REAL ESTATE: Kilroy and Thomas in Battle Over Planned Office Project

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Kilroy and Thomas in Battle Over Planned Office Project

Danny King

A campaign to block the proposed development of a 2.2 million square foot mixed-use project in El Segundo has its developers crying foul.

Thomas Properties Group is attempting to develop the El Segundo Corporate Campus on a 46-acre site owned by FedEx Corp.

But the project, a mix of office, retail and restaurant space, has run afoul of real estate investment trust Kilroy Realty Corp., whose headquarters and 700,000 square foot office complex sits across the street from the parcel.

James Hansen, director of community economics and development for the City of El Segundo, said Kilroy has challenged the development in three planning commission hearings over the past month and a half, citing air quality, traffic and ground contamination issues. (The previous landowner, Rockwell International Corp., had done some environmental remediation before selling to FedEx in 1997.)

“In my entire career, which is over 30 years, this is the first time I’ve seen an adjacent landowner or business offer such a serious and tenacious challenge of an application,” said Hansen, who added that the planning commission recently approved of the development, 5-0, and that final approval will go before city council next month.

The real issue, according to a statement issued by Thomas Properties, is the 1.8 million square feet of office space that will be dropped into a slumping South Bay office market once the project is completed. According to Grubb & Ellis Co., the El Segundo/Beach Cities market had a 16 percent vacancy rate at the end of the third quarter, having tripled over the previous year.

Hugh Greenup, executive vice president of Kilroy Realty, refuted the notion that his company was opposed to the project at all.

“We support the concept of this development,” said Greenup. “What we’ve said is that the community needs adequate scrutiny and comment for a project this size. There are massive traffic problems confronting the South Bay.”

As for the claim that Kilroy’s involvement is competitively motivated, Greenup point’s to the company’s track record of involvement with the planning commission.

“We’ve watched 10 million square feet built in El Segundo over the past 40 years,” said Greenup, who noted that the company’s first building was constructed there in 1961. “Find one (case) where we’ve ever taken this position on.”

“The real factor is the fear of competition,” Thomas Ricci, Thomas Properties’ senior vice president said in the statement. “Our competitor wants to delay or defeat the Corporate Campus so they can maintain their dominance over El Segundo and this real estate market.”

Dale Goldsmith, a partner at Greenberg Glusker Fields Clayman Machtinger and Kinsella who represents Thomas Properties put it more bluntly.

“John Kilroy is not exactly (Sierra Club founder) John Muir,” said Goldsmith. “I don’t recall Kilroy voicing these concerns when developing the Westside Media Center.”

“Kilroy’s not the issue,” Greenup countered. “Traffic is.”

More Marina Residential

Atlanta-based Trammell Crow Residential, whose local office is based in Costa Mesa, has purchased a two-acre site at 4077 Glencoe Ave. for $4.5 million and has started building a 102-unit luxury apartment complex that is scheduled for completion in mid-2003.

A departure from the recent developments that have flooded Lincoln Boulevard, the project, dubbed Alexan del Rey Apartments, is situated two blocks east on Glencoe, about halfway between the Costco-anchored shopping center to the north and Villa Marina Marketplace to the south.

“That was what was intriguing to us,” said Trammell Crow Residential Partner Michael Genthe, who added that CalTrans planned westward extension of the Marina Freeway was also a draw.

The complex will consist of primarily one- and two-bedroom units, which rents expected to range from $1,500 to $3,000 a month. Genthe declined to comment on the cost of building the project, though local sources estimated a $10 million price tag on the construction of the 102,000 square foot development.

Groundbreaking coincides with the recent approval for a 450-unit complex to be developed by Dallas-based Lincoln Property Co. on Marina Pointe Drive.

Rehab Revival

Add the Bartlett Building to the list of older downtown office buildings that are being rehabbed into live/work loft space.

The 80-year-old structure at 7th and Spring streets was recently purchased by Woodland Hills-based developer Mini LLC for $5 million and is being turned into lofts. The 200,000 square foot building, which will consist of 130 units, will be ready for market rate leasing in September 2002, according to Mini Principle Barry Shy. Shy estimated the cost of the renovation to be $8 million.

“It’s a wonderful building,” said Irving Bonios, senior vice president at NAI Capital Commercial Real Estate, Westside. “It’s one of the jewels of Spring Street.”

The project will be the second loft conversion Mini expects to complete next year. In February, the Higgins Building at Second and Main streets, which Mini purchased in 1997 and will consist of 143 units, is scheduled for completion in February. That structure, which once housed offices for the Los Angeles County Engineering Department, sat vacant for 20 years before being purchased by Mini.

Shy is confident that at $1.50 to $1.80 a square foot, he will be able to lease out the Bartlett Building within a few months.

Better View

Santa Monica-based architecture firm Keating/Khang LLP has taken space in downtown’s Library Tower and is planning to move from its Third Street Promenade location early next year.

The move gives the firm an opportunity for expansion, as the 7,000 square foot space is about double the size of their current offices. The 57th floor offices also give the firm a unique vantage point.

“From here I can look at the Gas Co.,” quipped Richard Keating of the next-door building he designed in 1991.

Staff reporter Danny King can be reached at (323) 549-5225 ext. 230 or at

[email protected].

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