If there were any questions about the demand for apartments in greater Hollywood, just consider Monarch Group.
The La Jolla developer is stepping out of its home turf to build not one but two mixed-use developments just a block from each other on La Brea Avenue. They will add nearly 400 luxury units and more than 30,000 square feet of retail to the area.
After securing equity financing from Palo Alto partner Essex Property Trust Inc., Monarch began construction a few months ago at Fountain Avenue and Santa Monica Boulevard on the projects worth a combined $140 million.
“For years, we’ve done stuff in San Diego and Orange County, (but) L.A. was a place that had good opportunities. There’s tight supply and high demand,” said Steven Paull, chief financial officer of Monarch. “Instead of building a two-story garden apartment and no one knows you’re there, here you are making a statement.”
Monarch, which has developed or acquired more than 8,700 units across Southern California since it was founded in 1997, bought the former sites of a Jons grocery and Carl’s Jr. in 2009 and has been working to get its plans approved by West Hollywood. It finally got the green light last year and plans to complete construction by 2014. (La Brea on those blocks forms that city’s eastern border.)
The projects are opening in an area that has seen a slew of multifamily construction that has continued virtually unabated despite the housing bust and financial crisis. More than 2,700 units have been built or renovated since 2008 in the Hollywood area, with at least 1,500 more planned, according to CoStar Group Inc.
Most recently, Dallas developer Lincoln Property Co., opened the Avenue, a 180-apartment project just blocks north on La Brea. Downtown L.A.’s CIM Group is planning a 305-unit mixed-use complex on Sunset Boulevard and Bronson Avenue, and West L.A.’s Champion Real Estate Co. recently bought property behind Hollywood’s famous Musso & Frank Grill where it wants to build its own mixed-use development.
Broker El Warner, an associate vice president at the downtown office of Colliers International, said he would expect other developers to announce even more projects.
“You are going to continue to see a transformation of that market based on its location within Los Angeles County and the increase in demand for housing product,” Warner said.
Sister projects
The local projects are not the first experience Monarch has had with mixed-use apartment complexes. It built a 262-unit complex with 100,000 square feet of offices in north San Diego County’s Scripps Ranch neighborhood a decade ago. But it has wanted to break into western Los Angeles County for years.
“Even during the recession, the vacancy never really collapsed like in Phoenix,” said Monarch’s Paull. “We try to enter markets that are hard to penetrate.”
Monarch partner Essex has a portfolio of 155 multifamily properties on the West Coast, including the 275-unit Belmont Station in downtown Los Angeles and the 296-unit Pathway at Bixby Village in Long Beach.
John Eudy, executive vice president of Essex, said her company hasn’t done a deal in Los Angeles in more than two years because of the economy. The Monarch projects – given their desirable location and hefty size – convinced his company to jump back in.
“We are very careful,” Eudy said. “We did (this one) for a reason and we were very market optimistic.”
The West Hollywood projects will each be six stories tall, with two levels of underground parking. Paull said they will be high-end luxury units that will be similar to Alliance Residential Co.’s sister Franklin Street projects: the Hollywood Tower, a 50-unit redevelopment of an 83-year-old building, and La Belle, a new 146-unit building next-door.
The project at 1216, 1222 and 1234 North La Brea will have 187 apartments and nearly 20,000 square feet of retail. The 1.6-acre site also will have a landscaped rooftop and an outdoor movie screen for tenants. Also planned is a public plaza on the ground floor.
The second project, at 1111 La Brea, will have 184 apartments and nearly 13,000 square feet of retail. Paul said some of the highlights will include quartz countertops and glass back splashes in the kitchens as well as a fitness center.
Rental prices have not been set, but will most likely range from $2,000 to $3,000 a month, depending on the size of the unit, which are 680 square feet to 1,250 square feet.
About 20 percent of the units in both building are being set aside for affordable housing, something that allowed the developers to qualify for some tax-free bond financing, Eudy said. They will rent for hundreds of dollars less.
The project’s retail leasing agent, Lee Shapiro, executive vice president at KennedyWilson Holdings Inc. in Beverly Hills, said no businesses have yet signed leases for the ground floor, but talks are being held with several potential tenants. He said space will likely be taken by both casual- and fine-dining restaurants, as well as service-oriented retailers.
“The ability to have customers living onsite is a great benefit,” Shapiro said. “It’s a proven commodity type.”
Hot market
As much development as greater Hollywood has seen, the area looks to be in for more. Both Los Angeles and West Hollywood are encouraging even higher-density housing and commercial space.
The West Hollywood City Council last year approved a new general plan that would allow developers in six areas of the city to build housing and retail with about 25 percent more space and up to six stories instead of five. The plan covers the eastern area, which has historically not seen the same level of development as the rest of the city.
Next to Monarch’s site, West Hollywood already has approved plans for another affordable housing project and a third developer has submitted plans for a mixed-use development at the former site of Faith Plating Co. only steps away on Santa Monica and Formosa Avenue.
In Hollywood, L.A. city officials are advocating an even more aggressive plan to rezone the neighborhood to accommodate more than 244,000 new residents by 2030. The plan could allow developers to build high-rises perhaps as tall as 30 or 40 stories or more. The plan has generated plenty of controversy, but those in the real estate industry say one thing is not for debate: the area’s desirability.
“Hollywood is hot,” said Albert Shilton, who specializes in multifamily investments as senior managing director of Charles Dunn Co. in Century City. “Everyone has heard of Hollywood. If you are moving from the East to the West Coast, you are likely to go to Hollywood.”
