As One Santa Fe in the Downtown Arts District progresses toward completion this coming year, TPR spoke with Bill McGregor, president of the McGregor Company, about realizing this mixed-use project. The McGregor Company is the lead developer of One Santa Fe, in partnership with Polis Builders and Charles Cowley. McGregor explains architect Michael Maltzan’s vision for the space, the impacts this sizable structure can have on its surrounding neighborhood, and the financing strategy that has made fruition possible.
“I think Michael Maltzan envisions the architecture of One Santa Fe as a reflection of the imagery of the history of the area, which is railroads, trains, transportation, railroad bridges, movement, linearity.” -Bill McGregor
“One Santa Fe is in some ways a model of transit-oriented development that has, at the end of the day as far as structuring the deal, depended on components of the financing that tie back to its transit roots.” -Bill McGregor
Bill, what about the One Santa Fe development in Los Angeles’ industrial core originally attracted you? What was the original vision more than seven years ago?
First of all, the time frame is closer to nine years, if I were to go back and look closely. For me, the attraction of many projects that I’ve worked on over the years—and it would apply to One Santa Fe—is an opportunity to do an unusual project in an area that required not only a design component, but a planning component, and that was an evolving area—the Arts District in this case—and at the end of the day achieve the goal of being exceptional from a design standpoint, a planning standpoint, and an economic feasibility standpoint.
Give us the metrics of One Santa Fe development.
The project is a six-story, mixed-use project that is, in gross area, including parking, order of magnitude 700,000 square feet. It’s 438 rental apartment units, an 80-20 project where 80 percent are market rate, 20 percent are affordable. The residential component is on the second through the sixth floor. The entire first floor is commercial. With a total of around 80,000 square feet, roughly half of it is leased for office-type uses, and training facilities to the MTA. The other half—order of magnitude 40,000 square feet—the south end, is retail that will be community serving, consistent with what the Arts District is. It will be appealing to millennials—chic, trendy, smaller retail tenants.
And the location—you’re on the eastern edge of the Arts District, adjacent to the rail lines of Metro, but give us a better definition of the development’s location and what impact it will, upon completion, have on LA’s Arts District.
We are in the northeastern area of the Arts District, starting with 1st Street and going to 4th Street. One of the more-or-less interesting characteristics of One Santa Fe is that it’s 1,600 feet long, and in deed it is permitted as one building. If you were to take that 1,600 feet and stand it on its end, it is probably the third-tallest building in the world, if you were to try to do that.
Santa Fe Avenue was historically an industrial boulevard with large trucks backing up to docks. Today is very different from that for this stretch of Santa Fe. The largest use on the west side of Santa Fe, where we are, is the Southern California Institute of Architecture. We very much think of SCI-Arc as an integral part of our neighborhood. Further to the north is the Daily Journal, and there are several other buildings all of which have either been built as new buildings or they’re rehabilitated buildings from that stretch that goes from 1st to 4th. When we finish One Santa Fe, one of the nice parts about is that stretch of the Arts District will be finished, all with new, renovated or rehabilitated buildings. Also, that stretch will be an urban pedestrian environment, with Santa Fe Avenue being narrower than it used to be and with sidewalks and trees lined from one end to the other.
One Santa Fe is now nine years in development, which includes the crash of 2008 and the closing over the last two years of all CRAs in California. Have you been able to retain your financial and construction partners throughout your long development process?
All of our partners still are with us. The ownership composition of One Santa Fe on the developer side—there’s something called PMC One Santa Fe that stands for Polis McGregor Cowley. Polis is Nick Patsaouras, and Nick, with his past involvement and knowledge at the MTA, was the original person that said, “These MTA parking lots may afford themselves to be a redevelopment sites.”
