Irvine Co. to Spend $190 Million on Building Shopping Centers

As part of its push to increase its retail holdings the Irvine Co. plans to spend more than $190 million on building new shopping centers by the end of 1988, nearly doubling the retail space in its community developments.

In addition, the company is determined to begin the long-delayed construction of a 1.5-million-square-foot regional shopping center at the juncture of the San Diego and Santa Ana freeways in Irvine.

The Irvine Co. is hoping that R.H. Macy & Co. Inc. will provide the lead anchor store in the proposed Irvine Center regional mall. Without Macy’s, Irvine Co. officials say, the center’s development cannot proceed.

A Macy’s official, who asked not to be identified, said Wednesday that Macy’s is “very interested” in the Irvine Center and is engaged in “heavy negotiations” with the Irvine Co.

He said the staffs of both companies are thrashing out the terms of a tentative agreement and selecting a possible location for a Macy’s department store in preliminary architectural drawings of the center. The final decision on the proposed Irvine site, he said, will be made by the R.H. Macy board of directors.

Richard Sim, president of Irvine Co.’s Investment Properties unit said the Irvine Center has become a top corporate priority. “The Irvine Center should have been built a long time ago,” he said. “It didn’t get done, and we’re going to get it done.”

As part of a plan to impress Macy’s, Sim said the Irvine Co. is close to negotiating agreements with major corporations to occupy two 15-story office buildings planned for construction next to the proposed Irvine Center. Workers in those buildings would help provide a customer base for the center’s stores. Already, Sim noted, the Irvine Co. has announced the planned construction of a third 15-story tower to be occupied primarily by AT&T.;

Sim said he expects to learn by the end of the year whether Macy’s will choose Irvine Center as the location for its debut in Southern California. An affirmative answer, he said, would launch development of the shopping center. Construction would begin in about a year, he said, and the first phase would open in the spring of 1991.

David Mudgett, president of the Irvine Retail Properties Co. within the Irvine Co., said that in addition to forging ahead with development of Irvine Center and completion of Newport Beach’s Fashion Island, one of his key objectives is to diversify the mix of stores in Irvine. Although the master-planned community has a population of 100,000 affluent and well-educated residents, he noted that it had no bookstore until last February, when the Little Professor opened at Heritage Shopping Center, followed in July by the opening of a Crown Books outlet.

Also, Irvine did not have a department store until the July 17 opening of a 90,000-square-foot Mervyn’s--the first stage of the 330,000-square-foot Crossroads Shopping Center under construction at Barranca Parkway and Culver Drive.

Until recently, Mudgett said, most of the retail establishments in Irvine have tended to be service oriented, such as hairdressers and dry cleaners, located in small neighborhood shopping centers.

In an attempt to attract the clothing stores, restaurants, sporting goods outlets and department stores that the burgeoning city sorely lacks, he said, the Irvine Co. had to begin development of larger and more visible shopping centers next to major thoroughfares.

Mudgett said Crossroads is the first large-scale community shopping center developed by the Irvine Co. It will be followed next winter by a nearly 750,000-square-foot center, tentatively named the Tustin Market Place, at Jamboree Boulevard and the Santa Ana Freeway. The first phase of the Tustin center, scheduled to open in September, 1988, will feature furniture and home improvement stores, while the second phase will concentrate on clothing stores.

Mudgett stressed that market demand is “the driving force” behind the Irvine Co.’s retail expansion. At the same time, he added, the company is trying to satisfy the demands of cities like Irvine and Tustin for increased sales tax revenue.

Mudgett said that in the past, Irvine has suffered because surrounding communities have grabbed stores that otherwise might have located in Irvine. After locating in adjacent cities, they frequently are reluctant to open another outlet in Irvine.

“The cities don’t realize we are in a very competitive environment,” he said.

Underscoring the ambitiousness of the Irvine Co.’s retail development plans, Mudgett observed that the company currently has 2.3 million square feet of retail space in its income property portfolio. Another 600,000 square feet of space is under construction in four shopping centers, he said, and construction of five more shopping centers totaling 1.3 million square feet will begin within six months and be completed by the end of 1988.

As a result, the amount of retail property owned by the Irvine Co. will increase by nearly 83% to 4.2 million square feet. Sim said the company’s principal owner, Donald L. Bren, wants to retain the properties. He denied reports that the company’s reorganization is a harbinger of potential sales of company assets.

To accelerate retail development, Irvine Co. officials have begun to hire firms specializing in shopping center construction, leasing and management rather than doing the entire job in-house as in the past.

So far the Irvine Co. has hired Costa Mesa-based Diversified Shopping Centers for the Crossroads center in Irvine, Costa Mesa-based Donahue Schriber for the Tustin Market Place and SDC Development in Newport Beach for a small neighborhood center to be built at Bison Avenue and MacArthur Boulevard in Newport Beach. Diversified Shopping Centers officials say they also have an informal agreement with the Irvine Co. to develop a smaller neighborhood center at Culver Drive and Alton Parkway in Irvine’s Westpark village.

Irvine Co. officials said that in addition to receiving a fee for their services, the contracting companies will receive a bonus based on the value they add to the projects.

“I think it puts a little more entrepreneurial spirit into the development,” Cary Treff, executive vice president of Diversified Shopping Centers, said of the Irvine Co.’s new arrangement with outside contractors.

Glenn Myers, vice president of development at Donahue Schriber, said the arrangement “allows them (the Irvine Co.) to administer a lot of development with a lot smaller staff.”

Also, Myers said, Donahue Schriber, which already manages 5 million square feet of retail space in Southern California, should have an edge on the Irvine Co. in finding tenants to lease the new shopping centers. He said the company’s staff of about 10 leasing specialists is “in daily contact with people looking for space.”

IRVINE CO. EXPANSION PLAN

Irvine Co. plans a massive expansion of retail space in the next few years on its properties in Irvine, Newport Beach and Tustin. Some of the major projects either under construction or about to begin are:

1. TUSTIN RANCH PROMOTIONAL CENTER

A regional promotional center with 400,000 square feet in Phase I, which opens in 1988.

2. IRVINE CENTER

A regional center with 1,051,000 square feet of leasable space in Phase I, which opens in 1990.

3. THE MARKETPLACE AT UNIVERSITY TOWN CENTER

A mixed-use center with Phase II adding 75,000 square feet of retail space when it opens in fall 1987.

4. JEFFREY & I-5 RETAIL SITE

A community center with a leasable area of 250,000 spuare feet due to open in 1987.

5. THE CROSSROADS

A community center with a leasable area of 300,000 square feet due to open in 1987.

6. IRVINE HOME & GARDEN CENTER

A specialty center with Phase II scheduled to open in fall 1987, adding 130,000 square feet.

7. LOWER CASTAWAYS RETAIL SITE

A free-standing site for one restaurant opening in fall 1988 with 10,000 square feet.

8. BAYVIEW LANDING RETAIL SITE

Free-standing sites totaling 35,000 square feet for three restaurants and a teen club, scheduled to open in fall 1988.