L.A.'s skyline has changed a lot in the 35 years that Jim Thomas has been developing downtown properties a lot more than the players.

"The property that we compete with and that I spend the most attention on have pretty much been owned by the same institutions for some time now," said Thomas, chief executive of Thomas Properties Group Inc. "For a time, you had the Japanese buying a lot but that turned out to be a blip."

The lack of volatility Thomas has witnessed in the Central Business District, where his company is the second largest landlord after Maguire Properties Inc., holds true for most of downtown's 14 districts, according to a survey conducted for the Business Journal by CB Richard Ellis Inc.

While stupendous proposals such as the $1 billion development surrounding Staples Center and the $1.2 billion Grand Avenue project are making headlines, many of the downtown's largest landowners have remained unchanged.

To be sure, there are some new faces, such as residential developers Geoff Palmer and Kor Group Inc. But according to CB Richard Ellis data, downtown is still dominated by private institutions such as Good Samaritan Hospital, Coca-Cola Bottling Co. of Los Angeles and the Los Angeles Times, as well as public agencies like the Los Angeles Unified School District, and city, state, county and federal branches of government.

"Institutional owners aren't going away," said Jeff Lee, principal of condo developer Lee Group Inc., builder of the Flower Street Lofts near Staples Center. "Much of their assets will never be for sale."

Indeed, the School District, the city and the state continue to absorb more property as their operations expand, which could stunt future development or overwhelm some smaller neighborhoods.

Carol Schatz, president and chief executive of the Central City Association, dismisses concerns about large institutional ownership. "Property ownership, from my 15 years of experience, is largely a function of economics and the financial position of a company that buys and sells real estate."

But that could create other issues. In the late 1980s, Japanese investors paid huge premiums to acquire large numbers of buildings, only to sell at a loss when conditions soured.

That experience should provide a sobering counterpoint to the current round of investment activity, much of it focused on residential development. With downtown ownership tied up by major entities unlikely to sell out anytime soon, the area's transformation, while significant, might not take on the magnitude that area boosters are anticipating.

Even some real estate executives privately wonder whether the boom can be sustained, especially if L.A.'s overall real estate market begins to sink, as some economists predict is possible by year's end. Another worrisome prospect: That too many for-sale units will come onto the market at once.

New ownership
Today, undeveloped downtown land for residential use is going for $300 a foot, at least 300 percent more than five years ago. Last week, the Business Journal reported that the owners of the Biltmore Hotel were putting the property on the market for around $500 million, and that brokers handling the sale were pushing for some of the space to be converted to condominiums.

"You have to assume some heady condo sale prices to justify the prices land is selling for right now," said Larry Bond, owner of Bond Cos., a housing developer with a large Chinatown project. "The overall cost of development is becoming prohibitive."

It's the same story in the Central Business District, where Thomas said the profitability of developing and owning high-rise office buildings fluctuates according to the economics of the day.

"Sometimes it's more attractive than others," he said. "It hasn't always been as good as it is today with values climbing so steeply. We have gone through many phases."

The current cycle of new downtown ownership has been spurred by three concurrent events, according to Mark Tarczynski, a CB Richard Ellis first vice president.

First, the city condemned more than 70 acres in South Park, razing many of the neighborhood's decrepit and crime-ridden buildings to make way for the Staples Center.

By the time the arena opened in 1999, crime had fallen in the area and new restaurants were catering largely to non-residents some working downtown, some not willing to give the area a chance. Some visitors but by no means all were drawn to the events at Staples.

Meanwhile, the city enacted its Adaptive Re-Use Ordinance, which allowed owners of older office buildings the flexibility to convert unused structures into apartments and condominiums with streamlined city approvals.

Because of record low mortgage interest rates and L.A.'s over-heated housing market, there were a rash of conversions and new real estate investors began entering the market in droves.

"Those three things adaptive reuse, the Staples Center and the availability of capital have caused this surge of development," Tarczynski said. "And I don't think this would have happened (if early residential developers) hadn't sniffed the winds and saw an opportunity downtown."

Newer arrivals
In the areas that have attracted the most development South Park, the Historic Core and the Artist District residential developers have surfaced as leading property owners.

Palmer, whose G.H. Palmer Associates is the largest downtown residential developer with nearly 2,300 apartment units either completed, under construction or entitled, is one of the largest property owners in the Central City West neighborhood, according to the CB Richard Ellis data. It ranks alongside stalwarts such as Good Samaritan Hospital and the LAUSD.

In the Artist District, all three top property owners are new to the neighborhood and either proposing or building housing. Kor Group Inc., one of the largest builders, is converting several warehouses into the Molino Street Lofts and Barker Bros. Lofts.

Meanwhile, developer Richard Meruelo is in a battle with the Southern California Institute of Architecture, known as Sci-Arc, to build a mixed-use residential project on an 11-acre parcel behind the school.

"We want to build a mixed-use, primarily residential, project but the school has some growing pains and they would like to further develop their campus," Meruelo said. "We're trying to work through a lawsuit filed by them right now."

As more residential developers begin building homes in downtown's industrial areas, Schatz believes it's vital for downtown to retain its industrial regions for wholesale businesses and manufacturing.

"At some point we're going to have NIMBYs," she said. "I hope it's later than sooner, but that's a conflict that's looming."

