New owner in the works for The Headquarters in downtown San Diego

A landmark dining and retail center on San Diego’s waterfront that has struggled with tenancy since its opening is on the cusp of new ownership.

Commercial real estate investment firm LBX Investments LLC is in the process of acquiring the leasehold for The Headquarters at 789 W. Harbor Drive from current owner TRC Retail, according to public records. The leasehold transfer is scheduled to be considered next month by the Board of Port Commissioners, which must sign off on the deal as the property is on Port of San Diego tidelands.

The price and terms of the leasehold acquisition were not disclosed, although they will become public next month.

The Headquarters leasehold, which has a term that ends on Jan. 10, 2052, had an appraised value of $52.2 million in 2016 when TRC amended its lease agreement. The current value is likely considerably lower with 27 years left in the term.

“We are in negotiations for a transfer of the leasehold,” Brianne Page, a spokesperson for the agency, told the Union-Tribune. “Should such negotiations be successful, we anticipate bringing a proposed assignment of the lease, as well as a proposed amended and restated lease agreement with the assignee to open session in the coming months for the board’s consideration, perhaps as early as the May meeting.”

When reached for comment, LBX founder and managing partner Robert Levy said he could not discuss the transaction, citing a confidentiality agreement. Byron De Arakal with TRC, previously known as Terramar Retail Centers, said the privately held shopping center operator does not comment on portfolio transactions.

Opened in November 2013, The Headquarters is the reincarnation of the old San Diego Police Department headquarters downtown. The historic venue, on 6.3 acres of land just north of Seaport Village at the foot of Pacific Highway, was refashioned as a specialty retail center with 73,823 square feet of shops and restaurants and 160 parking spaces.

The property is anchored by restaurants, including the Cheesecake Factory, Puesto and Eddie V’s, all of which are original tenants and have fared well at the center. Conversely, there’s been considerable turnover with retailers. Currently, seven of The Headquarters’ 23 storefronts are empty, with a total of 16% of rentable square footage vacant, according to data provided by the port.

TRC, which spent $40.5 million to restore and renovate the facility, secured a 40-year lease agreement with the port in 2012. The retail operator paid no rent for the first nine years of its leasehold as consideration for its upfront investment in the conversion project, per the terms of the lease.

TRC currently pays 5% of gross revenue in rent, with the rate set to increase to 7.5% in January 2032. The firm paid $205,421.43 in rent in 2024, the port spokesperson said.

TRC specializes in operating grocery-anchored centers and has marketed The Headquarters for sale as least once before. Most recently, the firm put the property on the market in November. A marketing brochure prepared by listing brokerage Jones Lang LaSalle highlights the center’s proximity to the waterfront and Seaport Village, and notes that The Headquarters should bring in more than $4 million in annual net operating income.

However, the center has struggled over the years to draw significant crowds and retain businesses other than restaurants because it lacks a clear entrance, has a large but empty courtyard and feels isolated from Seaport Village, said Sharon Cloward, who runs the port’s tenant association, the San Diego Working Waterfront.

“You’ve got three strong anchors that have a following, (Cheesecake Factory, Puesto and Eddie V’s), but you don’t just go to a place for the restaurants, you go for the experience,” she said.

The center’s orphan status is linked, in part, to the port’s takeover of Seaport Village from Terramar, when the operator’s lease for the bayfront retail center expired in September 2018.

The neighboring properties, separated only by parking spaces, have since been on separate tracks.

Seaport Village is currently managed by Protea Property Management, which has ties to developer 1HWY1. 1HWY1 was selected by the port in late 2016 to redevelop most of the Central Embarcadero region. The developer’s Seaport San Diego mega project is currently making its way through the state-mandated environmental review process.

“When you talk with the Seaport tenants, The Headquarters is like a stepchild of (Seaport Village),” Cloward said. “It’s exciting to see some new blood coming in.”

Founded in 2018, LBX Investments specializes in open-air retail and multifamily housing, with its real estate portfolio concentrated on the East Coast. The real estate firm owns 17 shopping centers, according to information on its website.

LBX has joined the Working Waterfront tenant association and is anxious to make improvements to The Headquarters, starting with a new entranceway, Cloward said.

The Port of San Diego, which owns The Headquarters as a trustee of state-granted tidelands, has the final say on the pending leasehold transfer. The agency will share in the final deal, collecting 0.85% of the gross sale proceeds at the close of escrow.