Developer looks to emerge from industrial park woes.

Santa Fe Springs development readies for first occupant

After six difficult years, developer McGranahan Carlson & Co.'s near-nightmarish endeavor to turn a 75-acre former oil field in Santa Fe Springs into an industrial park seems to be back on track.

McGranahan Carlson's principals have endured the financial institutions crisis and a deep economic and real estate recession while attempting to develop and/or sell parcels -- with limited success -- in the project known as MC&C Commerce Center.

Partners Chris McGranahan and Steve Carlson persevered after their original financial partner in the project, Providence, R.I.-based Old Stone Bank, was taken over by the federal government -- which was planning to package the partnership interest into a pool of distressed assets.

They subsequently pursued upward of 150 other prospective partners before recently formulating a public-private venture to develop the former oil field in partnership with the city of Santa Fe Springs' Community Development Commission.

The city issued about $7.5 million in taxable bonds to help acquire the land from the federal government's thrift liquidation agency, the Resolution Trust Corp., and to complete a development agreement with McGranahan Carlson. Old Stone Bank was placed under Office of Thrift Supervision control in 1991, then RTC conservatorship the following year, McGranahan explained.

The MC&C team now anticipates that furniture importer Coaster America will soon generate some much-needed momentum at the park by completing its pending purchase of nine acres and building a warehouse/distribution facility.

The 15-year-old, Santa Fe Springs-based McGranahan Carlson partnership has developed several California office, R&D and industrial projects -- including a pair of office buildings in Culver City's Fox Hills district -- in joint ventures with financial partners. McGranahan is a former mortgage banker; Carlson a former investment broker.

In the mid-1980s, McGranahan Carlson and Old Stone Bank teamed up to successfully develop a 190,000-square-foot industrial project in Santa Fe Springs. The development attracted Fortune 500 firms such as Coca-Cola Co. and TRW Inc.

In late 1988, the McGranahan Carlson/Old Stone team began pursuing the MC&C Commerce Center project, acquiring 110 acres -- 75 developable -- from Santa Fe Energy Corp. for about $17.5 million. The partnership spent another year and more than $2 million removing contaminants from the property.

Meanwhile, McGranahan explained, it became apparent that Old Stone was facing substantial financial problems.

By mid-1990, Old Stone officials informed their development partners that the bank wanted to sell its interest in the project, McGranahan recalled. Over the following year and a half, he and his partner came close to striking partnership deals with affiliates of two big real estate finance firms: Aldrich Eastman & Waltch and SunAmerica Realty. But Old Stone management rejected the Aldrich and SunAmerica final offers, McGranahan lamented.

He then hit the streets for the next year, soliciting 150-some institutions he and Carlson considered prospective partners in the development project. But he found no takers in the depressed real estate capital market.

Then in late 1992, RTC asset managers indicated the agency intended to liquidate the interest in the property -- likely packaged into one of the big portfolios it was bundling and selling at that time. Concerned that a "bulk" buyer might not pay sufficient attention to the project, McGranahan and Carlson approached city officials with the public-private partnership idea.

The developers and city representatives spent much of early 1993 discussing potential arrangements, then made an offer to the RTC that July. It took another year to close the deal.

"We knew that if the RTC closed down MC&C Commerce Center, it would be wrapped with other properties and sold at a deep discount," noted Santa Fe Springs Mayor Albert Sharp. "In addition, there was a strong possibility that the project would be dormant -- thus becoming a problem in our community for quite some time."

"We felt it was important to continue our progress in developing productive industrial and business park facilities," added Bob Orpin, the city's director of planning and development.

Before striking the deal with the city and the RTC, the MC&C team managed to sell about 10-acres that have been developed into facilities housing Roy Allen Interests, Air Products & Chemicals, Tobutsu America, Barr Engineering and Shoring Engineering. McGranahan Carlson has also kept busy with a variety of real estate consulting and remediation assignments.

With the new development agreement in place, McGranahan and Carlson are now working to close the pending deal with Coaster America -- then follow up with other MC&C Commerce Center property sales, "build-to-suit" projects, perhaps even some speculative development.

Firms seeking "21st-century" warehouse/distribution facilities are the best prospects in the improving "mid-cities area" industrial real estate market, McGranahan noted, adding that the new Century (105) Freeway has greatly improved access to and from Santa Fe Springs. Cushman & Wakefield Inc. brokers Tim Howard and David Hasbrouck are the center's listing agents.

With the Southern California economy now appearing "poised for a decent recovery," McGranahan is looking forward to better days after the "darkest hours" of 1992.

"That was a very tough year for us," he recalled. "I spent a lot of time riding my bike" to relieve frustration.