A tech entrepreneur who wants to bring the beachfront city of Santa Monica near Los Angeles back to its pre-pandemic glory has bought more traditional storefront property, betting that offering entertaining experiences will lure more customers than standard retail.
XYZ.rent, a commercial property investment firm affiliated with Daniel Negari, has shelled out $16.3 million for a vacant, two-story retail property totaling 50,000 square feet at 402 Santa Monica Blvd. from German asset management firm Manova Partners.
The sale, though a nearly 50% price cut from the prior transaction, was among the most expensive retail deals for Santa Monica in 2025, as area availability has climbed to 15.3%, the highest in nearly a decade, according to CoStar data, while rents have fallen 2% in recent years.
Negari is among a growing group of investors capitalizing on discounted property prices to transform traditional U.S. retail spaces into attractions that draw bigger crowds. Netflix House locations and Dick's House of Sport are opening in former department stores nationwide, while landlords add tenants offering experiences including FunLab and Slimeatory in malls where apparel and accessories tenants once dominated.
The former department store building was most recently tenanted by outdoors retailer REI, which vacated in February 2024 partly because of concern about the homeless population, according to Vince Muselli, president of Muselli Commercial Realtors, who has handled leasing of the property for 15 years.
After REI closed, the property "had a lot of destination-type entertainment uses looking at it — gyms, entertainment concepts, even operators that mix food and events,” Muselli told CoStar News, pointing to the location's desirability. But those tenants weren't able to close deals due to unfavorable lease terms.
The new owner is "in a much stronger position than the prior ownership ever was,” Muselli said. "That flexibility is what this building needed to finally move.”
Retail reset
The deal adds to XYZ's holdings in Santa Monica. In 2024, the firm bought an eight-building shopping and office hub on the Third Street Promenade from Federal Realty for $103 million.
XYZ recently won approval from the Santa Monica City Council to add a Times Square-style, 800-square-foot billboard to its properties at 301 Arizona Ave. and 1202 Third Street Promenade in a bid to boost energy in the neighborhood and revenue for the city. It's a reversal for a town that banned billboards in 1985 even as Los Angeles neighborhoods like West Hollywood and downtown embraced them.
Tenants like Nordstrom, Rite Aid and H&M have recently closed stores in the region, while new experiential users like the Museum of Illusions, Holey Moley Golf Club, the Teenage Mutant Ninja Turtles Pizzeria and pickleball chain Pickle Pop have opened.
The recently traded building’s backstory mirrors Santa Monica’s retail cycles: it was built for Toys R Us after an older department store on the site was demolished following earthquake damage, Muselli said, then later changed hands to landlord CIM Group as Toys R Us faltered and vacated.
CIM tenanted the property with REI and Pottery Barn and sold it to Manova Partners; REI decided to vacate after opening a Marina del Rey store. Pottery Barn is expected to leave its space in the building in coming months.
Muselli said the biggest challenge wasn’t the address — it’s a prominent corner with a major parking structure across the street — but the building’s design: a two-story layout with a dramatic internal staircase, elevators and second-floor conditions that limited the pool of users and made subdivision difficult.
Muselli now expects the building to finally land a tenant suited for the space and able to help draw visitors to the area. A musical venue operator like Live Nation or an experiential concept would make an ideal user, he added.
Bringing back experiences
Muselli served on the board of the Third Street Developers Corp. during the early decisions that turned the old Third Street Mall into the Promenade, and when cinemas and entertainment acted as the magnet that made the district work.
Those draws are thinner today, he said, as downtown wrestles with vacancies, reputational headwinds tied to homelessness and rent resets, though he pointed to moves like the return of Barnes & Noble as a positive signal even as other brands, including Sephora, have pulled back.
At the south end of the Third Street Promenade, Santa Monica Place, the open-air shopping center designed by Frank Gehry, is being repositioned after its owner, Macerich, defaulted on a $300 million loan last year.
Muselli said he expects initiatives such as the city’s open-container policy, street and patrol changes, and more active outreach to help the district regain momentum, and he sees large entertainment operators as the kind of catalytic user that could bring consistent traffic back.
Meanwhile, retail deals are gathering steam in the neighborhood. The purchase of an empty former Rite Aid by supermarket chain Trader Joe's ranks as the most expensive retail sale in the past two years in the affluent beachside city roughly 15 miles west of downtown Los Angeles, according to CoStar data.
“You can’t change the fundamentals," Muselli said. "The location, the beach, the weather, the parking. Santa Monica always finds its way back, and I think this property could be part of that next reset.”
For the record
Eastdil Secured represented the seller in the deal. In addition to Muselli, Muselli Commercial Realtors' Evan Pozarny and Laura Pozarny are managing leasing at 402 Santa Monica.