City partners with developers in bid to expand quirky retail site. (Spotlight on Commerce).

BEHIND the quarter-mile long barrier that fronts the Citadel Outlet Stores just east of the Santa Ana (5) Freeway in the City of Commerce is a 42-store retail mall backed by a hodgepodge of empty lots, warehouses and train tracks.

But by this time next year, the sight could be markedly different because two developers are making a $130 million bet that the city lives up to its name.

Newport Beach-based Craig Realty Group expects to close escrow by the end of the year on its $50 million deal with the city for the Citadel's 147,000 square feet of retail and 255,000 square feet of offices. The firm plans to expand the center by 125,000 square feet by next year's holiday season, with a second 125,000-square-foot phase planned for 2006.

Meanwhile, behind the complex, Overton Moore Properties bought 47 acres of mostly vacant land from longtime owners Pacific Tube Co. and has begun construction on a dozen spec light industrial buildings totaling 532,000 square feet. Letters of intent have been signed for 70,000 square feet, according to Rooney Daschbach, senior vice president at Gardenabased Overton Moore, who estimated that the $50 million development should bring between 400 and 500 full-time workers to the area.

About a quarter of the property, or 12 acres, will he sold back to the city as part of the Citadel expansion. Craig will act as the fee developer.

"This is a 50-yard-line location," said Daschbach of a site that's seven miles southeast of downtown, 15 miles northwest of Orange County and about 20 miles north of the ports.

It's the latest of a series of developments for a city of fewer than 13,000 -- and known more for its factories and industrial plants than retailing. Last year, Commerce Casino, long the city's largest commercial attraction, opened a 200-room Crowne Plaza hotel at the corner of Tubeway Avenue and Telegraph Road.

Next month, the city will send out request for proposals for two more properties it owns -- one, a block east of the Citadel, is seen as a site for an entertainment center, with theaters and restaurants, while the other, at the corner of Telegraph Road and Washington Boulevard, has potential as a big box location.

While the Citadel is dwarfed by outlet centers in Carlsbad (86 stores) and Camarillo (117), its retailers, including Ann Taylor, Old Navy and Eddie Bauer, have been able to draw shoppers from Los Angeles and Orange counties.

"Once we have selection, we'll have the same appeal (as the other larger projects)," said Steven Craig, managing partner at Craig Realty. "If you live in Orange County, you're 15 to 20 minutes away. Monterey Park's 10 to 15 minutes away. Downey's five minutes away."

Nando Lauto, who is a licensee for the United Colors of Benetton store that opened at the Citadel in 1990, is encouraged by prospects of an enlarged complex.

"Back then, 42 stores in a setting was excellent, so we did a phenomenal amount of business for the first couple years. But when the other outlet centers started opening, we lost some ground," said Lauto. "We were hoping that a scenario like this would happen."

Heriberto Valdes, community development coordinator for Commerce, said the city is pushing development as a way to establish a sense of identity. The sales taxes generated also are greater than the taxes that the city is able to collect on industrial properties.

"The city doesn't really have a commercial center," he said. "The obvious place to put it is along the 5 Freeway, so we're focusing on Telegraph as our commercial area."

For years, the area north of Telegraph was known for anything but that. In 1929, architects Morgan Walls and Clements (Mayan Theater) built Commerce's most recognizable landmark, the Assyrian-themed Samson Tire and Rubber Co. factory, which later served as a Uniroyal Tire factory before being shut down in 1978.

Meanwhile, Pacific Tube, a steel-tubing producer, had been operating its plant behind the tire factory since before World War II.

But the city bought Samson the site for $14 million in 1983. Seven years later, Trammell Crow Co. was brought in to oversee the $118 million redevelopment of the site into an outlet center, as well as the construction of a 201-room Wyndham Garden Hotel next door. Trammell continues to own the hotel and will manage the retail portion of the property until the sale closes.

Already grossing a healthy $380 per square foot in annual sales, Craig said that the combination of a recognizable site, a lack of nearby outlet centers and the additional employee population nearby will be enough boost sales further. Over the next four years, the number of stores is expected to increase to 120.