The owner of Old Pasadena’s troubled Marketplace project has put the block of historic buildings up for sale for the second time in a year.
Garry Marshall sold the project in August to Pierce/Lange Development of Los Angeles, but the deal collapsed Oct. 21 when the company failed to make a payment on the property.
Since then, Marshall has been negotiating with San Francisco developer Douglas L. Stitzel, but as of late Wednesday, no contract had been signed.
The possible sale of the site to Stitzel has been greeted with cautious optimism by historical preservationists and city officials, who have clashed with past developers over their plans to demolish the interiors of the buildings and construct a mall behind the turn-of-the-century facades.
Stitzel has already announced that if he buys the property, he will abandon plans for a mall and develop the property as a collection of separate stores, which he said was more in keeping with the character of Old Pasadena.
Instead of a central mall walkway through the core of the buildings, Stitzel said he would concentrate on providing more sidewalk access to 2-story shops.
“I can’t stand malls. That won’t be the concept,” he said. “I don’t think the market is there for tourist shops and T-shirt stores.”
Unlike previous developers who have stumbled in finding the $60 million to build the project, Stitzel said he has the necessary financing.
Having the money in hand is critical because the Board of Directors has established a Dec. 27 deadline for any development group to prove it has the money to complete the project. The board is prepared to condemn the property and take it over through eminent domain if the deadline is not met.
But Mayor William Thomson said: “Obviously, we are not going to institute condemnation proceedings on a developer as long as they are moving forward.”
Thomson said he was pleased that Stitzel would move away from the idea of building a mall, which has made the project one of the most controversial in the city.
“Clearly, he is moving the project design-wise in the right direction,” he said. “But the test of the pudding is in the tasting. We’ll all breathe a lot easier when he shows us that he has the financing.”
Claire Bogaard, executive director of the preservation group Pasadena Heritage, agreed that Stitzel’s plan would be a step forward.
But she added that after years of watching the vacant Marketplace buildings deteriorate, preservationists are somewhat skeptical about any new proposal.
“I just pray something will happen this decade, but I really don’t know,” Bogaard said.
Marshall’s decision to sell the property came quickly after the Pierce/Lange Development deal collapsed.
When Pierce/Lange bought the property, it agreed to make payments of several hundred thousand dollars in August, October and November, said Bruce Phillips, the company’s project manager.
The first installment was paid, but the developers balked at making the second installment, largely because of delays by lenders in appraising the property, Phillips said.
Marshall set a final deadline of Oct. 21, but the payment never came. Marshall then took control of the property again.
Dan Hayes, Marshall’s real estate manager, said negotiations with Stitzel began soon after that.
The chain of events has again raised questions of whether the project will ever get off the ground.
Many people associated with the Marketplace say it has been haunted by several difficulties, including the price Marshall paid for the property and the financial problems connected with a parking structure built across the street on Fair Oaks Avenue.
While Marshall has never disclosed the purchase price of the Marketplace property, Hayes said, “they were setting high-water marks in Old Pasadena.”
County tax records show that Marshall paid about $7 million for the 18 separate lots that compose the Marketplace block.
Many officials say the cost of the property has forced developers to embrace the mall concept, with a large number of stores, to recoup their investments.
“It’s been a combination of problems, but I think Marshall had too much money (invested)” in it to make a profit with a less ambitious project, Thomson said.
The parking garage has drained about $60,000 a month from the developers’ pockets to pay off the construction loan, according to the city Finance Department.
The structure was built with the help of the city, which sold $9.9 million in tax-exempt certificates of participation in 1984. The developers of the project, who benefited from the lower interest rate given to the city, make all the payments on the certificates.
It has also created problems in securing a construction loan for the entire Marketplace project.
Short on Collateral
In financing the parking structure, several properties in the Marketplace were used as collateral. Because those properties are already pledged, they are no longer available to serve as collateral for a loan to build the Marketplace. As a result, a developer is forced to come up with more cash or property to guarantee a construction loan.
Whether Stitzel or any other developer can overcome these and other problems is uncertain.
But many agree that Stitzel has a solid background in completing similar projects, including the $15-million One Rodeo Drive retail project in Beverly Hills and the $50-million One Union Square retail project in San Francisco. He is now building a $150-million retail center named Two Rodeo Drive in Beverly Hills.
If the property is sold to Stitzel, it will remove the last of the original group of developers who proposed the Marketplace project in the early 1980s.
Marshall and his partners, John Patrick Wilson and Albert T. Ehringer, began buying land in the Marketplace block around 1982.
Marshall provided the money, and Wilson, a flamboyant entrepreneur who made his first millions as an auctioneer of antiques, provided the ideas.
By 1983, plans for a shopping mall were the talk of the town, and many business people moved to Old Pasadena in anticipation of the Marketplace’s arrival.
A lavish ground-breaking party was held in 1985, complete with a parade and the unveiling of an antique trolley car that was supposed to travel around the periphery of Old Pasadena.
The project, however, soon ran into problems.
Birtcher, a national development company based in Orange County, joined the project in 1986 and secured a $106-million loan from First Interstate Mortgage Co.
But Birtcher later pulled out when the bank requested that the company provide a $30-million guarantee in case the project failed.
In 1987, the Connecticut-based CMC Capital Corp. joined the partnership, but it left early this year, saying the project had become too costly.
In July, Marshall announced that he was dissolving the partnership to cut his losses, and the properties were sold to Pierce/Lange.