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VALLEY AND VENTURA COUNTY BUSINESS

Developers Take Over Palladian Project

March 25, 1997|JILL LEOVY | SPECIAL TO THE TIMES

GLENDALE — A new partnership has taken over the troubled Palladian World Center project in Glendale and will break ground this summer on a 24-story tower.

The project is seen as a first for the region's stalled office real estate market because it will be the only large, new office tower under construction in Los Angeles since the recession.

"We are six to nine months ahead of any other project," said Pete Hillman, a member of PacTen Partnership, which closed escrow on the site this month. "Being the first project out of the ground is a real plus."

A "speculative" development is the industry's term for an office tower built without a specific tenant in mind--the build-it-and-they-will-come approach to office development. This risky style of construction is more typical of the heady '80s, when speculative buildings cropped up all over L.A., only to create high vacancy rates when the market bottomed.

Since then, developers have played it safe, building structures that are almost entirely preleased before ground is broken.

But high demand from the entertainment industry in Glendale makes this a good time for speculative projects, Hillman said.

"The market there is the strongest anywhere in the United States."

PacTen is negotiating with several potential tenants in the entertainment and finance sectors to occupy the $100-million tower but hasn't signed anyone, he said.

The project is a boost for Glendale, said John McKenna, city planning director. "The Glendale market currently has such low vacancy that it is difficult to attract national and international business," he said.

The other partners in PacTen are Nyal Leslie and Dennis Fitzpatrick. The three developers played college basketball on what are now Pac Ten teams--hence the name--and have since teamed up with Morgan Stanley Real Estate Fund II to finance construction of the tower at 655 N. Central Ave.

PacTen bought the empty lot where the tower had long been planned from K. Young Inc., an affiliate of South Korea-based Kunyoung Group.

K. Young failed to get financing to go forward with construction of the tower, although it got as far as clearing the site in preparation for building, Hillman said.

Hillman was a consultant to K. Young on that project and is moving ahead with a similar design. The title "Palladian," however, will be dropped in favor of another name that is yet to be decided, he said.

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