Major rehab advances in downtown's historic core; Mideb plans $55 million makeover of theater sites.

Commercial landlords on Broadway between Olympic Boulevard and Sixth Street in the downtown Los Angeles theater district have talked for years about converting their historic but dilapidated office/theater buildings into mixed-use projects with retail "swap meets" on the ground floor, office space on the middle floors and low-income apartments on the top floors.

Years of talk has not resulted in any action. But now Melbourne Australia-based Mideb Management is finally moving ahead with such plans while its neighbors eagerly watch for the outcome.

Mideb will spend the rest of 1993 working out development details with the Community Redevelopment Agency and the Los Angeles City Planning Department for its proposed $55 million first phase of its Arcade retail/office/apartment project on the east side of Broadway between Fifth and Sixth streets, said Mideb and CRA officials.

Along with 95,110 square feet of shops, Mideb will remodel basements under its five buildings that run from 512 to 540 S. Broadway to include 630 subterranean parking spaces, said a Mideb spokesman.

The existing Spring Arcade Building, 540 S. Broadway, has 38,350 square feet of space on the ground floor. Immediately above are two more floors of equal size that will be rehabilitated as offices in the second phase of redevelopment, according to Mideb's proposal. These bottom three floors are bisected by a three-story-tall atrium.

Two nine-story towers rise on either side of the atrium, making this building 12 stories high.

Plans for the remaining 116,460 square feet in the upper nine floors of the Spring Arcade Building will be fleshed out in phase two of the project, said a Mideb spokesman.

Mideb will convert the 33,000 square feet of theater space contained in the Roxy, Cameo and Arcade theaters into "swap meet" retail space. Those shutdown theaters are at 512,526 and 532 S. Broadway. Workmen will accomplish the conversion by tearing down the walls between the three theaters, leveling the sloped floors and restoring the ceilings and stages, according to Mideb's plans.

The remaining 23,760 square feet of retail space in Mideb's first phase will come from renovating the Spring Street Greenhouse on an adjoining parcel at 529 S. Spring Street, the plans state.

Originally, Mideb wanted to tear down the theaters and build a new structure. But disapproval from CRA officials forced Mideb to scrap that plan in May 1992, said Mideb officials who asked not to be identified.

Redevelopment and real estate experts said Mideb's timing could turn out to be fortuitous, even though the recession has prevented neighboring property owners from moving ahead with similar redevelopment plans. Speculation about Mideb's possible success stems from the fact that several government agencies scattered throughout Southern California are considering consolidating their operations into downtown L.A., possibly leasing as much as 3 million to 5 million square feet of office space there.

If government offices move into the area, they would provide additional customers for shops in Mideb's development. Mideb officials, however, said they will probably build mostly apartments rather than offices in the second phase of their project.

However, if neighboring property owners do not follow Mideb's lead, and government agencies turn their backs on downtown's historic theater district, the district may languish for years to come, said downtown real estate pros such as Bill Whitney, a real estate consultant at Big Six accounting firm Arthur Andersen & Co.

Most of the buildings along the one-mile stretch of Broadway between Olympic Boulevard and Fourth Street, including Mideb's buildings, were built around the 1920s. Originally, they housed ornate movie palaces, retailers, offices and apartments. But as the district declined in the following decades, tenants moved out of the upper floors. As a result, ground-floor retailers and movie exhibitors are the only tenants in some of the buildings, said downtown real estate experts.

Even so, retailers along the one-mile stretch of Broadway, catering to the large Hispanic population of Central and East Los Angeles, typically ring up more than $500 per year per square foot of shop space. That is well above the $250 to $300 per square foot most mall retailers report each year, said retail analysts. As such, Mideb would be able to quickly lease its proposed retail space, said Whitney of Arthur Andersen & Co.

"But the whole neighborhood must be cleaned up, more parking (structures) built and the focus of use along Broadway broadened," Whitney said.

