Dilapidated California Theatre building is on the market again. Will anyone buy it?

The crumbling, 98-year-old California Theatre building at the corner of Fourth Avenue and C Street in downtown San Diego is officially for sale, once again, as the insolvent property owner seeks to satisfy the terms of its legal settlement with the city.

Earlier this week, commercial real estate broker CBRE listed the 0.58-acre site at 1122 Fourth Ave. for sale, playing up in online marketing materials the property’s location in the city center.

The firm is also touting that a buyer can demolish the structure without pushback from a local preservation group that has proved to be an obstacle in the past, and can move at a speedy clip if it uses previously entitled plans for a hotel and condo project.

The property is currently unpriced.

“I see this location as being a landmark location. There’s not a lot of land left in the civic core,” said Jason Kimmel, an executive with CBRE and one of the property’s listing agents.

The California Theatre’s adjacency to San Diego’s Civic Center means that someone with a long-term outlook can own a piece of the future, he said, referencing the recent arts-and-education-center redevelopment vision being advanced by downtown boosters.

“That’s what we’re going to be selling,” Kimmel said.

But finding a buyer right now, one that can look beyond the location’s current conditions and is willing to tackle the demolition work, is unlikely, said real estate analyst Gary London, a principal of local firm London Moeder Advisors.

“The problem with the site is that it’s next to a semi-derelict and underutilized part of downtown, the C Street corridor,” he said. “This area is in bad shape, and has been for many years, starting with the creation of the trolley that basically devastated C Street. And, then, the overall degradation, over time, of the quality of the city’s property hasn’t helped at all.”

Opened April 22, 1927, as the New California Theatre, the building directly opposite City Hall has been closed since 1990 with multiple ownership groups contemplating demolition or restoration over the years. In the ensuing decades, the onetime vaudeville theater and the attached eight-story office building are said to have deteriorated beyond repair.

Melbourne, Australia-based Caydon Property Group bought the property in late 2019 for $21.1 million. In April 2021, Caydon received City Council approval to replace the dilapidated structure with a 41-story boutique hotel and condo project called Theatre House.

The following year, however, the owner began actively marketing the site for sale. By July 2022, Caydon was insolvent and the developer’s largest creditor, OCP Asia, had appointed Australia-based receiver McGrathNicol Restructuring to liquidate all of the company’s assets.

During Caydon’s collapse, the city’s code enforcement division documented severe deterioration, including building elements that appeared likely to fall into the public right-of-way. The property is also said to be a hot spot for homeless people, teen skaters and other illegal trespassers, who have repeatedly gained access to the building over the years.

In April 2023, the city sued Caydon in San Diego Superior Court, seeking to declare the California Theatre a public nuisance and secure a court order to force the owner to remedy the situation. Last month, the parties resolved the legal dispute, with Caydon committing in a settlement agreement to sell the property and close escrow by the end of next year. If there is no buyer, the owner must raze the building.

CBRE is now under a time crunch, working to meet a March 31 deadline for Caydon to enter into a purchase agreement with a buyer.

The real estate firm is publicizing the listing widely and will share it with its database of clients all over the world, Kimmel said. The buyer, he said, will likely have local ties, but have access to national or international money. CBRE, Kimmel said, is also better positioned than the previous broker, retained in 2022 for a short stint, to sell the property.

That’s because Save Our Heritage Organisation, the historical preservation group that sued a previous owner and successfully blocked demolition, will not stand in the way of redevelopment, according to a Wednesday news release issued by CBRE.

The preservation group’s settlement agreement with the previous owner is superseded by the city’s recent court order, SOHO Executive Director Bruce Coons said when reached by email.

SOHO’s court order had required major portions of the building’s facades to be reconstructed according to historical standards, and required replication of the famous “Caliente” wall design.

Other barriers remain.

London, the real estate analyst, said there is no obvious use for the land in the current market.

“There’s just no demand for anything,” he said. “You can’t expect people to live there the way that part of downtown looks today. You can’t expect people to office there, given the oversupply of office space. You can’t expect people to hotel there for the same reasons.”

The only potential buyer, he said, would be Iida Group Holdings Inc., the Tokyo-based housing developer that owns a portion of the same block occupied by the California Theatre. The firm bought the 0.34-acre site at 345 B St., formerly home to the 4th and B live music venue, in 2016. It later demolished the music venue in preparation for redeveloping the site with a skinny, mixed-use tower, but has so far held off on those plans.

“They’re the obvious buyer, because a full block development makes infinitely more sense,” London said. “The other obvious buyer is the city of San Diego, but they’re not going to step up. It should be a part of the overall redevelopment play that would include C Street, the (City Operations Building) and everything else. The city is not thinking along those creative lines … . I’m not going to hold my breath on that.”

San Diego was, until late last year, contemplating the purchase of a downtown building to replace its aging City Hall, and was expecting to offer its Civic Center blocks for sale or lease for a second time to help fund the relocation. In December, San Diego Mayor Todd Gloria shelved the two-pronged plan in light of the city’s substantial structural budget deficit.