Now that Big Lots has announced its move to the old Toys R Us building in Alhambra, the owner of the property at 1401 Huntington Drive in South Pasadena has laid out its objectives for the site and hired a consultant to find a new tenant.
“My goal is to upgrade the retail that was there with a tenant that’ll be able to draw more people, produce more sales and provide better tax revenue for the city,” said Luis Valenzuela, managing general partner of BH Partnership.
Big Lots “had a great run” of over 20 years, but BH is looking for a high volume grocer, pharmacy or specialty retail outlet, Valenzuela said. BH isn’t interested in a restaurant or health club, as those would require permits for more parking space. The existing location at the corner of Huntington Dr. and Fremont Ave controls or shares space for over 100 parking stalls, according to county records.
“The beauty of our property is that it is rare to find a 20,000-to-30,000 square-foot box, and inasmuch as South Pasadena is a high demand area—everyone wants to be there—it gives us an opportunity to throw out a pretty big net.”
The parcel is subject to an annual property tax of $34,361. City spokesman John Pope said the city gets about 24 percent of that. As for sales tax revenue, Pope said municipalities, which rely heavily on sales taxes, have been hit by the national shift from retail outlets to service companies like fitness clubs, so the benefit the city will see from the new tenant will depend largely on what kind of operation moves in. He couldn’t offer a figure for Big Lots’ historic sales tax payments, as that information is confidential. Moreover, sales tax revenue represents only 9.9 percent of the city’s general fund, while property taxes make up 51.5 percent.
BH has hired Pasadena-based Cypress Retail Group to find a new lessee. Cypress partner Bob Walsh told the South Pasadenan News he’s initiated a mail campaign notifying nearly 700 potential tenants or brokers and will actively reach out to the real estate departments of the top 50 prospective tenants.
“We also have a list of who’s looking and who’s not,” he told the South Pasadenan News. Walsh said the pitch is straight forward: the free-standing structure, 23,361 square foot building originally built in 1938 and renovated in 1970, is located in a strategic location serving South Pasadena, San Marino, Alhambra and Pasadena. Over 50,000 cars pass it every day. There are over a quarter million people within a three-mile radius, and at $116,000, the average household income within a mile radius is strong.
Walsh said the retail space market industry relies heavily on confidentially and declined to speculate or take questions about specific prospective tenants. But Valenzuela said there’s been a lot of interest.
Big Lots’ lease runs through next year, but it is unclear how soon they will actually vacate. Walsh said a new lease can take months to negotiate, but “we hope to work toward having the new tenant open in a permitted way sometime in the next six-to-nine months.”
Walsh also wanted local leaders to know the vacancy is a great opportunity, “We are optimistic it will be a win for the community and the landlord in that order.”
He wouldn’t discuss potential terms, but for what it’s worth, Big Lots recently reported that the average lease for its 1,400 U.S. stores is $207,600 per year, including property tax.
Big Lots told its investors that store leases “generally obligate us for fixed monthly rental payments plus the payment, in most cases, of our applicable portion of real estate taxes, common area maintenance costs, and property insurance. Some leases require the payment of a percentage of sales in addition to minimum rent. Such payments generally are required only when sales exceed a specified level. Our typical store lease is for an initial minimum term of approximately five to ten years with multiple five-year renewal options.”