Mideb plans to see how its initial retail/office phase goes before building either apartments or offices in that 183,160 square feet of undesignated upper-floor space in the Spring Arcade Building. Mideb hopes to have its first-phase plans finalized by the end of 1993 and finish the work by late 1994 or early 1995, a Mideb spokesman said.

But like other downtown experts, Mideb's representatives said people will not live in the theater district until the city beefs up police protection and social services in the area. CRA Director of Operations Don Spivack agreed.

"Mideb and fellow Broadway landlords will watch to see how well the Metropolitan does when it opens this year," Spivack said. The nearby Metropolitan is a new 228-unit apartment complex developed by Cleveland-based Forest City Property Corp. on the block bounded by Olympic Boulevard, Flower, Hope and Ninth streets. It is due to be finished by the end of February.

Despite possible pitfalls, Robert S. Harris, chairman of the Downtown Strategic Plan, still called Mideb's proposal "possibly ultimately shrewd." Harris also is the co-chair of the Mayor's design advisory panel, the group that is forming guidelines for the Downtown Strategic Plan, the $2 million document-in-the-making, being funded by the Los Angeles Community Redevelopment Agency that is supposed to set forth goals and policies for downtown redevelopment through the year 2010.

"There is a growing cry for redevelopment along Broadway and, in another two to three years, there is a good chance that a special assessment district will have been created to fund increased garbage pickup, police and fire protection," Harris said.

If the assessment district materializes, and government agencies lease office space along Broadway, the neighborhood will improve, Harris said. But that decision, which would add value to Mideb's property because it is already in the early stages of development and could quickly fill up, will not be made until downtown L.A.-based Albert C. Martin & Associates completes a space study it is conducting for the city, county and state government agencies, Harris said.

"That space requirement will be from 3 million to 5 million square feet. It would be nice if some of the old, historic buildings (like the Mideb property) could be renovated to meet that need," Harris said.

Mideb bought the Spring Arcade Building, 540 S. Broadway, in 1987. Mideb bought the Roxy, Cameo and Arcade theaters in 1989. At that point, a Mideb official claimed, the company had $25 million invested in the site.

Mideb's new proposal comes after it hired the Los Angeles office of architectural firm Whisler-Patri to design the retail/office/parking complex in August 1992. In turn, Whisler-Patri has hired Los Angeles-based David W. Denton, a former partner in Whisler-Patri, as the Mideb project designer. Mideb President Dennis Potts, who is based in Los Angeles, is the project manager.

Other theater district property owners await proof that the neighborhood is ripe for redevelopment.

Redevelopment plans that include street-level retail along Broadway include the old Luby Building at the southwest corner of Fourth Street and Broadway. That 450,000-square-foot structure formerly housed the Broadway department store.

Developer Ira Yellin and other owners of the Grand Central Market building and Million Dollar Theater building at the southwest corner of Third Street and Broadway are talking about a mixed-use redevelopment project with CRA officials and planners.

Yellin has already rehabilitated the Bradbury Building at the southeast corner of Third Street and Broadway, directly across the street from his other buildings.

There are signs that these loosely defined proposals will solidify and move toward development this year, said the CRA's Spivack.

Unlike many developers that build in the redevelopment district, Mideb will not tap the CRA for tax-increment financing or assistance on the first-phase office/retail portion of the project, but may if it converts the upper floors to housing.

As a redevelopment agency, the CRA often pays for all or part of the land on which redevelopment projects are built and then receives the resulting tax increment, which is the difference between taxes collected on the property before it was redeveloped and the amount collected on the higher-valued redeveloped property.

For example, if the owner of a parcel in a redevelopment district paid $100,000 per year in property taxes before redeveloping his property and $1 million per year after redeveloping it, the redevelopment agency would get $900,000 in tax increment. That money is used to pay for staff, conduct studies, buy land or whatever other expenses are incurred to carry out redevelopment efforts.