2 Struggling Horton Plaza Restaurants Sue Builder

Two of Horton Plaza’s largest restaurants announced Tuesday that they have filed lawsuits against the builder of the downtown San Diego shopping center, claiming that a series of broken promises, negligence and lack of nighttime business promotion have brought them to the brink of financial ruin.

The lawsuits by San Diego Culinary Concepts Inc., which operates the Harbor House restaurant, and Third Avenue Restaurant Ltd. describe a scenario of indifference to their problems by Ernest W. Hahn Inc., developer of the $140-million center and downtown centerpiece that celebrated its first birthday Saturday.

Jim Murphy, vice president of San Diego Culinary Concepts, said his company has absorbed $1.3 million in operating losses since the Harbor House--formerly the Grand Tour Restaurant--opened for business nine months ago.

On top of that, Murphy said at a press conference held outside the restaurant, his firm incurred losses of $500,000 in unnecessary construction costs and $300,000 on a second Horton Plaza restaurant before the project was halted to avert bankruptcy.

In all, San Diego Culinary Concepts seeks damages of $12.1 million in its suit filed in Superior Court last Friday.

Wayne Blackman, co-owner of the Third Avenue Restaurant, placed his restaurant’s operating loss at $620,000. Two weeks ago, Third Avenue Restaurant filed for protection under federal bankruptcy law.

The Third Avenue Restaurant suit, filed Tuesday in bankruptcy court, seeks $11.9 million in damages.

While those restaurants are taking to the courts, two other Horton restaurants--the Panda Inn and Heaven Pop Cuisine--report that their business is healthy and increasing during nighttime hours.

Murphy and Blackman said they were initially attracted to Horton Plaza by Hahn company promises that the development would be as much a nighttime entertainment center as a daytime retail complex. Without those representations, Murphy said, the restaurants would not have leased space at Horton. San Diego Culinary Concepts, which operates three restaurants in Seaport Village, relies extensively on dinner patrons.

“Two-thirds of our business takes place at night,” said Murphy, whose firm was sued by the Hahn company in January for $420,000 when it dropped plans for a second restaurant.

To attract nighttime visitors, the lawsuits claim, the Hahn company promised to have a nightclub, multiscreen theater complex, a large food market, a performing arts theater and a new hotel as tenants when the center opened.

While most of those businesses are now open or under construction, both Murphy and Blackman say they will have arrived too late to help their businesses.

Adding to the problem, the lawsuits contend, is a proliferation of fast-food outlets in Horton Plaza that has heaped serious and unexpected competition on the sit-down restaurants.

“We built the exact quality restaurant they asked us to,” said Blackman. “Yet our major investment has been undermined by the myriad fast-food outlets. We were told there would be only a few fast-food outlets and that the third floor would be the restaurant row for Horton Plaza.

“We had so much faith in Hahn that we took out a $500,000 loan and even guaranteed it with our homes. So we stand to lose more than a restaurant if this center doesn’t get turned around and the local managers don’t start showing some concern for the tenants.”

Blackman and his partners, Thomas Hays and Charles Kahan, operate the T.D. Hays and Bender’s Sidewalk Cafe restaurants in Pacific Beach, according to the lawsuit.

One area identified as a source of alleged negligence is the Horton Plaza parking garage, which initially opened under a confusing validation system but is free today. Blackman said the initial confusion drove away customers and Horton Plaza management moved too slowly to remedy the problem.

Blackman said another case of alleged insensitivity and negligence occurred when his restaurant printed 15,000 pamphlets announcing a new breakfast service. On the day breakfast service was to begin, the Horton Plaza garage remained closed until 9:30 a.m., undermining potential business, Blackman said.

Third Avenue was forced to seek protection under federal bankruptcy laws when the Hahn company reneged on a promise to hold in abeyance $140,000 in back rent until night business improved, Blackman said.

Kim Wenrick, a spokeswoman for the Hahn company, said the company would not respond to the lawsuit specifically, but defended Horton Plaza management.

“There are inevitable delays to any project of this complexity,” Wenrick said. “Everything we said is going to be there is going to be there. When you think about the amount of activity that has happened there in a year, it’s absolutely astounding.

“Yes, there is no doubt there have been delays, but it’s only been 12 months since the project opened.”

Wenrick said the Hahn company had no control over some of the delays. For example, she said, there was little the company could do to expedite construction of the Lyceum Theatre once the project was turned over to the Centre City Development Corp.

Bob Dobson, Horton Plaza general manager, said that some of the claims made by Blackman regarding negligence “were isolated events . . . that have been corrected.”

“Businesses here have had to adjust to the market . . . we did that with parking, going from validated to free parking,” he said. “Businesses have to do their homework.”

He said that perhaps the problem is that meals are too expensive at the two restaurants.

“People, for whatever reasons, have a perception that entrees shouldn’t cost $15 to $18 at a shopping center,” Dobson said. “You could have the finest restaurant in San Diego . . . but the perception is that you still couldn’t charge that at a shopping center.”

As for the number of fast-food establishments, Dobson said all tenants were told that “30% of the center would be devoted to the arts, food and entertainment,” explaining that the number of fast-food outlets should not be surprising to anyone.

Other sit-down restaurants at the shopping center say they are doing well at both lunch and dinner.

Next door to the Harbor House is the Panda Inn, a Chinese restaurant. Andrew Chan, manager and co-owner of the restaurant, said nighttime business at his establishment is strong.

“We have a very strong dinner crowd,” Chan said. “We’re not losing at all . . . we’re increasing. We satisfied.”

Panda Inn, part of a Los Angeles-based restaurant chain, has been open for seven months.

Also near the Harbor House is Heaven Pop Cuisine, a hamburger and soda fountain restaurant dressed in a 1950s motif. Its business, both night and day, has been consistent, according to Glen Chew, the restaurant’s general manager and co-owner. But it’s easier to sell hamburgers and french fries, Chew said, than some of the more gourmet type items offered at the Harbor House.

Both Murphy and Blackman said that, aside from the lawsuits, they want the Hahn company to name a special task force of its top shopping center managers. The group would analyze the center and develop an “action plan,” as well as conduct an audit of complaints and business results.

Murphy said both he and Blackman want to stay at Horton Plaza despite the difficulties.

“We’re not walking away,” Murphy said.