A Pearl of Beverly Hills Loses Some of Its Luster

The landmark Rodeo Collection office and shopping complex, once touted as the jewel of ritzy Rodeo Drive in Beverly Hills, has lost its luster amid financial troubles.

With a third of its shops vacant, the center’s owner is reorganizing under Chapter 11 of federal bankruptcy law, a rare recourse for commercial property owners in Beverly Hills.

The Rodeo Collection’s troubles stand in contrast to the fortunes of other Beverly Hills retailers, who generally are rebounding from the early ‘90s recession, in part because of a resurgence in tourism.

The owner, a partnership called Rodeo Collection Ltd., filed for protection Feb. 27 after failing to renegotiate loan terms with its lender, the New York branch of Sumitomo Trust & Banking Ltd. The partnership, unable to pay the loan principal that was due Feb. 1, was forced to file for bankruptcy because refinancing could not be found despite a six-month search for a new lender, said Ronald Wall, chief financial officer for the partnership.

“Unfortunately, we were unable to get a loan extension from Sumitomo,” Wall said. “Banks are not making loans to specialty [upscale] retail projects of this caliber.”

The Rodeo Collection’s tenants, such as the upscale Versace and Bijan, will remain open for business.

Wall said banks have been reluctant to make loans to major retailing projects in Beverly Hills since real estate values declined from the heady days of the late 1980s.

However, real estate and retail analysts said the Rodeo Collection is also struggling because sales have been weak. Wall would not comment on sales or the vacancy rate at the complex, but about a third of the retail space available appears to be vacant.

The bankruptcy filing marks a reversal of fortune for the Rodeo Collection, which opened with great fanfare in 1982. It was the first shopping complex on a street known for its high-profile stand-alone shops.

The Rodeo Collection is also the best-known creation of the Mahboubi family, which has extensive real estate holdings in Beverly Hills. The Mahboubis, principals in the partnership that owns the Rodeo Collection, built the complex on the site of a former parking lot.

When it opened at 421 N. Rodeo Drive, the center was the buzz of Beverly Hills and the fashion world. The international media attention it received helped lure big names to Beverly Hills in the early ‘80s. Armani, Ralph Lauren and Valentino joined the rush to Rodeo Drive during that period.

“The Collection brought tremendous cachet to the street,” said John Carroll, president of the Rodeo Drive Committee, the corridor’s merchant coalition. “It transformed the 400 block of Rodeo.”

Although merchants suffered through the recession in the early 1990s, Carroll said business on Rodeo has improved gradually since 1993.

“Tourism is doing well again, and Beverly Hills is attracting a lot of tourist traffic,” said Ira Kalish, senior economist at Los Angeles-based Management Horizons, the retail consulting division of Price Waterhouse. “The problems at the Collection are not related to the business environment.”

Ironically, many observers of the Beverly Hills retail scene said the Rodeo Collection’s difficulties stem from the same element that distinguishes it: its unique architectural design.

Merchants with storefronts facing the street have more exposure than those on two levels of shops around the Rodeo Collection’s courtyard--and that’s the problem, said Ronald Altoon of Altoon + Porter Architects, a Los Angeles-based firm that has received awards for some of its retail designs.

“Beverly Hills has grown as a village of street-level shops, and to operate a shopping center there is to cut against the grain,” Altoon said. “The marketplace is telling the Collection that consumers would rather shop on the street. After all, one of the reasons to shop Rodeo Drive is to be seen shopping Rodeo Drive.”