Paseo Colorado Center Is Sold

Yet another area mall has been snapped up.

Developers Diversified Realty Corp., the builder of the Pike retail project on the Long Beach shore, said it and a partner would buy the Paseo Colorado shopping center in Pasadena for $114 million from Trizec Properties Inc.

Developers Diversified said in a Securities and Exchange Commission filing that it was acquiring 25% of the site for $28.4 million. The lead buyer was not identified, but Pasadena real estate sources say it is Lehman Bros. Executives at the investment bank couldn’t be reached for comment.

Paseo Colorado’s 565,000 square feet of retail space is almost fully leased a little more than a year after its debut. Outlets at the open-air complex include Macy’s, Gelson’s and Pacific Theatres.

The sale of Paseo Colorado underscores the desirability of Southern California shopping centers to large investors, which have bought several malls in recent months. Among the others to change hands: Glendale Galleria and the Century City Shopping Center.

Experts say several factors are behind the trend. For one thing, retail real estate is more healthy in the Southland than in many other parts of the country. “We haven’t been hit as hard as other areas,” said Aubie Goldenberg, a retail analyst at Ernst & Young in Los Angeles.

He noted that malls such as Paseo Colorado have become magnets for people with disposable income, as they spend their leisure time seeing movies, dining or relaxing at spas.

At the same time, Goldenberg added, mall occupancy rates have been consistently stronger in recent years than those in the office sector, which has suffered from corporate downsizing.

The demand has enabled landlords to raise retailers’ rents above the previous peaks of pre-recession 1990, said Michael Epsteen, a Santa Monica real estate broker who represents chain-store tenants.

Meanwhile, sellers have their own motivations. Some investors that paid for mall developments years ago are now ready to unload the properties and take their profits, Epsteen said.

Among today’s top retail buyers are mall operators such as Westfield America Inc. of Los Angeles, which acquired the Century City Shopping Center, and real estate investment trusts such as Developers Diversified.

The Cleveland-based company also is developing the Pike at Rainbow Harbor, a $130-million retail and entertainment center on the Long Beach shoreline. Craig Trottier, an executive with the firm, said Developers Diversified intends to acquire more Southern California properties when opportunities arise.

On its books, Chicago-based Trizec valued the retail portion of Paseo Colorado at $90 million, said spokesman Rick Matthews. The 387 apartments that rise above the mall are owned by Post Properties Inc. and aren’t part of the sale.

Trizec isn’t totally in a divesting mode. Its Hollywood & Highland project in Hollywood and Desert Passage mall in Las Vegas have been taken off the market for now, Matthews said.