Costa Mesa’s South Coast Home Furnishings Centre is getting a new owner, its third since the collection of furniture showrooms and stores opened nearly two years ago.
This time, it’s doing so under court order.
A receivership sale of the shopping center is under way, after a private investor operating as South Coast Home Furnishings Center LLC defaulted on an $84 million loan from LaSalle Bank last month.
The investor paid more than $100 million for the center late last year.
The sale is being done with Bank of America Corp., which bought LaSalle last year.
The center, hit hard by the housing downturn, is being marketed below its sales price of a year ago.
The asking price is $65 million, or about $216 per square foot, according to Dixie Walker, senior vice president for the Newport Beach office of Grubb & Ellis Co. Walker is marketing the property for the court.
South Coast Home Furnishings Center LLC bought the outdoor mall from Irvine-based Birtcher Development and Investment Co., which built it in 2006.
Offers for the shopping center are due in early October. The goal is to have a sale completed by the end of the year, Walker said.
Early interest has come from local and national prospective buyers, he said.
New ownership could bring change to the kinds of tenants at the 300,231-square-foot mall, including the addition of more non-furniture stores.
Big retailers such as Best Buy Co. or Circuit City Stores Inc. have been suggested as potential tenants at the Hyland Avenue site, as has a movie theater.
Store operators said the addition of a few non-furniture stores would be welcome. But a wholesale change in leasing strategy isn’t the best idea, they argue.
“The important thing is to get people in and to fill up the (property),” said Brice Hata, regional manager for Linder’s Furniture.
The Costa Mesa store is one of 10 showrooms Garden Grove-based Linder’s has in the Southland.
The shopping center “is a great idea that just opened at the wrong time,” Hata said.
If a new owner “wants to add a Circuit City or Best Buy, that’s fine,” said Chris Mulhall, owner of furniture store Visions in Contemporary Living. “But I want to keep it as a furniture center. The (existing focus of the) center is viable.”
The specialty shopping center,which centralized a number of retailers in Costa Mesa and drew tenants from other parts of the county,still makes sense, Walker said.
“It was delivered at the start of the demise (of the housing market),” he said. “No one really knows what the potential of this site could be.”
The roughly 35% drop in the asking price for the center mirrors the declines seen in the prices of Orange County’s homes in the past year.
The median price paid for an OC home stood at $440,000 in August, a 32% drop from the record seen here in June 2007.
Tough Market
A new owner will face a tough leasing market.
The nine-building center, about a mile north of South Coast Plaza near Ikea along the San Diego (I-405) Freeway, holds space for about 30 showrooms and stores, as well as eateries.
At last count, the complex had about 15 stores. One of those furniture stores was advertising a going-out-of-business sale. A food court, designed to keep shoppers there longer, has just one restaurant.
The center was said to be about 90% leased when it was sold a year ago. Some preleased tenants never ended up moving in. Close to half a dozen businesses already have closed at the mall, existing tenants said.
Notable departures include anchor tenant Wickes Furniture, which by most accounts had been doing well until its parent company Wickes Furniture Inc. of Illinois filed for bankruptcy in February and shuttered all its stores.
The 42,000-square-foot building used by Wickes, which still is empty, could be converted into a non-furniture space, Walker said.
Since the center opened, there has been grumbling that not enough marketing was done for the site as a whole.
The “amount of promotion was not anywhere near where it should have been,” Walker said.
Smaller tenants expecting shoppers to show up without doing too much marketing on their own are the ones who have suffered the most, Vision’s Mulhall said.
“Guys who are advertising are doing OK,” said Mulhall, who heads up the tenants’ association for the mall. He opened his store about a year ago.
Sales at Linder’s Furniture picked up during Labor Day weekend and have benefited from falling gas prices, Hata said. But the recent financial market woes are bound to have a negative effect on the mindset of shoppers, he said.
More Hyland Avenue Space
South Coast Home Furnishings Centre isn’t the only big property on Costa Mesa’s Hyland Avenue looking for tenants.
The former headquarters of Valeant Pharmaceuticals International, at 3300 Hyland Ave., has been vacated as it gets a nearly $15 million facelift,one of the few big office projects now under way in the county.
A redevelopment of the three-story, 178,000-square-foot property, built in 1968, began this month. Upgrades include changes to the exterior of the distinctive black granite building that faces the San Diego (I-405) Freeway, along with asbestos-related cleanup work to the interior and landscaping.
Irvine’s Cor Realty Advisors and Boston’s AEW Capital Management LP bought the office for $38 million in early 2007 after Valeant moved its headquarters to Aliso Viejo.
The upgrades should be complete in about 90 days, said Louis Tomaselli, senior vice president for the Orange office of Voit Commercial Brokerage LP. He’s marketing the space for the owners.
No tenants for the upgraded building have been signed yet. The new owners are seeking tenants that would lease a minimum of 30,000 square feet. Monthly rental rates run about $1.99 per square foot. The building’s also on the market for sale, at $45 million plus the cost of the upgrades, Tomaselli said.
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Mark Mueller
