The results are in from the Feb. 8 auction of 79 condos at the Rowan Lofts building in downtown Los Angeles: 63 units were sold for a total of $21.8 million. Now comes the hard part buyers have to get approved for their mortgages.
Downtown Properties Holdings LLC, the L.A. developer of the 206-unit project at Fifth and Spring streets, is well aware of the problems of securing credit and consequently created an escape hatch for itself in the auction process.
It has reserved the right to cancel the sales made at auction if fewer than 60 units close. This could clear the way for Downtown Properties to convert the building to apartments.
Bill Stevenson, an investor in the project, said that it is possible the developer could allow the results to stand even if fewer than 60 units close. But he didn’t say what the cutoff point would be.
“Let’s say only 10 would get approved then we certainly wouldn’t go forward,” said Stevenson, president of Intelligent Market Systems, an auction software company. “I don’t know where that tipping point is. The straw that breaks the camel’s back is somewhere in the middle there.”
Stevenson has a small investment in Downtown Properties’ interest in the property. Morgan Stanley Real Estate Fund IV, an entity of Morgan Stanley, is the equity partner in the project.
Stevenson said that the ownership group will decide by Feb. 23 on whether it has enough closed mortgages to finalize the sales. All of the registered bidders had prequalified for mortgages with either Countrywide or Wells Fargo. Prior to the auction, 30 units had been sold, but those deals haven’t been finalized. Also, three units have been sold since the auction.
Sales at the auction ranged from $207,000 for a studio to $534,000 for a two-bedroom penthouse unit. While some of the units did sell for about 20 percent more than their asking prices, Stevenson said that “a number of units sold at the minimum bid.”
The average sale price broke down to about $400 per square foot, while some units sold in the mid-$300s on a per-square-foot basis. And some occurred at prices below the cost of the construction, though Stevenson declined to disclose the cost.
“We consider everything that people got a bargain,” he said. “It didn’t meet our hopes but we did consider it a success.”
Wade Killefer, the architect who handled the renovation and transformation of the 98-year-old office building, said that the auction was important because it defined the downtown residential market by setting price benchmarks.
“That in a sense is positive because people now know this is a market because they can point to the prices,” said Killefer, principal at Killefer Flammang Architects.
Goodwin Gaw, president of Downtown Properties, was traveling out of the country last week and unavailable for comment.
Small Homes
Neil Shekhter, head of NMS Properties Inc., an L.A.-based multifamily developer, has turned a zoning restriction on a piece of Santa Monica land his company owns into an opportunity for a new sort of apartment project.
Shekhter paid about $3.5 million for property at 2001 Olympic Blvd. about five years ago with the idea of building a mixed-use development on the dirt lot. But, the land is zoned for light industrial use, making a traditional apartment complex impossible.
“I went back to the drawing board, I said, ‘Well I have the land, I have the zoning, what can do I here?'” Shekhter said.
What he came up with was an unusual apartment complex with units that comply with the area’s zoning and also offer an alternative to the high prices of Santa Monica living.
The $20 million Olympic Studios development opened in December and includes 100 lofts that include bedrooms, full-scale kitchens and big windows all in a tiny package of 350 to 375 square feet.
And because they are lofts, they meet the requirements of the zoning, which allows for “single-room” occupancy residences, as opposed to apartments with separate rooms, he said.
The rental rates at the property are set in accordance with Santa Monica’s affordable housing guidelines. The development’s 15 lower-income units rent for $1,061 a month and are already fully leased. Individual renters with a maximum annual income of $42,450 or couples with a maximum income of $48,500 qualified. There are still units available among the 85 affordable units, which rent for $1,327. They are open to individuals with a maximum income of $53,100 or couples with a maximum income of $60,600.
Shekhter isn’t done: Construction is already under way next-door on a 65-unit second-phase component.
Project architect Killefer said that he is working with multiple clients on designing similar project across Los Angeles. He’s got about 1,000 such units “on the drawing board.”
Staff reporter Daniel Miller can be reached at [email protected] or (323) 549-5225, ext. 263.
