Development Team
Owners/Developers
Katell Properties, LLC
Long Beach, California
www.katellproperties.com
Capital Visions Equities
Los Angeles, California
Architect and Site Planner
Nadel Architects, Inc.
Los Angeles, California
www.nadelarc.com
Project Data
Site Area
22.4 acres (9 ha)
Facilities
250,000 square feet (23,226 m2) total building area
83,000 square feet (7,711 m2) landscaped open space
1,283 parking spaces
Land Use
retail
Completion Date
August 2004
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Chesterfield Square
Los Angeles, California
For a decade following Los Angeles’s civil unrest in 1992, the South Central neighborhood was in a downward spiral of economic disinvestment, loss of pride, and loss of hope. Chesterfield Square, an infill community shopping center, was the first meaningful development project to occur in South Central in over a decade. While offering the community a commercial anchor and a point from which to finally rebuild, it also has yielded financial returns for its investors.
“If I didn’t think this was going to make money, I wouldn’t have done it,” says lead developer Gerald Katell, who was motivated by a 1999 report from Pepperdine University that pointed to a strong consumer market: The residents of South Central were spending $900 million a year outside their neigh-borhood, the average household income was $37,000 (35 percent higher than the census and tax records), and 500,000 people lived within a three-mile radius of South Central. Many houses in the neighborhood were still well maintained, but the commercial corridors—dominated by barred windows, chain-link fences, and spray-painted graffiti—presented another picture.
Christopher W. Hammond, CEO of Capital Visions Equities and this project’s codeveloper, had put down a $100,000 deposit on an 11-acre (4.45 ha) industrial site planned for subsidized residential development. The site’s location near a major intersection (Western and Slauson avenues) prompted Katell and Hammond to consider a community retail development, which would require significant additional acreage. The developers had the strong support of the community in assembling the remainder of the site.
Katell personally guaranteed a 90 percent land loan at a blended interest rate of 19 percent. Home Depot’s purchase of a pad site triggered a construction loan and mezzanine financing from Bank of Amer-ica. Home Depot’s commitment to an anchor position of 132,000 square feet (12,263 m2) encouraged Food 4 Less to lease 60,000 square feet (5,574 m2). When the property was 93 percent leased, the developers closed a 7.16 percent permanent loan with Nationwide Life Insurance, which they recently retired with a new loan from Greenwich Capital at 5.57 percent.
Walgreen’s, at 17,125 square feet (1,591 m2), is the third major tenant. One-quarter of the 17 smaller tenants are local chains or locally owned. The median size of the smaller stores is 1,508 square feet (149 m2).
The design of Chesterfield Square is relatively simple—a happy coincidence of what the neighbors wanted and what could be afforded for the project to pencil out. The developers and neighbors were adamant about not wanting the type of iron fences and concertina wire that isolate strip centers in this neighborhood, so five-foot-high (1.5 m) grassy berms surround the center’s three street sides.
Other ameliorating touches in this project are generous landscaped areas and top-of-the-line tenant fixtures and furnishings. Almost 600 new jobs have been created at Chesterfield Square, 60 percent of which are held by neighborhood residents. With strong sales that make Chesterfield Square’s tenants top performers in their respective chains, tenants pay rents that are nearly as high as those on the west side of Los Angeles. The Food 4 Less is one of the top producers in that chain, the Radio Shack store is one of the top three Radio Shack locations in the state, and the Home Depot is grossing more than the projected estimates. “This project was a win-win for all involved—the community, the retailers that saw the potential, the city of Los Angeles, the construction and permanent lenders, and the developers,” says Katell, adding that Chesterfield Square “is the project of which I am most proud in my 41 years of development and it points the way for others who may now take a chance on inner-city development.”
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