Edison, Snyder woo tenants from major downtown L.A. site.

As new Mayor Richard Riordan begins knuckling down to his monumental task of helping to mend the City of Angels' broken economic wings, two real estate development teams are continuing their efforts to steal away one of the city's major business enterprises.

That enterprise is downtown L.A.'s California Mart, a 1.4 million-square-foot center with 2,000 apparel showrooms which serves as the anchor of downtown's garment district.

The hundreds of tenants that lease space in that center have been feuding for more than a year with Sidney Morse, lead general partner of the five limited partnerships that own Cal Mart, over various issues pertaining to lease renewals there.

Last year, those tenants distributed 60 "requests for proposals" to developers who might be interested in building them a new apparel center. Some industry sources have speculated the entire exercise is merely a tenants' ploy to gain negotiating leverage with Morse and his partners at Cal Mart.

Nonetheless, only two development teams responded to the tenants' request for proposals. One team, headed by prominent L.A. developer Jerry Snyder, is trying to woo the apparel tenants to Santa Monica. The other team, which includes the land development subsidiary of giant electric utility holding company SCEcorp, is trying to woo the tenants to Hawthorne.

If either team succeeds, and California Mart is vacated, it could represent a major economic loss to the city of Los Angeles and a major blow to Riordan's nascent revitalization efforts.

SCE's development team wants the apparel tenants in its 25-acre "Fashion City," proposed for a site in Hawthorne.

And Snyder, through his J.H. Snyder Co., hopes to entice 400 or possibly more Cal Mart tenants to a second phase of his team's Water Garden office complex in Santa Monica.

"We're going to start signing leases now," boasted Snyder last week. "We have had 400 letters of interest from Cal Mart tenants."

Letters of interest do not constitute legally binding contracts and are routinely signed by many prospective tenants who ultimately end up backing out of deals. But the letters are often touted by developers and brokers as evidence that their projects are highly desirable.

Cal Mart is a key factor in downtown L.A.'s economy. It attracts 100,000 wholesale buyers a year to downtown, and they tend to stay at local hotels and dine in nearby eateries. More than 8,000 people are employed in the Cal Mart building.

Moreover, Cal Mart anchors a part of downtown -- the Ninth-and-Spring-streets area -- that is troubled, faltering between being merely seedy or declining into an urban netherworld of homelessness, vice and crime.

"If Cal Mart lost the wholesale trade, it wouldn't be good for that part of downtown," said Ray Lepone, a broker with commercial brokerage firm Grubb & Ellis Co. "We should probably try to keep it here."

In sharp contrast, a successful, 700,000-square-foot "Fashion City" would mark a double bull's-eye for the SCE team. The utility company not only owns the land underneath the proposed development, through its Mission Land Co. subsidiary, but it would also supply electric power, through its Southern California Edison Co. subsidiary.

According to Fashion City's co-developer, Robert Comstock of Manhattan Beach-based development firm Comstock, Crosser & Hickey, the City of Hawthorne is helping out too, by designating the area around the project as a redevelopment zone. That means property taxes from the project can be redirected back to the project.

"We'll have $1 million a year we can devote to marketing Fashion City tenants to the world," said Comstock. "And, we are only minutes from the airport (Los Angeles International), and right off the 405 (San Diego Freeway)."

The Hawthorne tax breaks are so generous that Comstock described city efforts as "effectively a rent subsidy for the tenants."

Still, Fashion City monthly rents, in the $2.65-a-square-foot range, would be about one-third higher than Cal Mart's current rents, according to Sidney Morse, lead general partner in the group that owns Cal Mart.

"We have been cutting and holding the line on our rents," said Morse. "We gave up on our automatic rent increase for this year."

For his part, developer Snyder described Santa Monica as the only place trendy clothes buyers would ever really want to stay in the Los Angeles area, but he admitted his rents would be higher than rivals'.

"The problem with (wholesale apparel) buyers is that they don't want to go downtown," said Snyder, referring to downtown's downbeat reputation. "It doesn't matter what the rent is, if you don't have any buyers. Out here, we have the nice hotels and the places that buyers want to go."

Morse last week noted that Cal Mart and other local property owners have formed a special tax assessment district to finance additional "safety" patrols and trash clean-ups in the Cal Mart area.

He blasted the rival marts as disasters-in-waiting for the Southland garment industry, which employs more than 100,000 workers.

"Splintering the (apparel wholesale market) is the worst thing you could do," he said. "That would take us back to the Dark Ages, before 1964 (before Cal Mart was built), when buyers could not see everything under one roof. Back in those days, a buyer would come to town with $100,000 and only spend $40,000 of it because it took so much time to see all the different manufacturers."

Said Morse, "What will happen, if the market is split here, is that buyers will go to Dallas, where everything is under one roof."

Morse has written to Mayor Riordan, seeking his support for Cal Mart.

"I think Riordan will do a great job. He is a businessman, so he will understand what we need," said Morse. (Riordan, in the midst of inauguration ceremonies last week, could not be reached for comment.)

Asked if Cal Mart will continue to cut rents in order to retain tenants, Morse was abrupt: "We've done a great deal already. We have cut rents, lowered the parking rates (Cal Mart has underground parking). This isn't only about rents. We have services we can offer, the buyers come here because everything is under one roof. We are also developing programs to help the independent (manufacturers') reps market their clothes."

Lepone of Grubb & Ellis, however, said Morse and Cal Mart could lower rents enough to crush any new competitors.

"They have just got to be able to lower rents to well below what a new developer could offer," said Lepone. "The cost of building new is just tremendous."

One possible problem for Cal Mart: Morse refinanced the big Cal Mart project in the late 1980s, through the large insurer, Equitable Life Assurance Society of the United States.

Last week, he was terse when asked if he was overleveraged, given that property values and rents have been very squishy in the 1990s. "We are in conformance with all terms of The Equitable," was all that Morse would allow.