Giant Telecom Project Looms In Downtown.

One of the largest industrial projects to hit the downtown area since the Great Depression is in the works for a site previously targeted for a state prison.

Now set to emerge on the 33-acre site southeast of the downtown core are six buildings with 1 million to 1.5 million square feet of space that will be primarily geared to telecom switching operations, the same type that have been taking over old downtown office buildings.

City officials and downtown boosters are embracing the project because it would accommodate the booming telecom industry and shift those tenants away from the downtown core, freeing up old office buildings to be converted into residential lofts.

"I think that it is incredibly innovative, and we'll use it to help attract investors to the inner city," said Rocky Delgadillo, L.A. deputy mayor for economic development. "It will be the first time since the '20s or '30s that there have been industrial buildings of this scale built in downtown Los Angeles."

At the same time, Delgadillo notes that the industrial demand for space is sufficiently strong to support any number of projects. (L.A. County's industrial vacancy rate is below 4 percent.) And other types of industrial operations often create more jobs than telecom switching stations.

"We want to provide (area residents) with opportunities that are nearby," Delgadillo said. "This is a neighborhood that is in desperate need of investment and high-wage jobs, which telco does provide, just not as many."

The project, which has been dubbed the L.A. Tech Campus, is being built by developer Richard Meruelo, a longtime major property owner in downtown's wholesale produce district.

In fact, Meruelo originally envisioned his project as primarily geared to wholesale produce distributors, and that tenant base is stir expected to occupy a portion of his new project. But now the project's primary focus is telecom-switching operations. Enabling Meruelo to shift his focus to telecom is the fact that his project site is in close proximity to a high. capacity fiber-optic trunk, part of the same digital infrastructure that has drawn telecom switching operations into the downtown core over the past four years.

"There's a big movement downtown to restrict these data-tenant type conversions which would crowd out the movement to residential (conversions)," Meruelo said. "This site would fit well within that because it's outside what anybody would consider residential, and would put (telecom operations) in an industrial area, but one that still services the down town market."

Indeed, Meruelo's project comes at a time when city officials are grappling with ways to control the expansion of telecom uses downtown. The fear is that those uses, though a boon for owners of previously boarded-up office buildings, will stifle efforts to transform downtown into a vibrant community where people live, work and play.

"(Meruelo's project) is the kind of thing we would like to see -- more intensive use of underutilized land in the interior of the city," said Steve Andrews, chief of strategic planning for the L.A. Community Redevelopment Agency. "That would help relieve some of the pressure (in the downtown core)."

At least 17 downtown buildings (with a total of 3.4 million square feet of space) have been at least partially converted to telecom uses, according to the Central City Association.

Meruelo plans to draw tenants away by offering telecom users rents that are roughly 20 percent less than other downtown telecom buildings, said Bill Atha of Grubb & Ellis Co., who is marketing the site along with T.C. Macker.

"We're coming out at very, very aggressive rates," Atha said. "We're going to try to undercut the market to make this the best project in the city."

In addition, the stock of downtown buildings that are good prospects for conversion to telecom uses is dropping, and that should give the large, custom-built spaces at Meruelo's project even more appeal, Atha said.

"There's not a lot left in the core that can really be converted," he said. "(Few buildings have adequate) floor load and floor weight and power."

Some city officials are even hoping that Meruelo's project will spark similar projects throughout that entire area southeast of the downtown core.

"We want it to be a catalyst," said Deputy Mayor Delgadillo. "It's one of the original Genesis L.A. sites. It had always been a leading candidate for that."

Yet another purpose Meruelo's project is intended to serve is to accommodate downtown's exploding wholesale produce industry. While that industry is no longer the primary targeted tenant base, Meruelo still plans to devote part of his project to loading docks, refrigeration facilities and office space for wholesale produce distributors.

As one of the largest property owners in the existing downtown produce district, Meruelo already has a strong tenant base of such tenants.

A recent Keyser Marston Associates study found the produce industry to be growing steadily, and that such tenants would pay for additional storage and distribution space away from the city's relatively high-rent produce markets.

Meruelo was originally selected by city officials earlier this year to develop the 20-acre parcel that sits at the heart of the project, at Washington Boulevard and Santa Fe Avenue.

He won the bid by pitching a plan for an ambitious six-building industrial center -- twice the size of the next largest proposal -- that was made possible in part because he had acquired an additional 13 acres next to the site.

The empty parcel, commonly known as the Crown Coach site, is considered a key element of the city's effort to put "brownfield" infill sites back on the market. (Brownfield sites are abandoned parcels that are contaminated and must be cleaned up before being developed.)

City officials opted to buy the Crown Coach site from the state after plans to build a state prison there faltered in 1992, in the face of local opposition. Led by the Mayor's Office, CRA officials, and Councilman Nick Pacheco, the city has invested significant time and energy to get a handle on the environmental problems plaguing the property so it could be placed back on the market.

Under the terms of Meruelo's bid, the CRA would buy the 20 acres from the state for nearly $9 million and sell it at cost to Meruelo's Alameda Produce Market Inc., a wholly owned subsidiary of the Meruelo Family Trust.