Developers Shift Focus on Hollywood Office Property
By DANNY KING
Having poured an estimated $3 million into the renovation of the Hollywood Equitable office building at Hollywood & Vine, its developers have abruptly switched gears and plan to convert it to apartments.
The change comes amid a stagnant Hollywood office market and the former leasing agent's assertion that Tom Gilmore and Associates LLC has been pushed aside by majority partner William E. Simon & Sons as lead developer.
Tom Gilmore, manager of the firm that bears his name, denies losing his role in the project. "It's still going to be a combination of the two of us," said Gilmore. "We'll be hand and glove on that."
Officials at Simon & Sons, of which former gubernatorial candidate Bill Simon is co-founder, declined comment.
The partnership spent about $6 million to buy the 93,000-square-foot building, and while the core renovation was completed earlier this year, it remains 95 percent vacant. Adding to the projects woes, its lone ground-floor tenant, the Hollywood & Vine Diner, was forced into an involuntary Chapter 11 filing by creditors late last month.
"The property's been taken off the market for office leasing purposes," said Christopher Bonbright, chief executive at Ramsey-Shilling Co., who had been the site's leasing agent for more than a year. "Tom's no longer leading the process there he's got lots of other things going on."
The Simon/Gilmore partnership will present plans to the city to convert the 12-story building to 96 market-rate apartment units, ranging from 700 to 1,200 square feet and renting for between $2 and $2.25 a square foot, according to Gilmore.
While the plan is still a month or so from being completed, it is being viewed favorably among city officials.
"We're looking forward to seeing (Gilmore's) plans and are supportive of residential conversions in general," said Rich Llewellyn, spokesman for 13th District Councilman Eric Garcetti.
"I would hope to be in construction by March," Gilmore said. "This is a building type I know in my sleep."
The failure of the office project to gain ground is another example of the spotty success of the Hollywood "renaissance" once touted by local boosters.
While the El Capitan office and theater project on Hollywood Boulevard and the Amoeba record store on Sunset Boulevard west of Vine Street have been bright spots, the performance of the massive Hollywood & Highland retail/hotel/entertainment complex has been disappointing and the office market has floundered.
The failure of the office project also represents a rare misstep for Gilmore, known as the leader in the downtown loft movement for the past few years. His firm has redeveloped and leased up four downtown buildings totaling nearly 600 residential units.
With $8 million invested in the purchase and shell renovations, Gilmore and Simon signed Hollywood & Vine Diner to lease the bottom floor and have secured just five tenants for a total of 4,000 square feet upstairs.
"For a developer to get a return on investment (after tenant improvements), the developer would need to get long-term leases," said Stockwell, whose two most recent leases, both at the El Capitan about a mile west, were for two years and 18 months, respectively. "In Hollywood, tenants are looking for short-term deals."
Gilmore estimated that the residential renovation of the Hollywood Equitable would cost $75 a square foot, or about $7 million, a slight uptick from the $6 million he estimated to spend on office tenant improvements.
The asking rate for the offices was about $2 a foot, according to Bonbright, and Gilmore expects to get about $2.25 a foot for the apartments.
"It'll be a little more expensive to do residential but the spread for residential will be much higher," said Gilmore.
Further muddying the project's performance was the Nov. 22 involuntary Chapter 11 of Hollywood & Vine Enterprises LLC, which owns and operates the Hollywood & Vine Diner.
With three of its investors claiming more than $655,000 in overdue promissory notes, Richard Heyman, a principal of Hollywood & Vine Enterprises, said "We are in the process of finalizing financing on the issue," and would emerge from protection quickly.
He said the claims were not a reflection of the restaurant's performance. "We're jammed every day."
Gilmore is upbeat about demand for the apartments, which he is hoping will be complete by fall 2003. Hollywood's apartment vacancy was 3.3 percent for the second quarter, up from 2.2 percent for the year-earlier quarter and about even with L.A.'s Western region, according to Hendricks & Partners, which tracks the market.
"There was a time when people would ask, 'Who would want to live on Hollywood and Vine?'" said Gilmore. "I don't think people would ask that any more."
Richard Ringer, senior associate at Marcus & Millichap, agreed. Despite being in an area long in transition, he said the building should attract enough residents to make the redevelopment worthwhile.
"Getting 96 people who want to be in the mix is very likely," said Ringer, who has brokered apartment complex sales in Hollywood for seven years. "There's a girl in Sweden right now who's going to move to Hollywood. She's not going to move to Santa Monica."
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