DEVELOPER BAILS ON TOWN CENTER; HIGH REAL ESTATE PRICES BLAMED FOR SCUTTLING PROJECT.

Byline: Lee Condon Staff Writer

The developers of Town Center, a much anticipated $151 million open-air pedestrian mall that was to be the centerpiece of downtown Glendale, have dropped out of the project.

Donahue Schriber blamed the collapse of their deal with the city of Glendale on the high cost of buying land in the downtown area, financial problems in the hotel industry and the recent bankruptcy filing by Mann Theaters, which was to be a major tenant.

``When you have a project that's more than $100 million, all the stars have to line up perfectly,'' said Pat Donahue, a vice president at Donahue Schriber. ``We couldn't match up with what everybody wanted with this project.''

The city had high hopes for the 700,000-square-foot shopping center to be built on 15 acres just southeast of the Glendale Galleria. City redevelopment officials said Friday they will try to salvage the project, which is the key part in the city's downtown strategic plan.

The project as originally conceived was massive, including nine to 12 movie theaters, a 300-room hotel, 400,000 square feet of retail stores and restaurants, a 2-acre city park and a 3,000-space parking garage.

The city redevelopment agency was to be a major partner in the project, contributing $20 million in land the agency already owns and $5 million toward construction of the city park. In addition, the agency would pay $1.18 million a year in property tax revenues back to the developer for 22 years to pay for parking garages.

Donahue said the project failed for three reasons:

The cost of acquiring land in the downtown area has jumped 30 percent because of the improved economy, making it too expensive for the company to buy the property it needs.

Wyndham Hotels decided to pull out of the project because of financial problems in the hotel industry. Lending institutions are wary of hotel projects because the industry is considered overbuilt.

The recent bankruptcy filing by Mann Theaters, which was to be a major tenant in the project.

Earlier this year, Donahue Schriber proposed major changes to the project to compensate for the loss of the hotel. But council members were cool to the idea and angry that the hotel site had been moved from the center of the project. Donahue Schriber wanted to move the hotel so it could be built later, when financing might be available.

Donahue said the company tried many different configurations but could not make the project work.

``We must have had 40 different site plans,'' Donahue said.

Derrill Quaschnick, assistant director of the Glendale Redevelopment Agency, said the city is still committed to the project.

Town Center was the brainchild of city staff and civic leaders who put together the city's downtown strategic plan. The idea was that Glendale needed a central plaza that could be used as a community gathering place.

The developer's decision to abandon the project was a major disappointment for the city and for Donahue Schriber, which as creator of both phases of the Glendale Galleria, is the most successful retail developer Glendale has ever had. Town Center was also to be the follow-up to the 1-year-old Glendale Marketplace, a popular open-air pedestrian mall.

Donahue and city officials said they believe there is demand for more retail in downtown Glendale.

``There are still a large number of tenants who want to be in downtown Glendale,'' Donahue said.

Quaschnick said the redevelopment agency likely will attempt to get community input about what a revised project should look like and will start looking for a new developer. Quaschnick agreed that there is demand for retail space in Glendale, but said the timing was off for the ambitious project.

``The timing was not to (the developer's) advantage,'' Quashnick said.

Jack Kyser, executive director the Economic Development Corp. of Los Angeles, said the project suffered because of its reliance on the hotel and the theaters.

``This would be a project running into a rock of trouble in the hotel industry and the movie exhibition business,'' Kyser said. ``Despite the strong local economy, maybe it's not the best time to do this.''

While the developer and the city insist Glendale is still a retail magnet, Kyser said lending institutions are increasingly wary of retail projects.

``There's consensus that there is too much retail. A lot of people are asking `Are you getting to the point of saturation?' '' Kyser said. ``People are also looking down the road to see what e-commerce is going to do.''