Opening of Plaza Does Not End Its Problems : Studio City: The developer of the upscale Center at Coldwater says homeowner opposition caused delays that have hurt occupancy.

It’s 1 p.m. and Herbert M. Piken is having lunch inside the new Bistro Garden in Studio City, a swank restaurant that anchors a just-completed, upscale shopping plaza called the Center at Coldwater. In between nibbles of his $12 salad, Piken’s face beams.

“This is great, look at all these people,” he says as the dining room, with it canopy of 24-foot-high ceilings and skylights, fills with well-heeled patrons. A few minutes later the restaurant’s manager, Christopher Niklas, whose father, Kurt, founded the Bistro and the Bistro Garden restaurants in Beverly Hills, stops by Piken’s table to say hello.

Piken, 65, is proud of the restaurant and the center which opened the first week of February. His Studio City company, The Piken Co., developed the Center at Coldwater, located on the southwest corner of Ventura Boulevard and Coldwater Canyon at the Studio City and Sherman Oaks line. Piken, who has built several other shopping centers along Ventura Boulevard during his 30-year career, considers the Center at Coldwater an example of “suburban elegance.”

But the center also became his suburban nightmare. The venture was extremely controversial. Well-publicized protests by nearby homeowners, who griped that the development would produce traffic congestion and parking problems, forced Piken to make several major changes that pushed construction back a year and put it $2 million over budget.

Last May the cost overruns forced Piken to strike a new deal with his bank, Security Pacific, that turned the center’s control over to the bank and cut Piken’s share of future profits from half to as little as 15%.

Moreover, the center is nearly empty. At the moment, the only tenant is the Bistro Garden, whose lease Piken arranged. Security Pacific has been in charge of leasing the building since it took control, but James Rupp, senior vice president of Security Pacific Development, acknowledged of the remaining 36,000 square feet available, only about 4,000 has been leased.

Rupp said the bank expects the center to be fully occupied within 18 months. But he said leasing the building has been slowed by the same delays in getting zoning approvals and completing nearby street expansions that hobbled Piken.

Some commercial real estate brokers said the center’s low occupancy to date also probably stems from a recent flurry of commercial building in the area, which has given retailers lots of sites to consider. They suggested that another cause might be Security Pacific’s decision to hire a leasing agent, Jarvis & Associates, located in San Francisco, not the San Fernando Valley..

But Rupp said the leasing effort “had to be restarted from scratch” after the bank took control and predicted the program should be “closing some deals very quickly.”

Regardless of the reasons, Piken said, the situation is “very disgusting and very frustrating and it’s an embarrassment.”

The Center at Coldwater points up how developing commercial properties in the Valley has changed in the past decade as the population and commercial density, particularly along Ventura Boulevard, has increased and the public has become more vocal in how projects are approved.

Indeed, a city plan to limit development along Ventura Boulevard was released Monday and is scheduled to have its first hearing before the city Planning Commission on Feb. 22. The proposal, among other things, calls for tying the size of projects to the amount of additional traffic they generate. (See story on page B3.)

“You can’t go in any more and just knock down a gas station and the old Denny’s restaurant and build a 21-story building,” said Richard H. Close, a lawyer and president of the Sherman Oaks Homeowners Assn., which was Piken’s main opponent in the Center at Coldwater battle.

Piken recalled how, in 1986, he originally envisioned a three-story Center at Coldwater with 78,000 square feet of space to lease. He ended up, though, trimming the project’s size by about 40%. Piken said, “I wanted to do something very upscale because I thought the Valley was ready for such a development. . . ,” and he compared his vision to Rodeo Drive in Beverly Hills.

Piken had already spent $4.5 million to buy the property, which had been the site of the Tail O’ the Cock restaurant. Actually, the money came from Security Pacific, which committed up to $18 million to Piken to develop the center, he said.

The arrangement was not unusual for commercial development: Security Pacific put up the cash, and Piken put up his talent. As developer, he hires the architects, engineers and construction companies, gets building permits and, in many cases, leases space in the project.

In this case, Piken was to pay back the bank loan plus interest after the center opened, and any profits from the center over and above Piken’s loan payment were to be split 50-50 with Security Pacific.

Early in 1987, Piken unveiled his plan to the Sherman Oaks Homeowners Assn. “and that’s when everything hit the fan,” he recalled. From that point on, the group and others complained that without changes, the center would snarl traffic and neighborhood parking. The Sherman Oaks homeowners also contended that if the Bistro Garden was granted a liquor license, some intoxicated customers would stumble down their streets or urinate in public.

Piken and others were outraged. “It’s absolutely a slap in the face to Mr. Niklas and what he has accomplished” with his restaurants, said Sondre Frohlich, executive director of the Studio City Chamber of Commerce.

The restaurant got its liquor license, but the neighbors put enough pressure on city regulators to force other major changes in the center. Piken had to scrap his original design and ended up building a much smaller two-story center.

He also was ordered to widen Ventura Boulevard along the front of the center; widen nearby sections of Coldwater Canyon Avenue and change the signal lights to improve traffic flow on Coldwater Canyon and its on-ramps to the Ventura Freeway. Piken said the changes cost more than $700,000.

But in effect they cost Piken much more. As the changes pushed construction further behind schedule, the venture began running well over budget. Piken said he was personally liable for the Security Pacific loan and the situation was “scaring the hell out of me.”

So last May, Piken and Security Pacific renegotiated their deal, and Security Pacific agreed to effectively cancel Piken’s loan in exchange for control of the center and a bigger cut of the future profits, he said. Now, instead of getting half the profits, Piken said he will receive between 15% and 30%.

Will he make any money on the Center at Coldwater? “Probably not,” Piken said. He said that although the center has “tremendous potential because of its design and location,” he is troubled by the inability of Security Pacific and Jarvis & Associates to have signed up more tenants by now.

“Unless somebody, whether it’s me or somebody else, gets in there who knows what they’re doing about developing shopping centers, it could be screwed up and the whole thing could be made less valuable,” Piken said. “And it’s got to reach its full potential for me to make any money on it.”

What bothers him most, Piken said, is that the Center at Coldwater mess tarnished his reputation through no fault of his own.

But Piken’s adversary, Close of the Sherman Oaks Homeowners Assn., said Piken shoulders some of the blame because he was unwilling to compromise with the homeowners, thus causing delays.

“When it really got heated, we tried to meet with him to try to resolve the issues,” Close said. “He thought he had the votes” in the Los Angeles City Council “and didn’t need to compromise with the homeowners. And he was right. He had the votes with the City Council. But what it cost him was time,” and the time cost him money, Close said.

Close, in fact, said “everybody lost” in the Center at Coldwater fight. “The homeowners didn’t get as much as they needed to protect their neighborhood,” including more traffic lights and restrictions on when the Bistro Garden could be open. “And he didn’t get what he wanted,” Close said of Piken.

Perhaps the only winner was the Bistro Garden. Christopher Niklas said the restaurant is not worried about how soon the center fills up. “We’re very confident with or without tenants around us,” he said.