Where you once cashed your paycheck, you could soon be eating fish. And where you once took out a certificate of deposit, you may soon be buying compact discs.
Bank of America is hoping that entrepreneurs as well as consumers will think in those terms. Its 1992 merger with Security Pacific nearly complete, B of A has started selling or subleasing 37 closed branches--one of the biggest packages of surplus bank real estate to hit the Orange County market at one time--and it is hoping to draw buyers seeking locations for everything from restaurants to music stores. In all, the branches make up 263,000 square feet of space.
Nationwide, parent company BankAmerica Corp. in San Francisco has already signed deals to get rid of about 150 B of A or Security Pacific branches, office buildings and computer processing centers. It has about 700 properties remaining.
In Orange County, the bank has sites of various sizes, shapes and architectural styles. One is the Moorish-looking Laguna Hills landmark known as the Taj Mahal. Another is a pinkish, Mediterranean-style building among the posh shops of Laguna Beach.
"We want to move these as quickly as possible," said Dan Costello, executive vice president in the corporate real estate division of BankAmerica. "But we're not in a fire sale."
Given that Orange County already has a glut of retail space, some real estate brokers are wondering if anyone will want to spend as much as $1 million to convert a staid-looking bank building into, say, a California Pizza Kitchen or a Wherehouse music store.
The challenge will be to persuade prospective buyers that while the branch buildings might not be exciting architecturally, they are on busy street corners and in high-volume shopping centers. In other words, many of them sit on prime real estate.
"We might not get the same price as we would have five years ago, or maybe not even five years from now," Costello said. "What we are trying to do is sell at fair market value."
Only in the past few months have Security Pacific and B of A, which officially merged in April, 1992, emptied the vaults, disconnected the ATMs and locked the doors of the branches across the state that are being closed as the two consolidate into the nation's second-largest banking institution.
Selling the Orange County sites "is not going to be easy," said Jim Auther, a retail broker with Lee & Associates in Newport Beach. "They're great locations, but it's going to be tough to find financing to retrofit them. . . . We've never had this much product come on the market at one time."
Because of their size, the most practical use for many of the sites would be turning them into restaurants. Auther said a McDonald's outlet at Euclid Street and Katella Avenue in Garden Grove was converted from a Wells Fargo branch about five years ago.
"It wasn't easy," he said. "I think they ended up scraping the site."
In Newport Beach, the landmark Crab Cooker restaurant still bears B of A's former sailing ship logo and uses the former vault as a walk-in cooler. The branch was built in 1936 and closed about two decades later, when B of A opened a new office just up the street.
"We love it," said Bob Roubian, owner of the Crab Cooker. "We always wanted to own a bank. We do better business than B of A. People line up in front of our building."
As for the "new" bank office up the street, it is one of the branches now up for sale.
While the offices vary in size (among the largest is the Taj Mahal, at 9,200 square feet), most are about 4,000 square feet.
"That's an unwieldy size," said Jim Sloat, a broker at Scher-Voit Commercial Brokerage Co. in Anaheim. "It's a no-man's-land."
A small business like a mom-and-pop cafe typically uses 1,200 to 2,000 square feet, he said. And retail outlets such as Crown Books and Circuit City are now opening so-called megastores of at least 10,000 square feet.
"What you are left with," Sloat said, "is a box with a vault in it."
Another consideration, especially in beach cities, is that parking may be scarce. Also, the bank is not paying for alterations--those will be the responsibility of the buyer. The same is true for structural changes mandated by the Americans with Disabilities Act, which went into effect last year, and asbestos removal at some locations.
"It's a 'buyer, beware' situation," Costello said. "That will have to be factored into the price."
How much a buyer spends will depend more on location than on whether a building has a baby-blue-tiled mezzanine or a flagstone facade.
"Architecture is usually not a deterrent" Sloat said. "Location will make or break these deals."
Brokers say that the most valuable sites are a former Security Pacific branch on 17th Street in Newport Beach and another on East Coast Highway in Corona del Mar. Both are on heavily traveled thoroughfares. A building like the 12,000-square-foot B of A branch at 3444 Via Lido in Newport Beach, however, will have to be a "destination" location, Auther said. Only by drawing a glitzy retailer or an upscale pool hall will the site attract enough traffic for a successful business.
