School District joins with developer to build center.

Project could set precedent for cash-starved schools

In a rare move, a Southland school district and a real estate development company have teamed up to turn unused school recreation fields into a shopping center.

The Downey School District has joined on as an equity partner with the Koll Co. of Newport Beach to turn an alternative high school's fields into a 100,000 square-foot shopping center called Woodruff Square.

The development, still in the planning stages, is slated for the busy intersection of Imperial and Woodruff, on the grounds of Columbus High School, which currently serves as both an alternative school and an adult school.

Woodruff Junior High, the previous school on that site, was shut down in 1972, according to Downey School District officials.

"Everybody seems to be watching this project to see how it fares," said Kevin Barry, a retail marketing specialist at the West Los Angeles office of brokerage firm Grubb & Ellis Co.

He said a broker in the Dallas office of Grubb & Ellis recently received a call from school district officials in Dallas, who had heard about the Downey project and were interested in pursuing a similar joint venture.

Eric Bathen, a Costa Mesa lawyer representing a number of school districts, including Downey, said it is rare for a school district to get involved with a commercial project because school properties are usually located in residential areas.

He did say, however, that the Los Angeles Unified School District has been involved in developing parking garages on surplus property, and the ABC School District in Cerritos is currently pursuing a commercial venture.

Bathen further said he expects more interest in such ventures in the future because school districts are so broke.

Under the Downey joint venture, the school district would operate as a limited partner, owning 75 percent of the shopping center and land, and getting 75 percent of the profits generated from lease income, Bathen explained.

The Koll Co. would operate as general partner and 25 percent owner. The Newport Beach-based developer also would be responsible for securing tenants.

Kevin Deighan, vice president of the Koll Co., pointed out that this project is unusual for Koll because the company's other joint ventures are 50-50 partnerships.

Deighan also stressed that the $10 million to $15 million project is still in the "due diligence" stage, and there is no guarantee that the partners will succeed in securing construction financing. But if all goes as planned, the new shopping center will open in late 1993, he added. But the Koll Co. needs to "sew up" a few more tenants to achieve that goal.

So far, a 50,000-square-foot grocery store has signed on as an anchor tenant. But that is the only tenant signed up so far, Deighan confirmed.

The Koll Co. is, however, now negotiating with a 25,000-square-foot tenant interested in possibly moving into the center, he added.

The center's main anchor tenant will be Shop N Cart, a grocery store supplied by Fleming Cos. Inc., the $13 billion (1991 revenues) Oklahoma City-based food distributor.

Ron Frost, a spokesman for Fleming, said the Downey store is part of the company's strategy to "rapidly expand the number of retailers that we serve."

Frost said Fleming Cos. typically doesn't own stores. Instead the company finds an independent operator to run the store and Fleming supplies it.

Frost said Fleming started making its push into the L.A. market in January. But he said he did not know how many L.A. County stores the company is now serving.

Fleming Cos., which operates in 36 states, currently has 34 distribution centers -- including one in Phoenix and one in Fresno -- and supplies 5,000 supermarkets across the country, said Frost.

He added that 65 percent of Fleming's clients are independent operators -- chains with 10 or fewer stores.

Barry of Grubb & Ellis said that, in addition to the 25,000-square-foot tenant with which Koll is currently negotiating, the developer is looking to land tenants for another 20,000-square-foot store and 15,000 square feet of small-shop space.

Koll will also be handling the outright sale of two parcels of land on the Downey site, which Barry said would most likely accommodate fast-food franchises or gas stations, or one of each.

He asserted that tenant response to the project so far has been good, and that he expects to have more signed leases by next month.