. Walter and Donald MacLellan, managing director at Faris Lee, represented the ownership of South Bay Pavilion, HREG Genesis Carson LLC.

The 24 Hour Fitness sold for $11.25 million, and Chili’s deal was a ground lease sale for $2.8 million. The fitness club is a newly constructed building at 945 Dominguez Ave. where the health club chain signed a 15-year lease and opened for business in the winter of 2006. The buyer of the property was 24 Fit LLC of Los Angeles, which was in a 1031 exchange and was represented by Nicholas Coo of Faris Lee.

MacLellan notes that Faris Lee targeted 1031 exchange investors with experience in the local market. The marketing strategy was to emphasize the density in the trade area, the fact that the area was lacking in high quality fitness facilities and that the center would draw more customers due to the nearby retail stores.

Financing was an issue for the property because some lenders have been hesitant in the past to lend on fitness centers, according toMacLellan. The buyer put nearly 50% down on the property, with the rest of the funding from a lender who had financed another 24 Hour Fitness property in recent months. "During escrow, the credit crunch hit and many lenders backed out on deals. However, this lender held firm and completed the transaction,” MacLellan adds.

The Chili’s property is at 20760 Avalon Blvd. and was acquired by Los Angeles-based RPM Investments, which was in a 1031 exchange and paid all cash. The buyer was represented by David Maling and Chris Maling of Marcus & Millichap.

Walter says that the strategy of the South Bay Pavilion owners was to maintain ownership of the property and to sell off the outparcels. The South Bay Pavilion, which recently underwent an extensive renovation, includes Target, IKEA, Sears, JC Penney, Big 5 Sporting Goods, Washington Mutual, Jamba Juice, Panda Express and others.