Meruelo, whose family has been accumulating downtown land since the 1970s, has emerged as the area's largest property owner by acreage, according to CB Richard Ellis.

All told, he and his holding companies control in excess of 70 acres downtown twice as much as the next largest property owner, the Los Angeles Times, which has about 30 acres.

His largest asset is Alameda Produce Market Inc., which owns a 40-acre wholesale marketplace at the southwest corner of Alameda and 7th streets. The property is so huge that it makes Meruelo the largest property owner in the Produce District and the third-largest in the neighboring Seafood District, where the property slightly overlaps.

"I have property everywhere," said Meruelo. "You name the neighborhood and I'm there."

Most recently, Meruelo purchased about 5 acres of surface parking lots in South Park for potential mixed-use residential developments. Before he proposes a project for the site, Meruelo wants to make sure Anschutz Entertainment Group, majority owner of the Staples Center, goes forward with a planned $1 billion development surrounding the arena.

AEG intends to break ground by mid-year, but those plans hinge on the city providing subsidies to help finance a 1,200-room Convention Center hotel, a centerpiece of the plan.

"I hope it does happen, but it's been over five years that they've been talking about it and nothing has happened," he said. "We're waiting until the arena developers figure out what they are going to do before we decide what to do with our property."

Family business
The land slated to be developed for the project is being held by the city's Community Redevelopment Agency, and will be transferred to AEG once the firm has met its development obligations, which include securing construction of the hotel.

Once AEG takes possession, it will become the largest property owner in South Park, with acreage only slightly less than Meruelo's total downtown holdings.

Currently the largest private landlord in South Park is a partnership of New Pacific Realty and Canyon Johnson Urban Fund, which owns SBC Tower formerly the Transamerica complex. The partnership has struck a deal to sell the tower and a smaller building on Hill Street to Irvine-based pension fund advisor LBA Realty Fund Inc.

L & R; Investment, run by Joe Lumer and downtown's largest parking operator, has 53 lots encompassing more than 10,000 parking spaces on 14 acres. Lumer's family has been acquiring downtown property since the 1950s and at one time was part of a coalition of parking operators that controlled more than 80 percent of the parking spaces across Los Angeles.

Lumer has begun to sell off some of his surface lots to developers. Already he has sold a 100,000-square-foot lot in Little Tokyo to Tramell Crow Residential and a 120,000-square-foot lot in the Historic Core's Old Bank District to a developer planning a pair of 21-story condo towers.

In the Fashion District, Steve Needleman is one of the largest property owners, according to CB Richard Ellis, with more than 50 properties spanning 1.5 million square feet on a total of 15.6 acres.

Needleman began putting together his holdings, which include areas of the Historic Core, in the 1960s and 1970s. Most recently, he completed a renovation of the Orpheum Theatre on Broadway. Behind the theater, Needleman built the 37-unit Orpheum Lofts.

Little Tokyo, meanwhile, is being encroached by the Civic Center with the state's new Caltrans District 7 headquarters and a proposed new headquarters for the Los Angeles Police Department.

Including the Caltrans building, the State of California is the district's second largest property owner, behind the Los Angeles Times, with six properties encompassing nearly 3.7 acres.

Both Related Cos. and Trammell Crow Residential have large, modern projects within the district that don't necessarily reflect a Japanese cultural influence. "In a number of years Little Tokyo may cease to exist," said Tarczynski. "Even the apartment complexes going up there, those don't reflect Little Tokyo, they'll just be market-rate buildings."

In Chinatown, the new Gold Line metro station and the redevelopment of the 2-acre parcel now housing Little Joe's restaurant will reflect Chinese influences.

Larry Bond, who is developing the Little Joe's site, plans a mixed-use complex of housing, retail and a 7,000-square-foot Chinese cultural facility. Steve Riboli, owner of San Antonio Winery, is working on converting the Capitol Milling building on Spring Street into artists' lofts and studios.

Roadblocks and access
In other areas, downtown's institutional owners have instigated new projects. Plans to redevelop Grand Avenue between the Civic Center and Bunker Hill, including a new civic park, wouldn't be possible unless the city and county had agreed to allow the project to move forward on publicly owned parcels.

The joint powers authority in charge of the project has chosen Related Cos. to build it and is negotiating a contract with the company.

"We've seen a wide range of buyers in last couple years coming downtown," said Bill Witte, a Related principal overseeing Grand Avenue and several other downtown projects. "I don't think downtown will be the exclusive province of a couple owners for much longer."

But Bond and others believe that the city and state could do more. Both are taking an inventory of owned property to determine if there are any parcels that are excess and could be sold off.

Unlocking some of the public's land could be essential to ensuring that the revitalization of downtown continues and that developers don't run out of property to work with. "Having some of the excess land unleashed would be great," Bond said. "That would be a big plus."

Needleman said that while new developers are gaining a presence downtown he has seen more investment in the last three years than in the past 30 years combined most of the large landowners will likely continue to be the families who have owned property for generations.

"There's no question there is a new generation coming in and becoming major players, but there are still generational families who are large property owners," he said. "I don't see that changing anytime soon."

Meruelo agrees. "Everybody is riding the recent wave," he said. "They weren't here 10 years ago. They'll just come in and make a quick buck and move on. There are only a few people like us that will be here in the next 30 years."

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