A Los Angeles-based investment firm has become the latest to try its hand with Block 37, the downtown development site that has defied predictions of success since the 1980s.
CIM Group said Monday it has acquired the block’s five-story retail complex. Opened two and a half years ago, the 275,000-square-foot complex that fronts on State Street is only 30 percent occupied.
The seller was Bank of America Corp., which foreclosed on the property last year after its developer, Joseph Freed and Associates LLC, defaulted on a debt estimated at $206 million. Sources said the property sold for approximately $84 million.
CIM said it “plans to lease the balance of the building to national and local retailers” and cited its experience in improving retail developments on the West Coast. It is best known for its investment in the Hollywood & Highland commercial complex, which includes the Kodak Theatre, site of the Academy Awards.
At Block 37, CIM will attempt to do better than a line of prominent investors and developers who could not fulfill the city’s vision of a retail and entertainment wonderland on the block between Macy’s and the Daley Center.
Freed managed to get the site open and attract specialty retailers. But once Bank of America took over, attempts to draw larger, destination-type operations to fill upper floors foundered.
Experts said Bank of America would not approve money to improve the space and make it attractive for tenants. A bank spokeswoman declined to comment.
“It’s been two-plus years since I’ve made any offers for any of that space,” said Allen Joffe, principal of the firm Baum Realty Group LLC, which represents merchants in their searches for space. He said CIM will need attractions such as theaters, either for live shows or films, comedy clubs and famous restaurants to attract people into the complex.
“It doesn’t get any easier from here for CIM,” Joffe said.
Several high-profile tenants have entered into talks for the space but backed out as the economy worsened and the ownership remained in flux. They include Teatro ZinZanni, a Seattle-based dinner-theater troupe with elements of a circus, the Muvico theater chain and a restaurant backed by the owners of Chicago’s Gibsons steakhouse.
CIM executives could not be reached, with a spokeswoman citing a policy of not giving interviews.
The company purchased the Hollywood & Highland complex in 2004 for $201 million and claims that it has increased its net operating income 10 times since then. With that and other investments in Hollywood commercial properties, the company asserts on its web site that it “has been able to attract major office and retail tenants that have transformed the area into one of the top shopping, dining and entertainment destination for millions local customers and tourists who visit every year.”
The Block 37 sale does not include an office high-rise at Dearborn and Washington that was part of the same planned development.
Long-term design plans call for hotel and residential high-rises for which the retail complex would serve as a base. The city also proposed building a new transit connection beneath the property with express train service to the airports, but that idea has been mothballed.