A land development company in Los Angeles County has bought the “Rusty Skeleton,” a long-abandoned construction site in Garden Grove that it plans to turn into a senior housing and retail project.
An affiliate of Encino-based AMG & Associates LLC last month took over ownership of the ground lease at the Lotus Plaza project, a nine-story development on Garden Grove Boulevard.
The project, also known as the Garden Grove Galleria, initially was expected to be a 66-unit upscale condo development on top of a retail project running about 100,000 square feet.
Construction of the 90-foot-high steel framing of the structure—located on 3 acres a few blocks north of the Garden Grove (22) Freeway—started in 2007.
It came to a halt during the recession and has sat largely untouched for almost six years.
The site has been embroiled in litigation all the while, with most recent disagreements between Los Angeles-based Cathay Bank, which was the initial lender for the development, and the Emlen W. Hoag Foundation, which owns the underlying land.
The city signed off in 2013 on plans to demolish the existing steel structure—which locals gave the Rusty Skeleton name —although litigation had kept that order from moving ahead.
Development of the existing site—rather than razing the property—now appears to be on the front-burner again, following AMG’s deal.
AMG acquired the note on the development from Cathay Bank last month and then foreclosed on the site, which now gives it title to the leasehold interest there.
“Cathay Bank is out of the picture,” said Alexis Gevorgian, principal of AMG.
AMG paid a little more than $19.3 million in the trustee sale, according to property records. The property had $22.3 million of debt tied to it at the time of the sale, according to those records.
AMG’s relationship with the Hoag Foundation “is moving forward,” Gevorgian said at a city council hearing last week.
The company has made its first lease payment to the Hoag Foundation, and hopes to get its approval on the new plans, which it expects to file with the city in the next two months, Gevorgian said.
The Hoag Foundation—which uses rent paid for the land to support the Boys & Girls Clubs of Garden Grove—has balked at other plans proposed in recent years, and appeared to be in favor of demolishing the existing structure, according to city filings.
The developer plans to use that structure, however, with plans to build an affordable senior housing project on the upper floors, Gevorgian said last week.
The ground floor would be used for retail, he said. The developer has enlisted Architects Orange for the plans, and has “completed some conceptual designs” for the project, he told the city council last week.
The square footage of the retail project and number of senior homes have not been disclosed.
Laguna Beach-based Foundation for Affordable Housing, which has a portfolio of nearly 6,000 senior housing units in the state, would operate the project upon its completion.
The project would add to a busy local pipeline for the foundation, which also has a 200-unit project in Aliso Viejo, called Vintage Aliso, that’s scheduled to open later this year.
That project, whose cost has been estimated at about $44 million, is being developed in conjunction with Roseville-based USA Properties Fund Inc.
AMG has done six other deals with the Foundation for Affordable Housing, according to Tom Willard, president and founder of the foundation.
The Garden Grove project would be the first in Orange County for AMG, according to the land development company’s website, which lists close to 50 apartment, single-family home, and mixed-use projects that it has worked on.
12-Year History
The original Garden Grove project was proposed in 2004 by developer Garden Grove Galleria LLC, which broke ground in 2007.
It had a $42.5 million construction loan from Cathay Bank. Those two parties subsequently became involved in litigation, and construction halted in 2010.
It’s estimated that about $20 million of construction costs and other work has been put into the site to date, according to city filings.
At least two other developers have taken a stab at restarting the project. Beverly Hills-based Tri-Millennium Homes in 2012 proposed a 144-unit housing project with 53,000 square feet of ground-floor retail.
The Hoag Foundation disapproved of that project.
Newport Beach-based developer Brooks Street in 2015 proposed its own mixed-use project for the site and brought in Costa Mesa’s LAB Holdings LLC to help with the retail portion of the project, but was unable to complete a deal and buy the property from Cathay Bank.
The fact that AMG completed the purchase of the property and is leading the proposed development, rather than Cathay Bank, gives the latest plan more viability than the other proposals, Gevorgian told the city council last week.
“This is a real transaction,” he said. “We are investing in Garden Grove.”
