Investor Makes L.A. Debut With Record-Breaking Deal
by Danny King
A major Northern California investor/ developer has made its first foray into the L.A. market, plunking down what area brokers said was a record amount for a multi-family building.
Cupertino-based Sobrato Development Cos. purchased the 214-unit Alexan City Place in Pasadena from Trammell Crow Residential for $56.5 million. The deal, one of three between the two companies, is one of the highest prices paid per square foot for non-beachfront apartments in Los Angeles County.
Kevin Andrade, division partner for Trammell Crow Residential, said the sale was part of Trammell Crow's strategy to sell about half the complexes it builds. Alexan City Place, which is 83 percent leased, was completed last year.
"When the market's good, there is a time to harvest, and the market's pretty good right now," said Andrade.
So good, it may be even record-breaking for a complex its size. Last year, Sea Castle Apartments on Santa Monica Beach sold for $48 million, or at a record rate of $501 per square foot, according to Grubb & Ellis Co. But Barry Baker, vice president at Grubb & Ellis, said the only non-beachfront apartment sale to exceed the $276 per foot Sobrato paid for Alexan City Place was a 24-unit building in Beverly Hills, at $338 per foot.
"It's the premier luxury apartment in an extremely strong market," said Dean Zander, associate partner at Hendricks & Partners. "I think that property warrants it."
Sobrato also purchased the 373-unit Alexan Parc Rose townhomes in Oxnard and the 156-unit Alexan Sevilla in Chula Vista from Trammell Crow Residential. Though Sobrato owns and operates 110 commercial buildings and 3,600 residential units in the Bay Area, the three properties will be the company's first in Southern California.
A decision by the West L.A. Planning Commission to turn down plans for an office building development may not be the end of the story.
Development of an 18-story, 134,000-square-foot building at the northeast corner of Wilshire Boulevard and Barrington Avenue is supported by Councilwoman Cindy Miscikowski, who may bring the development before City Council.
If Miscikowski takes that action, it would be the first time in the two-year history of the West L.A. Planning Commission such an override was made.
"The community has people calling me nonstop," said Kristen Montet, planning deputy for Miscikowski. "Both sides are looking for an answer." She declined to say what action the councilwoman planned to take.
Project developer Roy McNeill declined comment.
The commission effectively stopped the project when it upheld the appeal of a number of local homeowners associations and community groups opposing development, largely on the grounds of height-limit violations. Though the property's zoning allows for its development, a commercial corner ordinance caps the height of projects that back up against residential units at 45 feet (there are apartments on the northern border of the property). McNeill's office building was to be 293 feet tall.
"It's real key whether she chooses to honor the process," said Flora Gil Krisiloff, vice president of the West Los Angeles Area Planning Commission. "What will be precedent-setting is if she chooses to take it beyond this."
The decision for the local planning commission to go against the councilwoman was uncommon, especially for a development of this magnitude.
"This is a big case," said Krisiloff. "More times than not, our thinking tends to be consistent."
Goodbye, Ugly duckling
UCLA's medical billing group has leased 81,000 square feet at 5757 Century Blvd., near LAX, doubling the size of its current offices in the process. Total consideration for the 10-year deal is more than $15 million.
The move will allow the division to expand without substantially increasing its occupancy costs. While its current space at 10920 Wilshire Blvd. is owned by UCLA, David Thurman, vice president at Grubb & Ellis Co., estimated that the space required for expansion near Westwood would cost about twice as much as the new location.
But building owner Decron Properties Corp.'s renovation of the 331,000 square-foot building was also a factor.
In 1999, the building made the Business Journal's list of "5 Local Examples of How Not to Develop a Property." Van Nuys-based Decron, which primarily owns residential property, bought the building the following year and put about $5 million into rehabbing the space.
"It was not even a B building before," said Thurman, who, with Grubb & Ellis' Chris Sinfield and Bill Maher, represented Decron. "It was a C-minus building, and it's been transformed."
The transaction is also a boon to a Century Boulevard corridor market that had a rough 2001. Last year, the submarket put 300,000 square feet back on the market, and its fourth quarter vacancy rate was 29.2 percent, according to Grubb & Ellis.
Robert Gray and Dean Heck of Beitler Commercial Realty Services represented the tenant.
In a down economy, you take your victories where you can get them.
As the City of Los Angeles braces for reductions in its general revenue funds due to the economic slowdown, the lone bright spot has been the documentary transfer tax, in which funds are collected through every escrow closing in the city. The tax, which generated $86 million in the year ended June 30, 2001, was budgeted for about a 6 percent decrease for this fiscal year.
While business and sales taxes are down from last year, the active real estate market has boosted documentary tax revenues, which totaled $47.5 million for the six months ended December 31, up from $46 million for the year-earlier period.
Rex Olliff, finance specialist for City Administrative Officer William Fujioka, said the jump is unusual, given that it generally runs lockstep with the other sources of tax revenues.
It's not exactly a boon for city coffers. The $8 million swing between the potential and budgeted revenues of the documentary transfer tax is a mere drop in the bucket, compared to the city's $3.2 billion general fund revenue base.
Staff reporter Danny King can be reached at (323) 549-5225 ext. 230 or at firstname.lastname@example.org.
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