The Ratkovich Company

The Ratkovich Company in the News

An Historic Turnaround in Alhambra
Anatomy of a Deal
Real Estate Southern California - June, 2004
By Clare De Briere

In the beginning, there was this 45-acre, 70% vacant, one-million-sf historic office campus located off the San Bernardino Freeway in the City of Alhambra. The challenges facing the Ratkovich Co. and our partners when we purchased the property in November 1999 for $78 million were many and varied. First, few institutional debt or equity sources, office or retail tenants—or most anyone else for that matter—could find Alhambra on a map let alone identify 1000 S. Fremont Ave., as the project was then known. Second, the property had been developed for almost 80 years by the C.F. Braun Co. as its international HQ, and was designed to house a single user. Third, Santa Fe International, which acquired Braun in the 1980s, had done little to lease the space it ceased to occupy, nor had it taken steps to upgrade the existing facilities. Therefore, the campus was less than 30% leased and in need of significant repairs.

We began the process by renaming the property the Alhambra, to give a strong identity to the project and the City of Alhambra. In addition, naming the project after the historic palace in Spain befits the architecture of many of its 20 brick-and-tile-roofed buildings, which surround a lushly landscaped interior courtyard running the entire length of the campus. We have invested over $25 million in updating and expanding the site’s infrastructure and have overseen an aggressive leasing program, which has increased the office occupancy to over 90%, converted an overflow parking lot into a 120,000-sf retail center and developed sites for two new office buildings, 10 acres of residential and a fitness facility.

In analyzing the market for office tenants, we determined that our location, immediately adjacent to the 1-10 freeway and midway between Pasadena and Downtown Los Angeles, was a major plus. We also realized that with abundant parking and a 24/7 working environment, with public sector, educational and health-care tenants, it would probably be our most productive market. This focused leasing strategy has paid off. Since acquiring the Alhambra, we’ve added the County of Los Angeles (over 200,000 sf), USC Keck School of Medicine (over 100,000 sf), Tenet Healthcare (90,000 sf), Platt College (25,000 sf) and Bryman College (42,000 sf). We’ve also expanded the space of existing tenants such as the East Los Angeles Regional Center and Care First Healthplan, which together occupy over 90,000 sf on the campus.

Having successfully exceeded our initial goals, we’ve now embarked on a master plan to turn the Alhambra into a fully integrated signature urban community. This process began with the addition of a variety of amenities to the campus including the selection of renowned three-star French chef Laurent Quenioux to run all the food service operations including Bistro 1000, a white tablecloth restaurant that serves both our tenants and nearby businesspeople and residents. We are also able to make Laurent’s catering services available to the community who can use our extensive banquet facilities for weddings, graduations or other types of celebrations. (Bistro 1000 was the location of the City of Alhambra’s Centennial Gala.) Also added to the site have been a car wash, snack shop and dry cleaner, with a health club planned for 2005. Currently under construction directly across Fremont Avenue are a 120,000-sf retail development consisting of the Shops at the Alhambra and a Kohl’s department store. The Shops at the Alhambra is a 2.2-acre, 17,750-sf retail center that will cater to the needs of both residents of Alhambra and tenants of our campus. Tenants already signed for the center include Starbucks, Jamba Juice, Subway, Red Brick Pizza, Nextel and Pick-Up-Stix. Our master plan also envisions on-site residential development and a day-care center, as well as the potential construction of 250,000 sf of build-to-suit office space.

The Alhambra has been a significant financial success both for our partners and us. The original acquisition was made in partnership with Lehman Brothers and Wachovia Bank, with iStar Financial Services as the lender. Last summer, we negotiated a $113.5-million recapitalization with Cigna as our equity partner and a new loan from iStar. We are now finalizing the refinancing of the property at a fixed rate to allow to move forward in the implementation of the balance of our master plan to realize Wayne Ratkovich’s vision and to create a true urban community at the Alhambra.

Clare De Briere is executive vice president and COO with the Ratkovich Co., a Los Angeles-based firm specializing in urban in fill and rehabilitation projects. She can be contacted at 323-692-0500.

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