A Black Eye for City’s Face-Lift

There is a little less town in downtown Costa Mesa.

Niketown, the store with the prominent dome that towers over Newport Boulevard, is closing today, dealing a blow to the city’s decades-long effort to remake its old commercial core.

“It’s going to be quite a noticeable void there,� said Ed Fawcett, president of the Costa Mesa Chamber of Commerce. “It will be hard to find such a prominent retailer.�

Here along one of Orange County’s most traveled highways to the beach, a landmark of urban redevelopment is flagging. Triangle Square shopping mall, which opened amid fanfare a little over a decade ago with Niketown, Virgin Megastore and the Gap, is struggling to keep tenants.

City officials remain optimistic about the mall’s future and say that the downtown neighborhood is thriving. To others, Triangle Square’s struggles renew the question of whether cities should subsidize such projects.

City officials downplayed the impact Niketown’s departure will have on the downtown redevelopment plan.

“It is still a prime location,� said Mayor Allan R. Mansoor. “Anyone with the right vision can make that mall a success.�

Gap and Virgin remain, but about one-quarter of the 191,000-square-foot center at Newport Boulevard and 19th Street stands vacant, according to the Charles Dunn Co., the mall’s property manager.

On a recent afternoon, Costa Mesa resident Chris Gordon was reading a novel in the open courtyard.

“I come here to relax,� said Gordon, 45, sitting in a chair and surrounded by empty storefronts. “It is really peaceful.�

Nike Inc. cited the low occupancy as the reason for closing one of its signature stores, the third Niketown to open in the country and the first to close.

“Certainly, [we] would wish any new tenant in that space much success,� said Nike spokeswoman Caitlin Morris, declining to elaborate on the company’s decision.

The Charles Dunn Co. also declined to comment in detail, but released a written statement announcing that it had recently signed on two new tenants, bringing the mall occupancy to 75%.

Longtime critics of the project point to Triangle Square as a prime example of the pitfalls of redevelopment zones, where cities try to revitalize depressed areas with an infusion of tax funds.

“If the market was there, it would have happened on its own,� said former Mayor Sandra Genis, the lone dissenter when the city approved the $62-million project in 1989. “If the market isn’t there, how are we to just wave a magic wand and make it appear? It doesn’t take a rocket scientist to figure out that people have other places to go to.�

Some of those other places include the Irvine Spectrum, a nearby pedestrian-friendly shopping complex that also opened a decade ago, Newport Beach’s Fashion Island, which underwent major renovations in the late 1980s, and Costa Mesa’s South Coast Plaza mega mall, which opened in 1967 and continues to be a large draw.

Critics of publicly funded redevelopment say that subsidies encourage inefficient projects and saturate the market with commercial space. Nonetheless, from Old Town Pasadena to Brea, cities have bet on the success of redevelopment zones to bolster their images as well as their coffers.

“Everybody is talking about remaking their downtowns,� said Scott Riordan, Brea’s economic development manager. “They have this attitude that if they build it, they will come. But you really have to see who your competition is.�

Brea’s downtown, which underwent a $100-million face-lift from 1995 to 2000, is now dotted by such major retailers as Old Navy and Eddie Bauer. Taxable sales in the area have increased from $15.5 million to nearly $70 million over that period, Riordan said.

He said private developers would not take the risk -- or the time -- to undertake such massive projects without government help.

But, he said, “we are lucky here. We have the density of population and the higher [household] incomes, and we are a regional draw for north Orange County and east Los Angeles County.�

Yorba Linda plans to remake its downtown as well. Councilman Ken Ryan said he was not worried about competition from Brea, the city’s neighbor to the west.

“Our downtown will be authentic,� Ryan said, adding that many of the area’s historic buildings would keep their facades. “We don’t want a counterfeit downtown like some of the retail centers you see.�

Ryan said the project would shun national chains in favor of local businesses and a small-town feel, and “we are going to make money on this too, we know that.�

But for each new development plan there is less money to be made, said George Lefcoe, a professor of real estate at USC. “People don’t shop a lot more because there are more shopping outlets,� said Lefcoe. “Demand pushes supply, not the other way around.�

Lefcoe said redevelopment zones can help jump-start economic activity, but not necessarily sustain it.

Cities may borrow against future property tax increases to fund projects in redevelopment areas. In Triangle Square, the city’s redevelopment agency used those tax increments to reimburse more than $5 million to the developers. But if property values remain stagnant in the long run, the redevelopment zone could go bankrupt.

There is no such danger in Costa Mesa, city officials said. The downtown redevelopment zone, which was created in 1973 and extends beyond Triangle Square into several blocks in the southwest part of town, continues to thrive, they said. And any drop in Triangle Square’s property value would not greatly affect the entire redevelopment area, they said.

Still, the city’s most visible symbol of its effort to remake its downtown has become a disappointment.

Triangle Square, which city officials once compared to San Francisco’s Ghirardelli Square, was expected to pull in $1 million in sales tax revenues annually. Last year, the city collected $200,000.

The mall’s cavernous underground remains empty after Whole Foods, an anchor store, left in 2002.

Some of the remaining tenants say their businesses are surviving, but no thanks to the mall.

“We do good business with my existing clients,� said Soner Kiyiskan, who moved his Sonash Hair Connection to Triangle Square from another part of town a year ago. “But when my appointment book is empty, I am not getting any new customers from the center.�

City officials say the shopping mall needs just another push, and some blame the owner, Triangle Square Investments LLC, and its management with failing to promote the mall properly.

“They haven’t quite gotten the formula,� said Councilman Gary Monahan. Triangle Square “has a hidden potential, and if someone can tap that potential, it would be a crown jewel.