A retail building on the Third Street Promenade in Santa Monica has sold for more than $26 million as investors bank on the newly renovated Santa Monica Place mall to bring more shoppers to the neighborhood.
The three-story structure, once occupied by a Borders bookstore and more recently by a temporary Kitson boutique, will be upgraded to attract another upscale retailer, the new owner said.
Kitson, a small chain of trendy clothing boutiques based in Los Angeles, has taken over a prominent spot at the entrance of Santa Monica Place on Broadway. The mall has often been crowded since it reopened last month after a $265-million upgrade intended to make it a luxury shopping destination. Tenants include Bloomingdale's, Tiffany & Co. and Louis Vuitton.
"We're counting on their success to spread to the first block of the Promenade," said Dan Blatteis, a Santa Monica real estate broker and investor who purchased the 33,000-square-foot building at 1415 Third Street Promenade through a partnership called ASB/Blatteis Promenade. The seller was another limited liability partnership.
The Promenade was more successful than the adjacent mall for many years and continues to be one of the region's top draws for shoppers, diners and tourists. The transformation of the high-end mall on its south end, however, may raise property values on nearby blocks if flush retailers rush to bask in its glow.
The block of the Promenade nearest the mall is like the intersection of "Main and Main," Blatteis said, using terms for prime real estate locations. "It's high street retail."
Blatteis said he planned to renovate the unattractive 24-year-old building and create "a clean vanilla box" for a new occupant. He said he was negotiating with potential "prestigious flagship tenants" but declined to name them.
Many Santa Monica shopkeepers and landlords have suffered in the recent economic downturn. Large chains and small boutiques alike turned out the lights at several locations and the retail real estate market turned cold.
"There was very little sales or leasing activity in 2009," said real estate broker Steve Algermissen of Cushman & Wakefield, who represented Blatteis in the transaction. "Now more tenants are looking for space."
The 1920s-era Mann's Criterion Theater building on the Third Street Promenade at Arizona Avenue was also recently purchased by investors, Algermissen said.
Some retailers would like to be near Santa Monica Place but still have their own identity outside the mall, the brokers said.
One landlord, architect Tommy Landau, said he had been approached by what he called "high-level" retailers interested in renting or buying his building on Second Street across from another entrance to the mall.
"They want their own signature building," he said.
A spokeswoman for Macerich, the owner of Santa Monica Place, said recent foot traffic numbers weren't available but that more than 100,000 visitors came each day during the renovated mall's first weekend.
"The opening of the new Santa Monica Place has been a tremendous success by every measure," said Anne Singleton, Macerich vice president of leasing. "We continue to hear that the success of our property is benefiting the surrounding retail areas in Santa Monica, including Third Street Promenade, which we view as an anchor to our project."