California Mart Is Sold to Hertz Investment
The owners of the California Mart, the center of Southern California’s apparel and fashion business, have agreed to sell the downtown Los Angeles showroom and office complex to Hertz Investment Group for about $90 million, according to people familiar with the deal.
The Los Angeles-based real estate investment firm is in escrow to buy the 2-million-square-foot California Mart from Equitable Life Assurance Co., which assumed ownership in 1994 after the complex’s founders, the Morse family, defaulted on about $250 million in debt.
Hertz will be under pressure to boost occupancy--now about 70%--and expand upon the improvements Equitable made at the California Mart, which was threatened in the early 1990s with mass tenant defections. The complex, which consists of four buildings at Ninth and Main streets, is home to more than 1,200 showrooms for designers, wholesalers and manufacturers.
“This is like a 24-hour trade show. It’s a unique commodity,” said apparel sales and marketing consultant Peter Jacobson, who is also president of the California Mart’s tenant association. “Anyone who is buying this as just a [typical] building is not going in the right direction.”
The acquisition would be one of the largest for Hertz, which is headed by Judah Hertz. In the mid-1990s, Hertz dived into the downtown Los Angeles real estate market when values were depressed by the recession and most investors were avoiding the area. His purchases included the International Jewelry Center and the California Jewelry Mart.
His other holdings include such landmarks as the Art Deco Oviatt Building in downtown Los Angeles and the Wiltern Theatre complex along Wilshire Boulevard.
People familiar with the deal said the firm emerged as a serious contender for the California Mart as soon as the property went on the market in January. Officials at Hertz declined to comment. Cushman Realty Co. broker Carl Mulhstein, who is handling the sale for Equitable, also declined to be interviewed.
In the early 1990s, many California Mart tenants sought to establish rival apparel centers on the Westside and in the South Bay as dissatisfaction grew with building operations, rent hikes and concerns about downtown security and cleanliness. The establishment of a business improvement district has helped address concerns about the surrounding neighborhood, and Equitable spent more than $20 million to upgrade the complex.
Now, California Mart tenants say Hertz must be willing to spend more money on promoting the industry as well as the complex.
“They could make this a cornerstone of the global [fashion] industry,” said Ilse Metchek, executive of the California Fashion Assn., which is based in the California Mart.
