Piggyback Apartments Work Elsewhere in County

The Flats is an unusual apartment complex, over a downtown commercial building and composed entirely of very small units. But it is not the only example of its genre in Orange County.

Less than 200 yards away, directly across the downtown plaza in Orange, there is a block of apartments over the old building that houses the Orange National Bank and a batch of local businesses.

Most of the county’s older downtowns contain at least a handful of apartments above some of the stores and restaurants: Huntington Beach and the Balboa Pier area in Newport Beach are prime examples.

Santa Ana’s downtown has a few such apartments. City officials have tried to encourage development of a downtown creative district where artists, dancers, theater people and others in the arts would live and work.

Anaheim used to have several business/residential buildings until the city demolished its old downtown in a fit of redevelopment fervor.

As land costs soar and housing prices skyrocket in the county, there has been a resurgence of interest in combining residential units with retail and in marketing downsized homes.

Real estate investor Bob Smith, partner with Charles Ebert in the Flats, said he recently was required by Dana Point officials to put apartments on the third floor of a three-story commercial building.

Mola Development recently completed a mixed-use project in Huntington Beach, with retail shops on the ground level and owner-occupied condominiums upstairs.

The development firm is also building a huge mixed-use project in Newport Beach that will combine offices, retail stores, restaurants and theaters with apartments and condominiums, including a high-rise condominium tower.

A similar project by a Japanese development firm is on the drawing board in Orange, near the MainPlace/Santa Ana mall.

Huntington Beach also is home to one of the current era’s first attempts at combining retail and residences. The Old World Village shopping plaza near Huntington Center was built in the late 1970s to resemble an Alpine village, with shopkeepers living above their stores.

Developers said the hard part is not getting people to live in such developments but getting banks to finance them.

When Ebert and Smith applied nearly two decades ago for a loan to gut the top floor of their 1904 commercial building in Orange and turn it into apartments, bankers laughed at them, Smith said.

“It was a mixed-use building,” Ebert said, “part commercial and part residential, and their guidelines didn’t tell them what to do with it. So they didn’t know whether to wind their watch or go to the bathroom.”

So the two paid for a lot of the work out of their own pockets.

And since the first of the Flats was opened, there has never been a vacancy.

The demand is there, even for small units, said Mark Frazier, president of Barratt America.

The Irvine development firm built downsized condominiums in the late 1970s and early ‘80s, including a project in Mission Viejo in which the units ranged from 440 square feet to 900 square feet. Sears, Roebuck & Co. made specially designed small-scale furniture for the units, and models were displayed in shopping centers.

“If I could get the land for them, I’d build more today,” Frazier said.

“They sold like hot cakes.”