A long-stalled, sleek $150 million mixed-use project is gearing up again and could help revitalize downtown L.A.’s up-and-coming Arts District, which is now speckled with old train cars and swaths of dusty unused land near the Los Angeles River.

But this time, the developers are up against a January deadline to close on private financing and begin construction on the project, known as One Santa Fe, or it may lose its largest tenant and crucial public loan.

One Santa Fe has long been touted by developers and officials as a much needed project to breathe life into an area east of Alameda Street that’s only a quarter-mile from Los Angeles City Hall yet seems out of the way. It was used for the first half of the last century as a rail-freight distribution hub.

The project would be the latest in attempts to revitalize the area, and across the street, the Southern California Institute of Architecture is eager to have some neighbors.

“We think the development would be a great addition and offsets our needs for student housing,” said Jerry Neuman, chairman of the Sci-Arc board of trustees. “We are on a dead-end leg and transportation all goes past us.”

The four-acre project, at 214 S. Santa Fe Ave., would bring apartments as well as office and retail space to the area, with the potential to become the site of a subway stop for an extended Metro Red Line.

The development team, composed of Beverly Hills’ McGregor Co., Polis Builders Ltd. and Goldman Sach’s Urban Investment Group, has been trying for six years to get the project off the ground, but the poor economy has thus far stalled it.

No member of the development team returned calls for comment.

But the developers have picked a good time and place for the project, if they can get it going, according to Transwestern senior research analyst Arty Maharajh.

“The One Santa Fe development … would help to spur on migration to the area and redevelopment of the industrial buildings,” Maharajh said.

Mixed-Use Project

One Santa Fe is situated on a three-block-long parking lot owned by the Metropolitan Transportation Authority at the Santa Fe Yards depot, next to the Los Angeles River. It’s in the heart of the Arts District, an industrial area that has slowly been renovated into artists’ lofts as industrial buildings have been renovated into housing and retail and office space.

The project would provide 438 apartments, 20 percent of which must be affordable units aimed at low- and moderate-income renters. The units will range from studios to two-bedroom, two-bathroom townhomes.

Pricing for the units hasn’t been revealed, but the developers have spoken with Sci-Arc about cooperating for student housing.

It will include 79,000 square feet of office and retail space, about 15,000 square feet of which would be used by a grocery. There would be public outdoor space of nearly 50,000 square feet.

It has been designed by Michael Maltzan Architecture in Los Angeles, which designed the modern pinwheel-shaped New Carver Apartments south of downtown as well as the Playa Vista Park project. According to the company’s website, the Santa Fe project will have an outdoor terrace that provides views of downtown and the river about 30 feet above street level. The bottom floor will include retail, an art gallery, a multi-use theater and a garden.

The project site is also one of three locations being evaluated by MTA as the site for a subway stop if the Red Line is extended; the land is owned by MTA.

Earlier this year, One Santa Fe renegotiated its ground lease for 81 years on the property. It now pays roughly $525,000 annually to the MTA, and has spent well over $1 million in rent since it first signed a lease in 2008.

Despite having all the entitlements and ground lease in place, the developers face another hurdle: financing.

The project is broken into two components: commercial and residential.  

The residential component is the largest and estimated to cost $91.5 million. It is being funded by U.S. Department of Housing and Urban Development tax-exempt bonds, and loans from the Los Angeles Community Redevelopment Agency and the city’s Housing Department.

The commercial component has estimated costs of $57.2 million, and the developer has secured all but $26 million in funding from a loan from the city of Los Angeles and New Market Tax Credits, a federal program created to revitalize blighted areas.

To come up with the balance, the developers are negotiating with Canyon Capital Advisors LLC for an undisclosed amount. The deal, however, isn’t expected to close until next month.

Last month, Mayor Antonio Villaraigosa signed off on a $14.6 million city loan to help finance the commercial portion, on the condition that at least 50 percent of it had to be preleased.

At least for now, that shouldn’t be a problem for the developers.

MTA has agreed to sublease 35,000 square feet, or about 45 percent of the project’s commercial space. The sublease agreement allows MTA’s monthly office space rent of $2.24 per square foot to be deducted from the ground-lease rate it pays MTA.

The catch, however, is that construction on the project must begin by January.

Without all the required financing, the development team may not be able to get construction started by January, and could lose its sublease with the MTA, and the deal could unravel.

If that happens, it would be the second time that the project hit the brakes. It was scheduled for a ground-breaking in 2009 as well, but the collapse of the credit market halted the financing.

If it can pull together a deal, the project has picked a good time to get started. The city has cut the business gross receipts tax, and downtown is seeing creative and entertainment companies moving to the area. That and the buzz around loft-style living downtown should give the project good demand, according to Transwestern’s Maharajh.

“There are already existing loft-style residential units as well as many more planned for the immediate area,” he said. “The fringe areas of downtown will finally see real traction.”