The McGregor Company is my company and is the lead developer and is an investor. Cowley is Charles Cowley, who is an investor and, for most of that period of time, was an employee of the McGregor Company. More recently he has gone off on his own but still plays a major role in the continuing development work of One Santa Fe. On the equity side, we are smaller investors in One Santa Fe, but the primary equity involvement was originally Goldman Sachs. Goldman Sachs continues to be an investment. The newest financial partner, and the largest financial partner, is Canyon-Johnson Urban Fund Three, which is one of the real-estate development funds of Canyon Capital. That comprises the total ownership structure.
Because you’ve long been a developer who is interested in architecture, who did you choose to bring on to execute on your vision?
Actually, at the time I originally discussed this with Nick Patsaouras, Michael Maltzan had already done some conceptual design work, and so it was a given that Michael would be the architect. My knowing Michael and having worked on another project with Michael made him hands down the right pick to be the architect on One Santa Fe. Michael Maltzan and Associates is the design architect of One Santa Fe. The production executive architect firm of One Santa Fe is KTGY, and they have a wealth of experience in residential and mixed-use projects.
Elaborate on the design vision that Michael Maltzan brought to your development team.
Michael would far better speak to his design concept and direction for One Santa Fe than me, but if you want me to continue answering the question, I’ll be glad to do so. I think Michael envisions the architecture of One Santa Fe as a reflection of the imagery of the history of the area, which is railroads, trains, transportation, railroad bridges, movement, linearity. All one has to do is look at any of the models or the renderings of One Santa Fe and you immediately think of those things. One place where Michael has distinguished himself is in his treatment of facades. In the design of facades he creates patterns of different materials and different scales. In the case of One Santa Fe, it’s particularly done with the use of windows and the many, many different sizes and types of windows that are used to create moving patterns on the exterior, especially as one views One Santa Fe obliquely, from up and down Santa Fe Avenue.
Another component of what Michael has brought is the planning concept, turning this part of the Arts District into a people-friendly, pedestrian-oriented, smaller-scale environment as opposed to what existed when Santa Fe Avenue was a wide industrial boulevard. That’s enhanced by what we call Yards at One Santa Fe, which is the retail arcade that one will walk through once the project is finished. Remember, that’s me speaking a bit for Michael.
Regarding the practicalities of the project, how has an extraordinarily down-and-up real estate cycle over nine years affected the density, design, and rollout of this project, now into construction?
Certainly the final structuring of the ownership of One Santa Fe and the overall financing structure of One Santa Fe is a function of those peaks and valleys over the past nine years. One Santa Fe is in some ways a model of transit-oriented development that has, at the end of the day as far as structuring the deal, depended on components of the financing that tie back to its transit roots. The combination of private-public partnership in a variety respects is the only way we know of that One Santa Fe could have gotten structured. It’s complex, but, nevertheless, we believe extremely well thought through and functional. We certainly rode through the considerable dip in 2008 and used that time effectively to complete the design and come up with what the ultimate financing structure would be, including a couple of components of tax credit funding. You live with the time you’re in, and you solve the puzzle based upon the givens, and that’s what we’ve done.
Bill, if I’m not mistaken, the size of the residential units offered will be from under 400 square feet to over 1,800 square feet. What’s the per-square-foot price you think you can get today, and is it what you could get nine years ago?
The size is from under 400 square feet, but to a maximum of plus-or-minus 1,300 square feet. As I sit here today, I don’t remember what average rental rates might have been nine years ago. We know what they are now for the 80 percent market rate portion of One Santa Fe. They will average somewhere around $3 a square foot, we believe.
Lastly, with One Santa Fe certainly the largest development project planned at the moment in LA’s Arts District, what impact will this development have on the evolution of the Arts District?
I think it will have a very positive impact on the evolution of the Arts District, and there have been several projects preceding us in the Arts District—not quite of the size of One Santa Fe, but large scale. There are several on the entitlement and drawing boards coming, in all probability, immediately on the heels of One Santa Fe. I believe what distinguishes One Santa Fe is its architectural and planning integrity and that together, with its 80,000 square feet of retail and MTA space, will contribute to a growing vitality and attractiveness of the Arts District.