Santa Monica’s New Direction?

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Downtown Santa Monica might be getting a landmark 12-story building that would add shops, a hotel, offices and possible residences to the area just east of the popular Third Street Promenade.

A $331 million, 448,000-square-foot tower could be built at the city-owned three-acre property south of Arizona Avenue between Fourth and Fifth streets if the City Council approves a plan recommended by an advisory panel.

After a council vote next week, the development group, composed of Metropolitan Pacific Capital, Clarett West Development and DLJ Real Estate Capital Partners, could immediately begin collecting public input and seeking entitlements while it finalizes its development agreement and ground lease with the city.

The project was designed for the development group by a U.S. division of renowned architect Rem Koolhaas’ firm, Office for Metropolitan Architecture in Rotterdam, the Netherlands.

John Warfel, principal at Metropolitan Pacific in Santa Monica, said his firm is eager to build the complex project on such a large site in the dense seaside city.

“Downtown Santa Monica is a very dynamic place,” he said. “Just the chance to develop something on a site this size in the middle of downtown Santa Monica is a very exciting opportunity because with a site of this size, you can really do something much more interesting than the typical development.”

The city has long had a reputation for being anti-development, but this project is just the latest in a string of new projects coming to what is already one of L.A.’s most popular shopping, dining and tourist destinations. The coming of the Expo Light Rail Line and the current boom of tech- and entertainment-related firms are strengthening its position as one of the strongest leasing markets in Los Angeles County. The city hopes to bring even more foot traffic to downtown by encouraging redevelopment on the streets east of the Promenade.

As part of that effort, the city has been struggling for years with its Arizona property, now home to two banks and a surface parking lot, and has sought input from the community and professionals about the site’s potential. Earlier this year, the council issued a request for proposals from three development teams – Metropolitan Pacific, a unit of Cleveland’s Forest City Enterprises Inc. and Irvine’s Related California Inc.

Although Metropolitan Pacific has the inside track, the City Council could pick one of the other two developers or make a different decision entirely.

Jason Harris, the city’s economic development manager and a member of the advisory panel, said he hasn’t received any community criticism about the Metropolitan Pacific project, which has been up for public review since early last month. Some concerns were raised about the other proposals, however.

“As much as development is a hotly contested and debated subject in Santa Monica, we have gotten no negative comments on this one in particular,” he said. “It’s very surprising.”

More projects

The notion of developing the area east of Third is a wise one, according to Christine Deschaine, senior vice president at a unit of Kennedy-Wilson Holdings Inc., who holds listings for a number of new and existing mixed-use projects in the area.

“We see more people on bikes and people walking east, everything is moving east,” she said. “I think maybe folks that traditionally would oppose (development) in these communities are seeing the benefit of living and working in the area that is really revitalizing east. It’s a very positive energy.”

The city acquired the 12-parcel site in pieces between 2007 and 2010 in hopes of finding a way to extend the bustling downtown further from the Promenade. It began considering development proposals for the property in 2010 after taking in public input for the site. Among the priorities was maintaining a community-centered property that would continue providing space for an ice-skating rink, which has been at the site in fall and winter for the last four years.

The three developers that submitted plans earlier this year took the priorities into consideration, a factor that is likely to help explain the public support for the project, Harris said.

Metropolitan Pacific has completed or is under way on more than 20 projects across Santa Monica, including conversion of the Mayfair Theater to residences and shops. This is its first venture with DLJ and Clarett West, which are building Hollywood’s 1 million-square-foot mixed-used project that spans the north and south sides of Hollywood Boulevard a block east of Vine Street known as Blvd 6200.

The Metropolitan Pacific proposal, known as the Plaza at Santa Monica, calls for the ground-up development of a 448,000-square-foot, 12-story tower designed by OMA. The ground floor would have space for shops, restaurants and community rooms. Floors two to four would have 172,000 square feet of office space; floors five to seven would have 85,500 square feet that could be used for residences or more office, depending on the city’s preference; and the remaining upper floors would accommodate a 127,000-square-foot, 226-room hotel. The property would include a rooftop pool and bar. A public open space on the ground could accommodate a wintertime ice-skating rink.

The proposal includes 1,220 parking spaces, nearly half of which will be available to the public. The developer said the project would generate $1.3 million a year in income for the city from a ground lease.

The most noteworthy feature of the project, Harris said, is the design. The tower would be built by stacking each component in rectangular shapes at what appears to be alternating angles, providing ample open outdoor space at each level.

It also has committed nearly $900,000 to community activities through a yet-to-be-created management group. The activities would include yoga classes, lectures and concerts as well as the rink.

“The open space was critical in our review,” Harris said. “We liked how the physical improvements interacted to the open space. … I would say the design aspects – the open space and the site planning – are what put this project over the top.”

Other proposals

The Metropolitan Pacific plan was recommended over the Forest City and Related California proposals, which both included outdoor space and accommodations for an ice-skating rink.

Forest City proposed building a $226 million project comprising two separate structures – one for a 213,000-square-foot office building and another for a 144,000-square-foot residential building for 175 apartments. Both would include ground-floor space for cultural, educational and workshop uses. It would include 508 private parking spaces and 339 for the public. Forest City proposed a $1.75 million-a-year ground lease to the city plus 20 percent of the cash flow after a 12 percent developer return.

Meanwhile, Related California proposed a $270 million residential-office development that included ground-floor shops. The total 484,000-square-foot development would include 146,500 square feet of office and 248,000 square feet of residential space for 260 apartments. It would have stood 19 stories tall at its highest point. It included a dining terrace and community art space as well. It called for 339 public parking spaces, 507 shared spaces and 367 for residents. It suggested an upfront capitalized $33.2 million ground lease to the city.

The City Council is slated to choose a developer for the site Aug. 27. The city can then begin negotiating a contract with the developer. The developer can also begin the process of community input and entitlement applications.

The existing banks’ leases expire in 2022 and 2026. It would be the developer’s responsibility to move the banks or strike a deal to move them into the project when it’s built.

Once approved, the project could take as long as three years to build. Harris estimates that the project could be finished by 2019.

“It’s a milestone,” he said. “It’s pretty representative of where Santa Monica is at. We are very diligent and thorough in our architectural work.”

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