Transamerica unit files for OK of major development.

Plan involves 1.85 million square feet of office space

Transamerica Occidental Life Insurance Co. is asking the City of L.A. to approve a development plan encompassing about 1.85 million square feet of commercial office space on two parcels near the insurance giant's headquarters at 12th and Hill streets in the South Park district south of downtown L.A.

The phased redevelopment project, which all involved describe as a long-term plan, covers two sites - one owned outright by Transamerica, and another partly controlled by developers proposing a new headquarters of the Southern California Metropolitan Water District.

The sites are within the city's Central Business District Redevelopment Project and thus require approval by the Community Redevelopment Agency -- and subsequently the City Council -- for an "ownership participation agreement" with Transamerica for each of the project's two "components."

The CRA's board recently agreed to negotiate the participation agreements exclusively with Transamerica over a one-year period. The City Council, which oversees the CRA, must first approve the CRA board's action, and is expected to take up the matter this summer, according to Don Spivack, the CRA's director of operations.

Transamerica has retained the services of Michota Co., headed by former Ahmanson Commercial Development Co. President Stan Michota and his partner, Chris Stewart. The pair and their associates are endeavoring to guide the long-term development plan through the necessary city approvals processes.

One of the two components of the project includes a site -- now owned by four parties -- where Michota Co. has proposed developing a new MWD headquarters.

Michota said he and Stewart, independent of Transamerica, have options to acquire the five acres within the block bounded by 11th Street, Grand Avenue, 12th Street and Olive Street -- Transamerica owns the balance of the block -- if they can consummate a "build-to-suit" development plan with MWD.

But if MWD opts for one of two other headquarters "finalists" still under consideration, or redevelops its own property on the northwest fringe of the downtown area, Michota said he and Stewart will continue to pursue somewhat reduced development entitlements for the portion of the block Transamerica owns outright.

Tentative plans proposed for this block include three office towers - with MWD slated for one -- totaling about 1.3 million square feet of space. The proposal also entails a Transfer of Floor Area plan, also known as an "air rights transfer," of about 110,000 square feet of commercial floor space from a site Transamerica owns across the street at the northwest corner of 12th and Grand, according to a memo by CRA Administrator Ed Avila.

And as half of the proposed development site is zoned for residential development, about 400,000 square feet of residential floor area would have to be converted to commercial use, Avila's memo stated. It also notes that the city's Planning Commission would have to approve the air rights transfer and the zoning conversion.

The second proposed component includes much of the southern half of the block bounded by Olive, 12th, Hill Avenue and Pico Boulevard. As proposed, development of a 550,000-square-foot office tower on this site would require transferring 252,800 square feet of residential floor space from another site. Transamerica owns at the southeast corner of 12th and Grand, and converting it to commercial use.

This proposed transfer required the approval of the California State Bar Association, which leased about 175,000 square feet at one of Transamerica's existing nearby towers. Part of that deal included the bar association swapping its former headquarters property at 3rd and Bixel streets for what Transamerica has proposed as the transfer's "donor" site at 12th and Grand.

The bar association will take possession of the donor site when it moves into the nearby tower, according to a real estate source close to the transaction. The deal includes many "contingencies" depending on the density of development rights remaining on that site if the transfer is approved as proposed.

The second component of Transamerica's proposal will also include a plan to replace 32 low-income residential units to be removed from the site slated for the 550,000-square-foot office development, according to Avila's memo.

One source said, "It makes sense for (Transamerica) to get all its sites zoned for commercial development, because it's much easier to back-pedal to residential if that's what the market wants."

Transamerica attorney Randall Hoiby conceded the market for commercial space is "dead right now," but noted South Park's prospects as a commercial center are "wide open for the future."

Michota agreed long-term development bodes well for the Figueroa and Grand Avenue "corridors" starting to emerge.