Ken Kahan founded West Los Angeles-based multifamily development firm California Landmark Group in 1988. Since then, the company has developed more than 3 million square feet of residential and commercial real estate, primarily on the Westside.

But now California Landmark Group has found itself venturing into new markets, categorized by a generalized push east with an appetite for further expansion. The company’s latest development is M1, a 100-unit apartment complex in Silver Lake. Rising six stories high at 1221 Myra Ave., M1 represents the largest multifamily development in Silver Lake to open since 2015 and also marks California Landmark’s entry into the Eastside territory.

“We’ve been pushing outside of West Los Angeles and into other markets as we’ve made sense of other opportunities and found locations where there are strong communities that we feel comfortable, similar to the Westside, in their resilience,” Ari Kahan, a principal at his father’s company leading acquisitions and development for California Landmark Group, said.

“We’ve focused on really strong markets,” he added. “That’s why we’ve been making this push out of West Los Angeles, (but) we’re still pushing within West Los Angeles, we’re still growing within West Los Angeles.”

Eye for Silver Lake

While California Landmark has its roots dispersed throughout West Los Angeles – mainly the submarkets of Marina del Rey, Palms, Century City, Westwood, Brentwood and Mar Vista – its push outwards is the result of staying on top of market trends and eyeing geographical favorability.

“We try to stay nimble,” founder and president Ken Kahan said. “The marketplace changes all the time; we try to do what others don’t. We’re always trying to look at what’s new, what’s creative, what will work in the community and we’re not afraid to try new things.”

In terms of Silver Lake, the father and son duo said the neighborhood had been on their radar for quite some time, due to its walkability and trendy forecast.

“It really was a neighborhood that we liked a lot because it has a strong well-knit community and a really diverse architectural presence,” Ari Kahan said. “Normally when we go into an area, we can drive around, and in a few minutes, we can find the core of any area in terms of its architecture. Silver Lake didn’t have that. We drove through the hills, we drove through the streets, we went all around. There was such an amazing amalgamation of architecture.”

California Landmark Group first acquired the land to build M1 in 2017 and construction started in October 2020. The design is intended to pay homage to Silver Lake’s industrial nature.

“Whenever possible, we try to find development sites that have one amenity that a lot of projects don’t, and that is the ability to walk out your door, and within five or 10 minutes, walk to restaurants, coffee shops (and more),” Ken Kahan added.

He joked that whenever a neighborhood has market tenants such as Erewhon or Lassen’s, it’s usually a good sign for community development.

Ken and Ari Kahan shared that they are actively pursuing a couple of other sites in Silver Lake, as well as keeping an eye on the adjacent neighborhoods of Virgil Village, Sunset Junction and Echo Park.

ULA spurs further expansion

But, while interest in Eastside neighborhoods and other pockets within Los Angeles city remains, recent legislation has encouraged an even further push.

“As we push out easterly, we’re also pushing out southerly and exploring other cities within the Los Angeles basin and beyond that allow for development opportunities,” Ari Kahan said. “Particularly ones that are business friendly.”

The company has found itself venturing into new markets entirely, actively considering deals in Culver City, El Segundo, Santa Monica and Beverly Hills – notably all cities exempt from Los Angeles’ Measure ULA tax.

“The city of Los Angeles has made great progress in rezoning and in allowing for more density and in putting opportunities in place for developers to further unlock properties over the past five to 10 years,” Ari Kahan said. “Unfortunately, ULA is a major deterrent to those opportunities because the ‘mansion’ tax is applicable to multifamily.”

Measure ULA, enacted April 1 of last year, requires sellers of properties valued at $5 million or more to pay a minimum 4% tax on the sale price during transfer.

Marketed as a Robin Hood “steal from the rich and give to the poor” tax intended to fund homeless initiatives, the city’s tax has stunted sales altogether, generating only a fraction of the suspected revenue and frustrating many local developers.

“The city of Los Angeles’ competitive advantage, historically, was that they had a definitive path to entitlement,” Ari Kahan said. “And as state laws have expanded, that definitive path has been broadened to other cities as well. And as ULA deters people from investing in the city limits of Los Angeles, and the definitive path that previously existed in Los Angeles now exists in other cities, development in other smaller cities has become a lot more feasible. That’s been in our pursuit.”

And even though California Landmark Group’s development strategy is to build and hold their assets, as opposed to building and selling, the impact of Measure ULA still trickles down into all facets of the industry.

“If you’re building and really holding for long periods of time, the number of times that you’re going to have to pay that ULA tax is once,” Ken Kahan said. “But every lender that you’ll ever have will penalize you for it because they’re not sure when you’re going to sell that property. It will affect our proceeds. It will affect our cost of funds. It makes it much more difficult.”

Business friendly markets

California Landmark Group is now looking beyond California, eager to expand into cities like Salt Lake City, Nashville, Austin, Dallas and Denver – all of which tend to be more developer friendly, boasting both strong job and population growth markets – a new focus for the company.

“We are not neglecting California,” Ken Kahan asserted. “We believe that there is growth in certain markets and many cities, whether they choose to or have been forced to, are now embracing housing. There are opportunities for developers outside of Los Angeles, and we see that growth as well. It’s just a function of the economics.”

California Landmark Group is not alone in feeling this way. Other Los Angeles-based multifamily developers including Cityview and MJW Investments have also expanded outwards, in their own attempts to avoid the Measure ULA tax.

According to Kitty Wallace, a senior executive vice president specializing in multifamily transactions at Colliers, the developer flock the government has spurred through passing Measure ULA is “tragic,” only worsening Los Angeles’ housing supply and demand divide.

“When you take a California Landmark, who’s been one of our prolific developers in town and has done an excellent job, and they’re saying, ‘I don’t want to build in Los Angeles anymore because it’s too costly to build in Los Angeles,’ who’s coming behind to take this space up?” Wallace prompted. “They’ve got a high IQ, they build a good product, family office who oversees these things. If you can’t keep the family offices and the institutions who are leaving Los Angeles because of the legislation, we’re going to have a void of housing.”