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Edwards' Troubles Help Sink Valencia Mall Sale

O.C. BUSINESS PLUS

Bankruptcy: O.C. centers also report lost business as theaters have faltered.

August 29, 2000|LESLIE EARNEST and MARC BALLON | TIMES STAFF WRITERS

Edwards Theatres Circuit Inc.'s bankruptcy has scuttled a shopping mall deal in Valencia, an indication of the ripple effects of the Newport Beach movie chain's financial woes.

Newhall Land & Farming Co. said the buyer of its Valencia Town Center mall--the shopping hub of the booming Santa Clarita Valley--called off the purchase, citing Edwards' recent bankruptcy petition.

Edwards has two theater complexes totaling 21 screens and an IMAX 3D theater in the mall and neighboring entertainment center.

The buyer's decision to back out of the Valencia deal highlights the far-reaching implications of Edwards' effort to reorganize its debts and operations, which has raised doubts about some new retail projects and could have broad financial implications for Southland shopping centers that have counted on Edwards as an anchor tenant.

Some Orange County shopping centers have already been hurt by the chain's financial crunch and decision to close several smaller, poorly performing theaters.

Dave Busk, managing partner of Franciscan Plaza in San Juan Capistrano, said business at the shopping center has fallen by about 10% since Edwards closed its five-screen movie complex in April.

"There's not a lot of retail space in San Juan Capistrano so ultimately we'll survive this and move on," he said. "But it's challenging."

Other centers are also feeling the pinch. The operator of the Triangle Square shopping center in Costa Mesa says Edwards owes it more than $627,000.

Doug Gray, president of Ezralow Retail Properties, co-owner and developer of Huntington Beach Mall, said it pulled the plug on Edwards' planned multiplex in March because of concerns about the chain's "economic viability."

Edwards was to have built a multiplex in the soon-to-be-renovated mall on land leased to it by Ezralow, Gray said.

The developer is in discussions with one potential theater operator, but Ezralow also may resume negotiations with Edwards as a result of the bankruptcy filing, Gray said.

"They're going to come out of this bankruptcy probably healthier than any other operator out there," he said. "I'm inclined to look on them more favorably now, because they're cleaning house."

Edwards said Monday that other projects are moving forward.

For example, construction is nearly compete on a 20-screen Edwards movie house at the El Paseo South Gate shopping center in South Gate, Chief Executive James Edwards III said. That theater should open late this year.

In Orange County, the company still plans to add four screens to its 21-screen complex at the Irvine Spectrum Center, beginning late this year. The new screens should be complete by early summer 2001, Edwards said.

But Edwards' bankruptcy has tossed a wrench into Newhall Land's plans to sell the Valencia shopping center and some adjacent office buildings.

The Santa Clarita-based developer, a limited partnership, said in December that it planned to sell about $200 million of retail, office and residential property and use the money to buy back 20% of its partnership units. The buyback was intended to boost the company's unit price.

On the New York Stock Exchange Monday, Newhall Land's partnership units fell $1.44 to $25.25.

Newhall Land officials only last week announced that the 675,000-square-foot mall and an additional 125,000 square feet of retail and entertainment space were in escrow.

That announcement did not reveal the buyer, but industry observers identified the firm as RREEF, a Chicago-based real estate investment firm.

The 8-year-old Valencia Town Center is the largest shopping mall in northern Los Angeles County, with more than 100 stores, including JCPenney, Sears and Robinsons-May department stores.

For the first six months of this year, rental income from Edwards represented about 16% of the mall and entertainment center's combined total income.

The buyer wants to wait to see whether Edwards closes the theaters, tries to renegotiate the leases or keeps them as is, Newhall Land spokeswoman Marcia Ward said.

A spokeswoman for Edwards would not comment specifically on its Valencia theaters. "The company is reviewing all of its theater operations," Ann Julsen said.

*

Times staff writer Jesus Sanchez and Dow Jones Newswires contributed to this report.

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