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COVER STORY : AFTER THE BLOOM : Conceived During '80s Building Boom, Water Garden Project Remains Half-Finished, a Symbol of Recession

October 30, 1994|B.J. PALERMO | SPECIAL TO THE TIMES

When Jerome H. Snyder promised Santa Monica a water garden, it was during the mega-development boom of the 1980s, a time when a developer could begin erecting big buildings and worry about the financing and leases later. The Water Garden, three six-story office buildings and one five-story building surrounding a 1.4-acre artificial lake, was to house 4,900 employees and bring the city $1 million in taxes each year. Plans called for a 17-acre oasis where workers could stroll along tree-lined walkways and bridges, a place where "fish swim and water lilies flourish," the developer said.

After nearly a decade of negotiations, the city in 1988 approved Snyder's plans for the $450-million project.

It was touted as Santa Monica's largest commercial development and an impressive addition to its new office district near Colorado and Olympic boulevards.

Snyder also made expensive concessions to the city. He promised to install equipment on the site to treat sewage and recycle water. To prevent traffic congestion, a transportation plan for employees was to be included. And he agreed to pay Santa Monica millions for low-cost housing, public parks, street improvements, programs for the homeless and public art.

The sky was the limit--and so, it turned out, were the two Water Garden office buildings that opened in 1992. Two years later, the lavish project remains only half-finished, a prime example of development projects in Los Angeles that burst on the scene in the 1980s only to be stunted by recession and a sudden end to easy credit.

"The recession killed new development of all types in this city," said Kenyon Webster of Santa Monica's Planning and Zoning Division. "A number of projects died that had gotten city approvals and had certain time limits because they were unable to get financing. And commercial and office development was the most affected. There have been virtually no new projects applied for in the last few years."

Nevertheless, J.H. Snyder Co., like some other local developers, has weathered the economic climate with the kinds of adjustments that have characterized commercial development in the 1990s. It is a landscape in which banks foreclose, properties change hands, partnerships are reshuffled and visions are revised.

By the summer of 1989, Snyder had started excavating the site at Olympic Boulevard between 26th Street and Colorado Avenue. To pay for the construction of Phase One--the first two buildings and the lake--he became partners with financier Marvin Davis, whose real estate development firm, Miller-Klutznick Davis-Gray Co., secured a $230-million loan.

Snyder calls the 667,000-square-foot result his "baby." Although Snyder has only a minor interest--the project is controlled by Davis--he walks with pride across the marble floor of one lobby, with its pillars and vaulted glass ceiling and its broad veranda overlooking the expansive lake and gardens.

"This one's from Italy, and that one's from Brazil," he says, touching his toe to the varieties of inlaid marble in the floor. "We've had sit-down dinners for 300 people in these lobbies."

The directories list prominent tenants, among them RAND, software giants Candle Corp. and Microsoft, and the law firm of Haight, Brown & Bonesteel. There is an upscale child-care center and a large health club. Roving teams of security guards in blue blazers ensure the privacy of tenants in the two buildings, which are 98% leased.

Beyond the turquoise-and-peach decor of the lobbies and the buildings they join lies a watery scene with splashing fountains, concrete islands filled with flowers, and gardens beneath palm trees and weeping willows. The promised public improvements, including the water recycling and sewage treatment facilities, were completed.

But the lavish development abruptly ends at a field of weeds. The vacant lot stretches from Cloverfield Boulevard along Colorado to the edge of a ravine, revealing the subterranean parking structure beneath the lake, its gazebo and fountains, and the two completed buildings.

The empty field is all there is of Phase Two. Construction of the remaining two buildings was to begin this year.

"We had no financing problems in 1989 or 1990. But by 1992, the market was awful," Snyder said. "We had no financing commitments for Phase Two because we didn't have the tenants."

With no tenants signed up and payments on a $45-million loan overdue, California Federal Bank foreclosed on the undeveloped land in March, although the land was reacquired when Snyder found new partners, including a subsidiary of a Korean real estate conglomerate.

A changed economy had lowered rents, dashing the financing prospects for major commercial developers. And lenders had become much more conservative, demanding greater equity and requiring that buildings be leased in advance.

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