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Friday, Oct 7, 2022

L.A. Making Clean Break With Tech?

Years of efforts by Mayor Antonio Villaraigosa to build a clean tech corridor in the downtown area that would make Los Angeles a national leader in green technology now hinge on what could be a last-ditch development effort.

Trammell Crow Co. is negotiating with the Community Redevelopment Agency to take over redevelopment of a sprawling industrial site south of downtown that’s seen as the key component of the corridor.

Meanwhile, Villaraigosa said last week that other types of companies can come to the corridor, not just those specializing in clean tech.

“We welcome any and all other innovative, creative companies moving into the corridor to create jobs and revenue for Los Angeles,” the mayor said in a statement to the Business Journal.

The Trammell Crow negotiations represent the fifth attempt to bring clean tech companies to the 21-acre site, once home to a bus manufacturer.

But Dallas-based Trammell Crow faces significant hurdles. The property requires a massive cleanup, the city’s redevelopment agency faces a deadline for repayment of a $13.4 million loan on that property that has already been extended twice and, finally, fallout from a state law reforming CRAs complicates matters.

Larry Kosmont, an L.A.-based economic development consultant who is not involved in the project, said that if Trammell Crow can’t make the project work, that should be a signal that the CRA and the Villaraigosa administration should change course.

“Chances are that Trammell Crow will realistically assess whether they can bring in clean tech companies,” said Kosmont, an expert in redevelopment. “If they conclude they can’t, they’ll come to the city and tell them that. Then maybe the city will have enough cover to make a change.”

The clean tech corridor stretches more than 3 miles along both sides of the Los Angeles River in the eastern part of downtown and extending southeast of downtown. The 21-acre site sits at the south end of the corridor. It is the largest open lot and seen as the corridor’s centerpiece property for development.

Other parcels in the corridor are envisioned to eventually be occupied by mostly clean tech companies, but for now, those properties would have to be purchased separately, probably through eminent domain, in order to make them attractive to clean tech companies.

Very little progress has occurred anywhere in the corridor. Only one clean tech company has moved into a business incubator there: a nascent electric vehicle-charging station operator with six employees. (See sidebar on this page.) One other company, Green Bar Collective, an organic alcoholic drink maker, is close to moving in with a handful of employees.

The CRA is also considering renaming about half the area the Arts and Innovation Corridor to capitalize on an arts community in the area that features galleries and lofts.

The Villaraigosa administration lays most of the blame for the lack of progress on the clean technology corridor on bad timing. The initiative began just as the real estate market tanked and the economy entered the worst recession in 75 years.

“The fact that this particular initiative hasn’t performed perfectly in eyes of others and some folks here is not a shock,” said Matt Karatz, Villaraigosa’s new jobs czar and point man on the corridor. “There are a lot of things that we pushed that will either take longer or need to get re-evaluated in order for us to see real progress.”

Troubled site

Chief among the things Karatz referenced is redevelopment of the 21-acre site at Washington Boulevard and Santa Fe Avenue, once home to bus and fire engine manufacturer Crown Coach. When it closed 20 years ago, it left chemical contamination in the soil.

Villaraigosa’s two predecessors, Richard Riordan and James Hahn, tried but failed to redevelop the site. Villaraigosa decided to make the site the centerpiece of his clean tech corridor by turning it into a major manufacturing center for alternative energy or alternative vehicle companies.

His first effort was to bring Italian rail-car maker AnsaldoBreda Inc. to the site to build and service light-rail cars for local transit. But the deal fell apart in early 2009 when the company pulled out after questions over whether it could deliver the cars as promised.

Later that year, Santa Clara solar panel manufacturer Applied Materials Inc. attempted to set up a plant, but the firm failed to get an expected contract from the Los Angeles Department of Water & Power.

Last year, electric-vehicle maker Coda Automotive Inc., now based on Fairfax Avenue near the Santa Monica (10) Freeway in Los Angeles, considered building a lithium-ion battery-pack assembly facility, but wasn’t able to get the financing it needed, according to a redevelopment agency report. The company is now attempting to build a plant in Columbus, Ohio.

Meanwhile, a cash crunch approached: The CRA, which had bought the site from the state three years ago using a loan from Pasadena’s East West Bank, owed a $13.4 million note that was due May 1. With no prospect of bringing in a tenant on its own, the CRA decided to sell the site to a developer and use the proceeds to pay off the loan. The developer would then be responsible for constructing buildings on the site and seeking clean tech tenants.

The agency put out a request for proposals in September. In March, the CRA selected Culver City developer Genton Property Group as its top choice and Dallas-based developer Trammell Crow, a unit of CB Richard Ellis Group Inc. in West Los Angeles as the runner-up.

Genton signed a preliminary deal to develop the site but pulled out in May.

Each side now points fingers. Jenny Scanlin, CRA downtown project manager, said Genton couldn’t bring its financial partners to the table.

In response to Business Journal inquiries, Genton released a statement that put the blame largely on the contamination problems and the requirement that only clean tech companies could be considered for tenants.

Soon after Genton pulled out, the CRA reached a deal on a cleanup plan for the site with the state. That may ease the way for redevelopment. At about the same time, the agency put out another request for proposals.

Five of the original seven bidders resubmitted proposals, including Genton and Trammell Crow.

This time, though, the CRA rejected Genton’s proposal.

Scanlin at the CRA said Genton asked that the East West loan be extended for a total of four years, a condition that the agency found unacceptable. The CRA officially rejected the Genton proposal two weeks ago.

Instead, the CRA chose to open negotiations with Trammell Crow.

Meanwhile, a new law that reforms redevelopment agencies throughout California has delayed the project’s progress. Earlier this month, the state Supreme Court ruled that redevelopment agencies cannot sign any new contracts or deals until it rules on whether the law is constitutional.

If that ruling is delayed beyond Feb. 1, the CRA would be unable to sign a contract with Trammell Crow before the bank loan extension comes due, raising the specter of default.

Bradley Cox, Trammell Crow senior managing director, told the Business Journal last week in an e-mail that the development company has some confidence, but acknowledged that there are challenges.

“We are cautiously conducting our due diligence to ensure a successful project which can be financed in today’s highly volatile financial markets,” Cox said. “We are optimistic that we will enter into a deal.”

Howard Fine
Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.

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