Developer Mike Harrah hopes to revive his stalled One Broadway Plaza office tower in downtown Santa Ana and is trying to sell a theater he developed as part of the effort.
Harrah, owner of Santa Ana developer and landlord Caribou Industries, has brought a revised development plan for One Broadway—proposed as Orange County’s tallest building—to the city’s Planning Commission.
A hearing is scheduled for this week. Santa Ana’s City Council could take up the matter in early July.
Harrah is asking the city to remove a requirement approved by voters in 2005 that One Broadway be at least half leased before construction can start on the 530,000-square-foot tower.
Those “rules were set six or seven years ago,” he said. “It’s a different world now” in the office market.
Harrah also wants the city to help him get about $1.5 million in yearly tax incentives, which would run for about 10 years and help offset some costs associated with building and leasing the building in a down market.
A potential sale of one of Harrah’s best known properties—the OC Pavilion concert theater—could go toward financing One Broadway.
Harrah, who owns several million square feet of space in Santa Ana, is in talks to sell OC Pavilion to the nearby Orange County High School of the Arts.
The sale price likely would be at a discounted $13 million or so, according to Harrah, a longtime supporter of the public charter school that was founded in 1987.
A deal with the school hasn’t been finalized and the property isn’t in escrow, according to school officials.
“Right now we’re in discussions with Mr. Harrah,” said Cambria Morgan, vice president of development and marketing for the school. “There’s no firm timeline—we’re still ironing out some of the details.”
The school, which has about 1,400 students, would use OC Pavilion for classrooms, studios and performances.
The school raises about $4 million annually for operations and would have to raise more money to help buy the building, according to Morgan.
Harrah developed the lavish 528-seat theater in the early 2000s in Bank of America Corp.’s former regional headquarters on Main Street. He spent more than $25 million renovating the site.
One Broadway Plans
Harrah’s high-end Ambrosia restaurant at OC Pavilion would move to One Broadway if the school were to buy the building.
If Harrah can win with the city, construction could resume at One Broadway later this year, he said.
Preparatory work is done on the site, which otherwise has been idle for years.
Harrah said he’s lined up new, undisclosed investors for the project.
“The investors just want to see for sure that the city is behind the project,” he said.
Keeping the preleasing rule would force Harrah to lease half of the building at current depressed rates, he said. Office rents are
25% or more below where they were a few years ago.
Harrah contends he would be better off building the massive tower on speculation.
“This really is the poster child of ‘build it, and they will come,’” he said.
Telecommunications companies, television stations, law firms and government agencies all have been floated by Harrah as possible tenants at the building, which has yet to announce any leases.
City planners are recommending a Planning Commission vote in favor of the changes to the lease requirements.
“The private market is better able to discern whether construction of this project is appropriate in today’s market,” they said in a report released last week.
While Harrah would be selling OC Pavilion at a loss, he said he’s not hurting financially.
He said he recently made “a few million” buying and selling stock of automotive companies and has been snapping up distressed properties in Las Vegas.
His Caribou Industries, estimated to do about $40 million in annual revenue, also has been busy building parking lots and condominium towers in Hawaii.
Down markets “are when I’ve made all my money,” he said. “They’re only bad times if you want them to be.”
Harrah came to Santa Ana’s real estate market in the early 1990s and has bought and renovated close to 80 buildings, totaling about 4 million square feet, near the civic center and downtown.
Harrah’s helped spur a revival that’s attracted art galleries, shops and restaurants to Santa Ana.
