County Revises Market Loan

Seeking to bail out downtown’s financially struggling Grand Central Market, Los Angeles County transportation officials have decided to restructure a multimillion-dollar loan package made to the market’s developer nine years ago.

Under the agreement, the $38.6-million debt owed by the private development team that rehabilitated the market and a surrounding group of buildings in downtown’s historic district will be split into two 30-year loans, and the payments will be lowered, said Steve Carnevale, chief legal counsel for the Metropolitan Transportation Authority.

One of the loan notes, for $19 million, comes with an interest rate that starts at 4% and will rise over time, reaching 8% in the last five years. Records show that annual payments will begin at $760,000 and eventually reach $1.5 million. The second loan, for $19.6 million, will be due in one lump sum, without interest, at the end of the 30-year term.

The market’s ownership said the restructured deal will allow it to keep the Grand Central complex intact. To help boost revenue, rates will be raised on its 500-space parking lot, said Anne Peaks, vice president of the Yellin Co., which owns and oversees the complex.

Negotiations are underway to fill vacancies in the theater that is part of the complex and a basement under the market, where a grocery store is one possibility. Peaks said ownership is also banking on a recovery by the historic area, which would increase patronage.

The MTA, which signed off on a previous restructuring in 1997, could have foreclosed and taken over or sold the market, but chose not to do so.

“Given the options, this was just the best thing for us to do,” Carnevale said, noting that his agency did not want the responsibility of operating the complex and would have lost millions if it tried to sell the building.

In 1993, the MTA led an effort to provide public backing of the complex, teaming with the Los Angeles Community Redevelopment Agency on a $44-million loan package to a group headed by Ira Yellin, a noted developer and downtown preservationist who died in September.

Yellin’s group of investors added about $20 million to the project, which included revamping the landmark market, turning surrounding offices into apartments, remodeling the vaudeville-era Million Dollar Theater and building a multilevel parking garage.

City officials saw the rehabilitation as key to efforts to energize the historic core. MTA officials said they thought the project could spur ridership at the nearby Red Line stop.

Despite its popularity, the Grand Central Market complex has struggled financially from the start, as has much of the long-depressed downtown core.

Five years ago, the MTA and CRA approved a deal to restructure debt payments from Yellin’s management team. That deal allowed the management team to fall behind on payments, to a limit of $4 million, at which point the MTA could foreclose.

Records show that, in June 2001, the management team fell more than $4 million behind on payments and is now more than $5 million in arrears. A report prepared for MTA board members details the complex’s struggles. The report also shows that much of the financial trouble springs from the market, which relies on stalls that sell fast food and curios.

Vacancies and higher-than-anticipated maintenance costs are dragging the market’s finances down. The apartments and theater also are bringing in far less revenue than anticipated. The entire complex is now appraised at $19 million, Carnevale said.

Yellin’s widow, Adele, is now overseeing the project. She said it was important that the market complex be saved.

“It’s a linchpin in the effort to revitalize downtown, and it needed to be kept intact,” she said. “I know Ira would have been thrilled with the deal.”