It would start with a 32-floor office tower, the tallest in Orange County. Restaurants, shops, a movie theater, condominiums and a health club would surround the high-rise. Santa Ana's first deluxe hotel--yes, first, not counting smaller motels and inns--would follow a couple of years later.
To say the least, the $500-million Main Street Concourse project would be an ambitious undertaking--and a welcome conversation piece in the comatose commercial real estate industry.
But will it still happen?
Plans for the office and hotel complex, which would be built on 18 acres of prime property across from the MainPlace/Santa Ana shopping mall, have been underway for four years.
In 1988, Orient Corp.--Japan's largest consumer credit company--bought the farmland for $23.5 million from the Hurwitz family, which had owned it for more than 50 years. Shimizu America Corp., the New York-based subsidiary of the large Japanese developer Shimizu Corp., signed up two years later to build the proposed project.
Much has changed since then. Orange County's building boom went the way of the national economy. "The world was a wonderful place in 1988," said James R. Kruse, a broker with Schneider Commercial Real Estate's Anaheim office. "Everyone was tanned, doing lunch and signing leases. Then the rain started to fall."
Today, not a single office tower is under construction here, and many existing buildings suffer from high vacancy rates. American sources for construction loans have become an endangered species. And in the past year, even previously generous Japanese real estate investors have begun to withdraw from the United States.
Despite those hurdles, Shimizu remains confident, promising that construction will begin within the next year.
"We don't have financing lined up yet," said Michael A. Cutri, development manager for Shimizu America. "But we're dealing with two high-caliber companies. If anyone could secure financing in this marketplace, they could."
Financing, Cutri said, probably would come from Japanese and other offshore lenders. Orient has the wherewithal to kick in some of the financing itself, he added, noting, "That's a definite possibility."
For the past two years, the project's developer has been bogged down in compiling an environmental impact report for city officials. Shimizu and Orient representatives are to present the report, which will include air quality and traffic studies, to Santa Ana planning commissioners on May 26.
"We anticipate that the project will go to the City Council for final approval later this summer," said Jeffry Rice, senior planner for Santa Ana's Planning and Building Agency.
Rice, who has followed the project since its conception, expressed hope that it will proceed. "Santa Ana has been very anxious to have these facilities," he said.
The complex would be built in two phases, with the first scheduled for completion in 1995 and the second in 1997.
Phase One would include construction of the 32-level office tower, shops and restaurants, a multi-screen movie theater, a sports club and 64 townhouses. The hotel, a 19-story condominium structure and a 20-story office tower--making for combined office space of 931,075 square feet--would make up Phase Two. Orange County's proposed monorail transit system would eventually have a station on Main Street between the complex and MainPlace/Santa Ana.
Santa Ana Mayor Daniel H. Young called the project "a substantial investment in the community" that would broaden the city's employment base. According to its developer, the project could create 2,000 construction jobs during each phase and attract a total of 4,500 permanent employees to the office buildings and surrounding facilities.
A luxury hotel would be much appreciated in Orange County's oldest city, Young said: "We desperately could use it. We don't have a hotel with a large-scale meeting room. Organizations often hold their meetings outside the city."
Although the developer is optimistic, some industry watchers doubt that the project will see the light of day.
"Its chances for getting financing?" Schneider broker Kruse said. "Slim to none."
"I just don't see a need for it right now. What users are looking to come to Orange County to take big amounts of space? We've got companies here closing up their Orange County offices and going all points north," he said.
The county's office vacancy rate has languished at about 22% for the past two years, with the Santa Ana area coming in at about 21%. "There's a ton of office space that has to be absorbed before a new high-rise could hold its own," Kruse said.
Others are less skeptical.
"Clearly, it is extremely difficult for any developer to get financing for office construction in today's market," said Michael Meyer, managing partner of the Newport Beach office of real estate consultant Kenneth Leventhal & Co. "But lenders are still making loans, and with the two strong credits (Orient and Shimizu) behind this project, the prognosis is very good."
Because construction in the county is now at a standstill, "limited competition could give those buildings a tremendous advantage," Meyer said. "Very few premium office buildings will be developed in the next five years."
Also, time could be on the side of the project, he said: "The economic picture will be totally different in 1995 and '97--anything is possible."
The developer and landowner, however, "will need substantial pre-leasing to get the project off the ground in 1993," Meyer said.
As of now, the first office building does not have any tenants in place, Cutri said.
Depending on the success of the office buildings, the hotel could do well, said Donald W. Wise, a hotel broker with CB Commercial Real Estate's Anaheim office. "It's in a wonderful location, and the timing is right," he said. "By 1997, I would think the market will have had time to recuperate. Many of the problems in the hotel industry can only be solved by time."
Wise said the hotel would probably attract business travelers, who are willing to pay higher room rates, rather than tourists. "Ideally, that kind of hotel needs to have about 5 million square feet of Class A office space within a five-mile ring, and this one would," he said.
Orient obviously felt that the costly land purchase it made four years ago would pay off down the line--though that line may be longer than originally expected. But that's all right, said Shimizu's Cutri. The company can wait.
"They're taking a long-term perspective on this project," he said. "They think in terms of generations, not years."
Shimizu Corp. at a Glance: * Headquarters: Shimizu Corp., Tokyo; U.S. subsidiary, Shimizu America, New York * Founded: 1804 * Principal businesses: Multinational corporation with interests in construction, real estate planning, engineering and design, research and development, and transportation * Revenue: $15 billion (1991) * Employees: 16,000 worldwide Source: Shimizu America
Orient Corp. at a Glance: * Headquarters: Orient Corp., Tokyo; U.S. subsidiary, Orient Corp. of America, Newport Beach * Founded: 1954 * Principal businesses: Conglomerate of 37 companies, including Japan's largest consumer credit company * Revenue: $40 billion (1991) * Employees: 5,200 worldwide Source: Shimizu America
The $500-million Main Street Concourse project would encompass:
1. Phase One office building(32 stories)
2. MainPlace/Santa Ana (existing)
3. Town & Country shopping center(existing) 4. Tishman Executive Towers and parking structure (existing)
5. Town & Country Manor
6. High-rise condo
7. Attached single-family homes
8. Conference facility
9. 27-story Phase Two hotel & restaurants
10. Parking structure (existing)
11. 20-story Phase Two office building
12. Lincoln Town Center office building(existing)
13. Fidelity Federal Bank (existing)
14. Retail building
15. Station for proposed county monorail
Orient Corp. at a Glance: