Tiffany Wants New Store, Sues South Coast Plaza
Tiffany & Co., seeking to expand its presence in Orange County, is suing South Coast Plaza, claiming that the region’s biggest shopping mall is preventing the tony jeweler from opening a store at the Mission Viejo mall.
The suit underscores the high-stakes battle taking place for the purses and wallets of well-heeled South County shoppers, a fight that retail experts estimate will cost the giant South Coast Plaza in Costa Mesa more than $100 million a year in lost sales.
The Shops at Mission Viejo, as the former Mission Viejo Mall will be known, is undergoing a $150-million renovation to position itself as the only upscale shopping center in South County. The center next month will debut two new department-store anchors that have--and will keep--stores at South Coast Plaza: Nordstrom and Saks Fifth Avenue.
“That’s compromising one of the highest-income areas that South Coast Plaza draws from,” said Irvine retail consultant Gregory Stoffel.
Tiffany, in its lawsuit filed Wednesday in Orange County Superior Court in Santa Ana, said that South Coast Plaza denied its request to open a store in Mission Viejo, invoking a noncompetition clause in the jeweler’s lease that is “illegal and unenforceable.”
Attorneys and officials for Tiffany couldn’t be reached for comment late Thursday. South Coast Plaza’s attorneys are examining the lawsuit, said mall spokeswoman Debra Gunn Downing, who declined further comment. Officials at Simon Property Group, which owns the Mission Viejo center, could not be reached for comment.
The suit by the 162-year-old New York jeweler seeks at least $1 million in damages, attorney fees and an order preventing South Coast Plaza from blocking a second Orange County store.
Clauses that prohibit merchants from opening competing stores within a specified radius are “fairly typical” between a landlord and a shopping center tenant, Stoffel said.
And South Coast Plaza is very careful about holding onto its prized stores.
“They’re trying to protect their uniqueness in Orange County,” Stoffel said. “There [are] a lot of tenants at South Coast Plaza who would like very much to be in Mission Viejo and Fashion Island and a number of other centers, so they could increase their market penetration in Orange County.
“South Coast Plaza’s a wonderful shopping center, but it doesn’t penetrate all the high-income areas in Orange County.”
In particular, he said South Coast Plaza tries to keep its tenants out of Fashion Island in Newport Beach and the still-expanding Irvine Spectrum Center, which plans to build a third phase that will include many stores.
South Coast Plaza itself is in the middle of a less-dramatic overhaul. Its former Crystal Court wing, which dropped its name earlier this year in favor of the more prestigious South Coast Plaza moniker, is getting a major face lift and wooing new tenants. It recently signed both Crate & Barrel Furniture and Borders Books, Music and Cafe. Also planned is a 611-foot bridge that will stretch across Bear Street, linking the two properties.
Tiffany’s opening at South Coast Plaza in 1988 was a key event in the mall’s growth, helping developer Henry Segerstrom elevate the center to a world-class shopping district rivaling the likes of Rodeo Drive in Beverly Hills and the Champs Elysees in Paris. “Tiffany is one of those tenants that helps make a statement of who you are,” Stoffel said. “They’re not the kind of store that’s going to go into any mall. It’s a carrot.”
The presence of Tiffany also was used to attract other highbrow merchants to South Coast Plaza, which does about $900 million in sales a year, making it the highest-grossing mall in the western U.S.
The Mission Viejo Mall, by comparison, did about $125 million in annual sales before its renovation began. Its projected sales after the remodeling range from $300 million to $400 million annually, Stoffel said.
At present, the only fully operating regional shopping center in South County is the Laguna Hills Mall, anchored by JC Penney, Sears, Roebuck & Co. and Macy’s. It underwent a multimillion-dollar renovation earlier this decade.
Segerstrom, who transformed some of his family’s bean fields into the internationally known shopping mecca in Costa Mesa, spent 10 years wooing Tiffany to Orange County. He granted a number of special concessions to land the New York jeweler. Among them were a separate outside entrance to the mall, a choice location next to Nordstrom, and rent that was not based on Tiffany’s sales volume. Retailers typically pay a percentage of their monthly sales as rent for space in a shopping mall.
In its suit, Tiffany acknowledges that the lease it signed upon joining South Coast Plaza in 1988, and which it renewed in 1992, includes a clause that prohibits it from opening a competing store in Orange County until its lease expires. But Tiffany now contends that the clause violates portions of the California Business & Professions Code and is hampering the company’s ability to grow and make more money. The suit does not say when Tiffany’s lease expires.
South Coast Plaza “threatened Tiffany with drastic consequences if Tiffany attempts to open a store in the Mission Viejo Mall,” according to the suit, but it does not say what those threats entailed.
Tiffany first tested the waters of Orange County in 1984, opening a small office rather than a store, to cater to corporate clients. But business didn’t prove lucrative enough, and the office closed in early 1985. But as the economy surged in the second half of the ‘80s, Tiffany picked up 7,000 customers in Orange County just through its mail-order division.
Four years after deciding Orange County wasn’t ready, Tiffany officials were back. A 9,500-square-foot store opened at South Coast Plaza in October 1988. Preceding the opening was a glitzy $300-a-plate charity event benefiting the South Coast Repertory Theatre that was one of the biggest social events of the year.
Among the guests were Paloma Picasso--daughter of artist Pablo Picasso--who at the time made a line of jewelry for Tiffany. Developer Kathryn Thompson went so far as to commission a special embroidered ball gown from a Newport Beach boutique that depicted a brooch set with a replica of the 128-carat Tiffany Diamond.
