Glendale mall rings up sale in deal with big national investor. (Real Estate Awards--Dealing in Hard Times).

EVEN in a year with soaring commercial real estate prices, the sale of the Glendale Galleria to a Chicago real estate investment trust for $415 million made some jaws drop.

General Growth Properties Inc., the nation's second largest mall operator, purchased the 26-year-old 632,000 square-foot shopping mall in late October, marking the single largest commercial real estate transaction in Los Angeles County last year.

The deal, which comes to $657-per-square foot, does not include the 870,000-square-foot adjacent building that houses Macy's, Robinsons-May, Nordstrom, Mervyn's and J.C. Penney.

The $657 figure dwarfed other high water mark prices reached last year, including the 220,000-square-foot Westwood Marketplace, which sold for $357 per foot, and the 410,000-square-foot Paseo Colorado in Pasadena, which sold for $278 per foot.

"It was the largest transaction to happen in Los Angeles last year. And it's the biggest mall deal in the country," said Christopher P. Hoffmann, a managing director at Eastdil Realty, who helped broker the deal for the seller.

The selling group included developer Donahue Schriber, the New York State Teacher's Retirement System, and insurance giant Cigna Corp.

General Growth's chief executive, John Bucksbaum, said price is relative, noting that because the mall's tenants average annual retail sales of $525 per square foot, the company was willing to pay a higher price.

"The Glendale Galleria is a very productive mall' Bucksbaum said. "These days you only get one shot at malls like this, and we didn't want to miss out on this opportunity, which we didn't think would come around again for a long time."

General Growth bought the Galleria in partnership with the New York State Common Retirement Fund, the pension fund for New York's public employees. Teaming up with pension funds on large purchases is a common practice used by mall holding companies to leverage better returns.

The acquisition gives General Growth, which also owns the Northridge Fashion Center and Fallbrook Center, its first flagship West Coast property.

Stuart Axelrod, an analyst with Lehman Brothers, said the Galleria is the second-best mall asset in Los Angeles and Orange counties, topped only by the Del Amo Fashion Center in Torrance, the nation's second largest mall property.

Even so, Axelrod is concerned about the price paid for the mall, which he characterized as "a stretch."

"The acquisition looks pricey and somewhat surprising given (the company's) track record of pricing discipline," he said. "No question, owning a dominant West Coast mall adds to its overall franchise portfolio. The question is at what price."

Still, Hoffmann said the price wasn't out of line with what others were bidding on the property. While he declined to cite specific companies, Hoffmann said the next closest bids were not far behind General Growth's best offer.

"It's a very special property," said Stephen Gabriel, associate director of the Ziman Center for Real Estate at UCLA's Anderson School, one he said was not out of line for a successful regional mall of comparable size in the market.

"It comes down to the rate of return on equity," he said.

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Project: Glendale Galleria, purchase by General Growth Properties Inc.

Players: Christopher P. Hoffmann, managing director at Eastdil Realty; Joel Bayer, chief investment officer of General Growth Properties.

The Deal: General Growth Properties acquired the Glendale Galleria for $415 million, or $657 per foot for the 632,000-square-foot mall. The property gives Chicago-based General Growth a flagship presence on the West Coast and highlights the high price mall properties are fetching in Los Angeles County.