Businessmen Join to Fight South Coast Village Landlord Segerstrom & Sons

After years of complaints, 12 retailers and former tenants of South Coast Village have banded together and pooled funds to fight what they claim has been a pattern of broken promises by their landlord, C.J. Segerstrom & Sons.

The most likely step, representatives of the merchants’ group said Monday, is a lawsuit alleging that Segerstrom, a major real estate developer and operator of South Coast Plaza, did not live up to promises about how it planned to develop the smaller mall.

If the civil action is filed this week as expected, it will be the second time the company has been sued by shop operators for allegedly misleading merchants about how it planned to build up and promote South Coast Village. There were a series of civil complaints by tenants and a threatened suit by the district attorney in 1976.

Segerstrom officials would not comment on the complaints except to say through spokeswoman Maura Eggan that “South Coast Village is an important part of South Coast Plaza and has been . . . a successful operation.�

But according to a former tenant, Julio Sanchez, the merchants’ complaints stem from the developer’s “absolute indifference� to its retailer-tenants.

Claim Indifference

“They really don’t care whether retailers are there any more or not,� said Sanchez, who last month moved his business, Village Pet Center, to a location several blocks away from South Coast Village. “We complained and just got promises about how the building was going to be filled up--which it never was,� Sanchez said.

Sanchez and others contend that vacancies at the center--which some tenants estimate at 50%--have caused their businesses to slide because fewer shoppers walk through the mall. Segerstrom spokeswoman Eggan would not comment on the vacancy rate at South Coast Village.

The merchants’ action is the latest in a long history of problems at the beleaguered South Coast Village, the 130,000-square-foot center across the street from the Segerstrom Co.’s successful South Coast Plaza and $100-million Crystal Court expansion.

While South Coast Plaza has thrived and now leads the state in retail sales, South Coast Village has become its poor stepsister, plagued by the lack of a major tenant and frequent turnover of store owners.

When it opened about 13 years ago at a cost of $6.2 million, the mall was unique with its open sky, cobblestone walkways, sycamore trees and clean wooden architecture. But unlike virtually every other piece of property developed by C.J. Segerstrom & Sons, South Coast Village has continued to try the stamina of its retailers and the company.

The Mercantile Building, in particular, has been a sore spot among tenants. Instead of the 30 exotic specialty tenants it once housed, the facility today has a single tenant--a fashion design institute that spreads across an entire floor.

In a bid to head off any potential litigation, Segerstrom has reportedly been offering to renegotiate leases with tenants at South Coast Village in exchange for an agreement not to sue the developer, according to two tenants and a lawyer representing some merchants at the mall.

The retailers’ complaints evidently were brought to a head in July, when company representatives reportedly told tenants that they had decided “not to decide� how to revitalize South Coast Village.

Merchant Tells Complaint

“It was like the donkey with the carrot. For three years or more, they kept us hanging on. We got all these glowing promises month after month after month� about plans for development, said a merchant who asked not to be named. “Now they’ve said they have no plans for anything, and we’ve been left flat. It may be six months or six years� before any redevelopment is under way, the merchant said.

After similar complaints surfaced from merchants in 1976, C.J. Segerstrom denied accusations that it had violated state consumer protection laws. But the developer paid $20,000 to the county and agreed to retain a consultant to aid and advise merchants. It also settled for undisclosed terms a number of private suits by merchants--some of whom say they now will sue again.

To aid in the latest legal battle, the retailers have retained Belli & Sabih, headed by flamboyant San Francisco attorney Melvin M. Belli. One of the potential plaintiff-tenants said the Beverly Hills office was hired after several Orange County attorneys expressed reticence to oppose the powerful Segerstrom family.

The tenants’ complaints, however, are not unanimous. Benny Spatola, owner of Spatola Tailoring at the mall, said he “did OK� in renewing his lease and is not contemplating joining the lawsuit. “I came out fine,� Spatola said.