The long-stalled Pacific City development in Huntington Beach is nearing another change in ownership, according to real estate sources.
A variety of mixed-use developers are said to have recently bid on a construction loan tied to the 30-acre housing, hotel and retail development along Pacific Coast Highway.
Bids on the debt were due at the end of August.
Sources familiar with the process said the construction loan was likely to trade in the $60 million range, well below its $130 million face amount .
The winning bidder, who would subsequently foreclose on the loan, is expected to close on the sale later this month.
Orange County developers such as Santa Ana-based City Ventures LLC and SunCal Cos. in Irvine are rumored to be potential bidders for the property.
Another possible area buyer that sources are keeping an eye on is Los Angeles-based real estate fund manager CIM Group, which developed The Strand, a 3.5-acre mixed-use development in Huntington Beach.
Another potential bidder without local ties is Miami-based Crescent Heights, a developer of condo towers, apartments, offices and hotels, according to sources.
A sale would represent the second change in ownership for Pacific City in as many years.
Farallon’s Role
Last March, Newport Beach-based Makar Properties LLC, the initial developer of Pacific City, transferred ownership of the property and the $129 million loan tied to the project to San Francisco hedge fund Farallon Capital Management LLC.
Farallon Capital long has been one of Makar’s main financiers. The two previously owned the St. Regis Monarch Beach Resort. The Dana Point luxury resort was turned over to lenders in 2009.
At that point, the $130 million loan for Pacific City was said to be held by Cadim Note Inc. in Canada.
Sources said the note was initially being marked by brokerage Eastdill Secured at a price close to $75 million, but the final sale price should end up being about $15 million or so lower.
Plans for Pacific City, billed as a mix of “SoHo hip, South Beach cool and Rodeo Drive luxury,” have been in the works for close to a decade. The city of Huntington Beach signed off on the project in 2004.
THE NEWS:
Long-stalled Pacific City mixed-used development in Huntington Beach expected to change hands
BACKGROUND:
Project has seen only minimal work in recent years; $130 million construction loan up for auction
WHAT’S AHEAD:
Winning bidder expected to foreclose on property, pursue mixed-use development with some changes to original plans
A combination of shops, restaurants, entertainment venues, offices and homes have been slated for the site on Pacific Coast Highway, south of the Huntington Beach Pier.
Construction was originally expected to begin in earnest around 2008, but stalled amid the recession.
So far, development at the long-delayed site has primarily consisted of early work for an underground parking structure.
Prior plans at Pacific City included about 190,000 square feet of retail and office space and 49,000 square feet of restaurant space.
In 2008, the development’s prior owners announced they would be bringing a 250-room W Hotel—the first in Orange County for Starwood Hotels & Resorts Worldwide Inc.’s boutique chain—to the site. Those plans also called for several hundred upscale condominiums, some of which would have had access to hotel services.
Sources said last week a hotel remains a possibility for the site, but it’s unlikely to be a W Hotel.
Other changes the winning bidder makes to Makar’s original development plan are likely to involve the addition of more apartments or condos, according to sources familiar with the sale.
The city of Huntington Beach remains eager to see development rolling on the high-profile site, but a total redo of the prior plans isn’t expected by whoever ends up taking over ownership of the site.
“They’re not going to start over,” said one real estate source.
A sale of Pacific City could be one of two Orange County properties previously owned by Makar that’s expected to change hands in the next month or two.
St. Regis Update
Last month, the Business Journal first reported news of the potential sale of the St. Regis Monarch Beach Resort in Dana Point.
The property now is owned by Seattle-based Washington Real Estate Holdings LLC, which took it over last year.
Sources not directly involved in the St. Regis deal say the sale price is likely to be near $290 million, or a lofty $725,000 per room.
Trade reports now say Bethesda, Md.-based investor Host Hotels & Resorts Inc. is under contract to buy the 400-room luxury hotel, although the sale could still fall through.
