REAL ESTATE : Illinois Teachers’ Pension Fund Buys Costa Mesa Center

The Illinois teachers’ pension fund bought the Costa Mesa Courtyards shopping center at the corner of Harbor and Newport boulevards for $38.75 million, the center’s manager said Wednesday.

The three-year-old shopping center was sold by BHI-Dover, a Newport Beach concern which buys and manages shopping centers. The company will stay on to manage the center.

While other pension funds--including the California teachers’ fund--have made some large purchases in Orange County, this is thought to be the first large purchase in the county by the Teachers’ Retirement System of the State of Illinois.

Unlike many shopping centers of similar size, Courtyards has no single large anchor tenant like a supermarket or department store. The land there was so expensive that developers didn’t want to give over so much of it to one large retailer, according to Harold Hofer of BHI-Dover. The developers thought they could make more money at the busy street corner by building a larger number of smaller shops.

Health Club Biggest Tenant

So far that strategy appears to have worked. About 95% of the center’s 171,000 square feet is leased, BHI-Dover said.

The largest tenant is a health club, with 37,000 square feet, and the next-largest stores are a drugstore and home furnishings shop, each with 9,000 square feet. A record store, a computer software store and a clothing store are among the other tenants.

The original developer was Pacific Savings Bank, which began construction in 1985 but sold the new center a year later, before the problem-ridden thrift was seized by federal regulators. The thrift has its headquarters across the street in the same Spanish architectural style as the shopping center.

Pension funds once bought only what the real estate industry calls “trophy” buildings, office towers in big cities and enormous regional malls.

But as competition intensifies for those buildings, the pension funds, insurance companies and foreign investors are looking farther afield.

BHI-Dover is a joint venture of two Newport Beach concerns, Bonutto Hofer Investments and Dover Investment Properties. BHI-Dover owns about 20 smaller shopping centers, most in the Los Angeles area. The largest is a 275,000-square-foot center in Upland.