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HAWTHORNE, CA-The Costco Wholesale Corp. membership warehouse chain has signed a 15-year lease for a 128,000-square-foot former distribution facility that San Francisco-based AMB Property Corp. has converted to retail use as the best value-add strategy for the property. The building, located at 12530 S. Prairie Ave. in the Los Angeles International Airport submarket, will house a Costco Business Center, a version of the retailer’s stores that carries many of the same products found in standard stores but in larger sizes.

The project, which was completed in 1998 as a distribution center, was at one time known as LAX Cargo Center and once housed air freight operations. AMB studied alternative uses for the property after a tenant vacated the space in 2007.

Kim Snyder, managing director of the Southwest Region for AMB, says that the company decided on the conversion to retail use for a large customer after an analysis showed that the space represented “a good example of a value-added conversion opportunity in our existing portfolio with the potential for significant increases in property value.” City of Hawthorne officials agreed that the conversion would benefit the city as well through the long-term positive impact of reducing truck traffic and increasing sales tax revenue.

Costco will complete extensive tenant improvements, including the elimination of truck doors, in order to convert the space to business-to-business retail usage. The Costco Business Centers focus on business-to-business wholesale products.

AMB was represented by Jeff Keronochan of Fisher & Co. and Dave Drummond of Colliers International. Costco was represented by Steve McArthur of Northwest Atlantic and Jay Jasaitas of Larem. Terms of the deal were not disclosed.

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