A vacant crafts store in one of Los Angeles' busiest corridors is set to make way for a public park, thanks to a city's ability to outmaneuver supermarket chains, medical users and other prospective buyers of the property.
The city of Glendale beat out national retail chains and landlords to acquire the former Joann fabrics store at 1000 S. Central Ave. for $24 million, or about $709.68 per square foot. Private investor Aria Investments sold the site at a premium; it paid $17.7 million for the property in 2014.
“This site had so much going for it — location, size, flexibility — that it attracted every kind of buyer you could imagine,” Sheila Alimadadian, senior director of investments at Marcus & Millichap, which represented the seller, told CoStar News.
The deal involving the 33,818-square-foot former Glendale store that was sshut in January — after years as a retail anchor for the neighborhood — provides a glimpse into potential uses for the chain's spaces around the United States.
The firm filed for Chapter 11 bankruptcy this year and decided to liquidate and close all of its 800 stores, 75 of them in California. Those closings have added to a wave of U.S. retail vacancies, opening the door for landlords and investors to repurpose well-located big-box space nationwide.
One such new owner is the city of Glendale. Officials plan to replace the 2.39-acre parcel with a park, addressing what they call a “very high need” for green space in south Glendale.
The area around the property has just 0.3 acres of parkland per 1,000 residents, the lowest ratio in the city, according to public filings. The proposed park, with walking paths and a water feature, would be the fifth largest in south Glendale.
Glendale, situated about 6 miles north of downtown Los Angeles, is one of the county’s most stable and hard-to-penetrate retail markets, bolstered by its affluent residential base, two major regional malls and a reputation for clean, well-managed streets, according to CoStar research. The Joann site is surrounded by dense housing and major shopping destinations like the Americana at Brand and Glendale Galleria.
How the city won
When the store closed in January, the owner at the time — Aria Investments — had just closed a refinancing of the property and faced some choices: Find a new tenant, redevelop the property, or sell it and face a tax penalty from the refinancing.
Multiple unsolicited offers for the site started coming in as news of JoAnn’s exit spread, with grocers, electric vehicle firms and experiential retailers showing interest.
The city emerged as the most attractive buyer due to a tax code provision and other financial incentives. The city’s purchase under Internal Revenue Code Section 1033 would allow the seller to avoid the refinancing penalty. The city was also willing to pay a competitive price that included all closing costs, helping to tip the deal in Glendale's favor.
A fast-closing municipal buyer was more appealing than dealing with private buyers who might sell or walk away, Alimadadian said. And since the seller lives in Glendale, there was also a civic incentive to sell for a public project rather than hold out for just a profit-driven deal.
The city's $24 million purchase was funded through a combination of local and regional sources: $8 million in park mitigation fees, $14.3 million in capital improvement funds and $2.3 million in Measure A grant funds from the Los Angeles County Regional Park and Open Space District.
“The city got a site it’s wanted for years and my client achieved an excellent return,” Alimadadian said.