Postal Service Agrees to Sell Terminal Annex

The U.S. Postal Service has tentatively agreed to sell historic Terminal Annex in downtown Los Angeles to a Texas developer, which plans to transform the former postal facility into a giant telecommunication and high-technology center.

Officials from Dallas-based Nexcomm Properties, the Postal Service and the city of Los Angeles are expected to unveil plans today for the $60-million project, which could attract as many as 1,000 new workers to the central city.

Nexcomm owns several other high-technology centers nationwide, including the 1.65-million-square-foot Infomart-Dallas. Terminal Annex, which would be renamed Infomart-Los Angeles, is scheduled to reopen early next year after a renovation that will leave intact the 60-year-old building’s Mission style facade and historic lobby.

“We’re not going to have any trouble leasing it up,” said Nexcomm Chairman Philip Wise on Monday as he toured the empty facility that his company will pay $40 million to acquire and $20 million more to renovate. “It’s a crime to let this building sit empty.”

Nexcomm’s concept has won the initial blessing of Los Angeles Mayor Richard Riordan, who had opposed a previous proposal to turn Terminal Annex into a telecommunication switching station. That plan would have absorbed much of the property’s 500,000 square feet of space but would have generated few new jobs. Nexcomm’s plan includes space for switching equipment and for tenants that employ more people, such as software developers, Web designers and e-commerce companies.

“We look forward to assisting these particular investors in bringing top-quality digital companies to [downtown] Los Angeles,” said Rocky Delgadillo, head of the city’s business team.

Nexcomm’s plans met with mixed response from the area’s real estate brokers, however.

Infomart-Los Angeles would probably have an easy time leasing space to telecommunication firms, which have already filled about 1 million square feet of downtown space, primarily with switching equipment. But it will be much more difficult to attract the Internet-related firms that employ large numbers of engineers, designers and support staff.

Most of those firms have flocked to pricey locations on the Westside of Los Angeles for its amenities and lifestyle, said Matthew Miller, principal at Los Angeles-based Cresa Partners, which helps high-tech firms locate space.

“We don’t see downtown emerging as an Internet destination in the near future,” Miller said. “We see our clients choosing locations based on where they can attract and retain the best talent. So far, that has not been downtown.”

Real estate leasing expert Stephen L. Bay said attracting worker-rich Internet firms downtown remains an elusive goal. But that could change as Westside rents spiral and vacant space evaporates.

“The locations that these Internet and high-tech firms are considering are expanding beyond the traditional home on the Westside,” said Bay, who co-manages the Los Angeles brokerage operation of Insignia/ESG.

Nexcomm’s Wise said he is confident his company’s project on the eastern edge of downtown will attract Internet tenants with a combination of low rents, large amounts of space, state tax incentives and a large pool of like-minded tenants located in a landmark structure.

“That’s really not available in L.A. today,” Wise said.

Nexcomm was one of several bidders--which ranged from the Los Angeles Children’s Museum to investor Marvin Davis--that had shown an interest in buying Terminal Annex in the last 18 months. The complex served as the city’s main post office until 1989.

Terminal Annex occupies about one-third of an approximately 18-acre site at Alameda Street and Cesar Chavez Avenue.

The Postal Service plans to eventually sell the remainder of the site for future development, according to Los Angeles developer Wayne Ratcovich, who served as an advisor to the U.S. agency.