L.A.'s Telecom Hotel

"Working with Chris has most definitely been a good ride," Kernan grins.

ONE WILSHIRE BECAME L.A.'S TELECOM hotel in the early 1980s almost by accident. Facing deregulation, Pacific Bell made a decision to ban competitors' connector switches and circuits from its central office at 400 S. Grand. MCI needed a rooftop microwave site, so it turned to One Wilshire, one of the tallest buildings in downtown at the time. Thus, a multimillion-dollar real estate business was born.

Today One Wilshire is sold out -- no more room at the inn. "We're focusing on providing services to our existing customers," says Mark Messana, project manager for Paramount Group Inc., which manages One Wilshire. "Our customers always want more power, connectivity, roof access."

To illustrate, Messana ushers me into the Meet Me Room. The tiled floor is raised and shiny; the tiles lift out so the underlying cables can be serviced easily. Equipment cabinets and locked chainlink cages stand in rows. Overhead, metal cable trays circle the equipment racks like a suspended cog railway. It's silent, save for the whirring of equipment fans. The only signs of human habitation are a yellow mop and a bucket left behind by a janitor. "Nothing to it, huh?" says Messana, sensing my bewilderment that this small, sterile room plays such a major role in telecommunications. Nobody said the phone business was sexy.

STAR is about to install a second fiber network system to connect its 11th-floor NOC to the fourth-floor Meet Me Room. However, with no more floor space available for a new switch, the company has made a unique arrangement: Paramount will give the telecom giant empty conduit pipes connecting the Meet Me Room to a nearby building -- 530 W. Sixth St. STAR will place a huge domestic switch on West Sixth and pull fiber cable back to the company's international switch in One Wilshire, tying together the whole operation. "No one else in the country ties buildings together like this," says Messana. "We also connect to 611 and 700 Wilshire and 800 S. Hope."

STAR isn't the only telecom player searching for an empty stable to bed down equipment. The overflow demand for telecom space has turned no less than 15 buildings in downtown Los Angeles into Mini-Me One Wilshires. From a bird's-eye view, you can see the miles of new asphalt where trenches were dug to lay fiber-optic cable along Fifth, Sixth, Seventh and Eighth streets, South Grand, Wilshire, Hope, Olive and Flower for companies including PacBell and GTE. The Los Angeles Department of Water and Power, and Southern California Edison, realized windfalls by building fiber networks in their rights of way.

The rush for downtown telecom space has created a niche real estate specialty for companies such as Telecom Real Estate Services (TRES), which offers space at 600 W. Seventh St., the old Robinsons-May department store headquarters. It's now called Carrier Center L.A. The old bank building at 530 W. Sixth St. is known as Telecom Center. With the rising demand comes higher prices. Regular class-A office space in downtown Los Angeles goes for $20 to $25 annual gross per square foot; the rate for telecom space is $30 to $35.

Bill Peckovich was one of the first in L.A. to see the telecom real estate boom coming. After graduating from UCLA in 1983 with a B.A. in economics, Peckovich went to work for CB Commercial Real Estate. A 1986 trade-magazine article got him interested in Chicago Fiber Optics. He sent a steady stream of news clippings and business forecasts trying to woo the Chi-town company to L.A. Three years later, the phone rang and Peckovich was hired by Metropolitan Fiber Systems (MFS), a major national fiber-optic leader that had bought out Chicago Fiber. Peckovich found MFS (which was subsequently purchased by MCI WorldCom) its first space in the old Pacific Financial Building at 800 W. Sixth St.

IN 1994, PECKOVICH ATTENDED A LECTURE by USC professor Jon Goodman, now the executive director of EC2, a media-start-up incubator. Inspired, Peckovich quit CB and co-founded a telecom real estate partnership, Markley Stearns. In late 1998, Peckovich struck off again with his cousin, George Sarcevich, a Princeton man who had worked at Bear Stearns. Their new company, IX2, took offices in the Garland Building at 1200 W. Seventh St., across the freeway bridge from downtown, and started leasing telecom space there.

The building was uniquely suited to telecom. Built in 1983 by First Interstate Bank at an astronomical cost of $350 million, the Garland originally housed the third largest data center in the country, processing $90 million in checks each day, and controlling the bank ATM network for 13 Western states. Security was so tight it squeaked.

"Downtown L.A. has become a premier interconnection point," says Peckovich, seated at his desk in white T-shirt and jeans. "But my idea is a neutral co-location space where telecom carriers can pass their traffic. With One Wilshire full, a particular carrier dominates many of the telecom buildings in downtown and their co-location customers are encouraged, through pricing, to use the incumbent carrier network to pass their traffic. I let them connect to whomever they want."

IX2's space is connected by separate data circuits to PacBell, WorldCom and AT&T Local Services, as well as to IX2's cages at One Wilshire on the 16th floor and in the fourth-floor Meet Me Room.