Another complication is that B of A owns only about half of the closed sites in Orange County. The rest are leased, and the bank is selling subleases. Some are long-term and could fetch good prices, but those just a few years from expiration will be tougher to unload. And the property owners will hold the bank--not the new tenants--responsible for rent payments, Sloat said.
"The bank has a net worth a hell of a lot greater than you and I," Sloat said. "It is highly unlikely the owner would just let them out of the lease. Getting income from the Bank of America is as good as gold."
One such site is on Laguna Beach's posh Forest Avenue just blocks from the ocean. The peach-colored building has 7,300 square feet of space and just four years left on its lease, one broker said. The bank is asking for rent of $2.25 a square foot plus 45 cents a square foot to cover taxes, utilities and maintenance. That works out to almost $20,000 a month.
"There is no way anyone will lease (at that) and also take the lease as is," Sloat said. "It comes down to just how low the bank is willing to drop the rent."
Sloat added that other space on Forest Avenue has been leased for as much as $3 a square foot, but that was smaller: 2,000 square feet. The bank, he said, does not want to spend the money to subdivide the Forest Avenue site.
Tony Cherbak, an audit partner at accounting firm Deloitte & Touche's Costa Mesa office, said that retail space in a typical strip mall with heavy traffic has been going for about $1.20 a square foot in Orange County, and top-of-the-line space is $2 a square foot.
"That's got to be a great location, great parking," Cherbak said. "It would be pretty tough to get $2.25. Right now, it's the (tenant's) market."
A further challenge is that the bank is not offering financing, preferring that buyers pay in cash. Some brokers say that could make transactions more difficult.
BankAmerica's Costello said that "so far, potential buyers are not having problems meeting this requirement, and interest in our surplus properties remains quite high." That policy may be modified in the future if necessary, he said.
During the height of development in the 1980s, many banks ended up paying top dollar just to get into an area. Developers of shopping centers and office plazas even started bidding wars among banks for prime spots, Sloat said, and in some cases that meant banks paid more than tenants in comparable spaces nearby.
B of A officials, however, say that each site is different. And with overhead already trimmed because the properties are vacant, they can afford to hold onto sites until the market improves.
There is some interest, including queries from people interested in opening a pool hall, a video rental store, even a tire shop. And the bank has spoken with fast-food chains such as McDonald's, Carl's Jr. and Burger King about the possibility of buying all the sites as a package. Though few deals have closed yet, the bank says it is near agreement on several.
"They tend to come to us," Costello said of prospective buyers. "But we still have to get some competitive bidding going."
One site in Laguna Niguel was sold before the offices were actually listed for sale or sublease. That was a Security Pacific site at 30202 Crown Valley Parkway, bought by Home Savings of Los Angeles. And a former Security Pacific branch at 32201 Camino Capistrano in San Juan Capistrano is being rented by Farmers & Merchants Bank of Long Beach while its permanent office nearby is renovated, Costello said.
The conversions in those cases were easy: One bank became another. But such instances are rare. Though other banks and S&Ls;, including those that once competed for the sites, are being approached as potential buyers, these are hardly glory days for financial institutions.
"The market, yes, it's overbuilt, but the good space will get leased," said Jim Clarkson, a retail broker at Grubb & Ellis in Newport Beach. "The banks picked good locations, good traffic flow. They're not in a position to make a killing, and they want to get rid of the sites as soon as possible. It's good property. It's going to move."
A Bigger B of A The merger of Bank of America and Security Pacific--the No. 1 and No. 2 banks in the state, respectively-- that was announced in August, 1991, and formalized in April, 1992, is the largest in U.S. banking history. Combined assets of the two banks are estimated at $190 billion. Corporate headquarters: San Francisco Branches to be closed statewide: 450 Number to remain open statewide: 990 Branches to be closed in OC: 40 Number to remain open in OC: 89 Estimated jobs lost statewide: 9,000 Estimated jobs lost in OC: 800 Orange County branch closures: Anaheim, two; Brea, one; Buena Park, two; Corona del Mar, one; Costa Mesa, two; Dana Point, one; Lake Forest, one; Fullerton, four; Garden Grove, three; Huntington Beach, four; Irvine, one; Laguna Beach, one; Laguna Hills, two; Laguna Niguel, one; Mission Viejo, two; Newport Beach, three; San Clemente, one; San Juan Capistrano, one; Santa Ana, three; Seal Beach, one; Tustin, two; Villa Park, one Sources: Bank of America; Los Angeles Times editorial library Los Angeles Times