The new owner of Horton Plaza is embroiled in a legal tussle with a small-business owner who exited the downtown shopping center late last year — and millions are at stake.
The parties are real estate investment firm Stockdale Capital Partners and Burgerim franchise owner Irwantio, Inc. They are suing each other in San Diego’s Superior Court over the terms of a broken lease, with both sides alleging the other is at fault.
Stockale, which last year purchased the 900,000 square-foot retail center and also operates the city-owned Horton Plaza park next door, lodged the first complaint on Jan. 30. It filed suit against Irwantio for illegally terminating its 10-year lease at a standalone pavilion in the park. Friday, the business owner countered in a newly filed complaint that it was duped into signing its lease, and that the past and present operators failed to run the property according to the standards spelled out in the agreement.
The franchise owner is asking for a minimum of $1 million in damages, while Stockdale claims to be owed the balance of the lease term (or rent through August 2027).
The legal battle is taking place as the once acclaimed Horton Plaza mall, which first opened in 1985, prepares for its second act as a fancy office park. Stockdale purchased the downtown property in August for $175 million with the stated plan to reuse most of the retail center for a modern employment hub. That plan is on hold, however, until the city signs off on a new agreement that would allow for more office space on the site. As it stands, the Horton Plaza Owner Participation Agreement requires a minimum of 600,000 square feet of retail on the site.
In the interim, the urban mall has turned into a retail ghost town with most tenants leaving as their leases expire. In January, the United Artists theater closed its doors after a 33-year run. It was followed soon after by the shuttering of Claire’s accessories. That leaves just a small collection of businesses still open at the site, including Macy’s, Jimbo’s and 24 Hour Fitness.
Burgerim, meanwhile, shut up shop at Horton Plaza after just 13 months in business. The fast-casual burger franchisee, owned by Djulianto Irwantio and Lena Lazuardi, signed its lease in May 2017, opened in November of that year and closed in December of the following year. It temporarily took over a 1,500 square-foot kiosk in Horton Plaza park built as part of the city of San Diego’s $18 million investment in, and expansion of, the park. Under terms of the aforementioned owner participation agreement, Stockdale is required to operate, maintain and program the city-owned park.
But in court documents, the Burgerim proprietor claims to have been duped by previous mall-owner Westfield into signing its lease. The business says it was led to believe that the outdoor shopping center would be revitalized, that the park would programmed with a number of events and that its venue was in a desirable location. Instead, Irwantio alleges that it got a space adjacent to public bathrooms where the homeless bathe and that mall operators turned a blind eye to security incidents.
“Conditions have progressively worsened, such that, before (Irwantio, Inc.) was forced to exit the space, (the business) faced daily issues with homeless individuals. These conditions created an unwelcome environment for both customers and employees,” the suit states.
Stockdale Capital Partners declined a request to participate in this story, but court documents highlight a different version of events. The firm, in its complaint, argues that Irwantio stopped paying rent in November 2018, did not respond to multiple notices and illegally abandoned its restaurant venue. It’s suing the Irwantio business and Oren Loni, who is listed as a guarantor, for breach of lease and rent owed. A copy of the lease shows that Irwantio agreed to pay minimum rent starting at $112,000 per year and going up to $151,607.52 per year in 2027 — increasing on an annual basis — along with a percentage of gross sales, depending on business. Stockdale did not say how much in total it’s owed.
Separately, the real estate investment firm is being sued for similar reasons by specialty grocer Jimbo’s Naturally, which has been a tenant at Horton Plaza since 2012. The local company first filed suit against Westfield last May for breach of contract and amended its complaint earlier this year to include Stockdale.