Vacancies Dog Developers of Housing on Golden Mile
By DANNY KING
The new crop of tony Golden Mile residential high rises is showing a few signs of strain.
Vacancy rates at the Legacy, a year-old, 187-unit apartment project, are substantially higher than the broader market, and two new condo projects sit largely empty.
And now signs of the times have started sprouting up along Wilshire Boulevard just east of Westwood Village: signs touting amenities at the various projects.
"When they're putting the signs on the street, some of the snoot is off the product," said Barry Baker, vice president at Grubb & Ellis Co.
The new developments boast asking rents more than twice the county-wide average of $1.40 per foot and condo prices starting at $600,000, reaching $13 million for a penthouse.
The squeeze is being felt all along the boulevard.
- The Legacy at Westwood apartments, on Wilshire near Glendon Avenue, is seeing slower-than-expected lease-up rates. The project, whose 187 units came on line in April 2001, remains 30 percent vacant in an L.A. market where apartment occupancy stands at 97 percent. Its owner has started cutting rents.
- Crescent Heights Investments' 93-unit Remington, on Wilshire near Manning Avenue, opened recently and has sold or taken deposits on just 40 percent of its units, according to Julie Cortez, a Remington marketing associate.
- Crescent Heights has had a better time with the 109-unit The Grand on The Wilshire Corridor, on Wilshire near Beverly Glen Boulevard, where it has sold all but six units. The Miami-based developer completed the project a year ago.
- At the recently completed 25-unit Venezia, at Wilshire and Malcolm Avenue, 10 units have been sold, and Malibu-based developer Richard Weintraub was putting a positive spin on sales activity.
"What I'm happy about is that we're getting our asking price," said Weintraub, president of Weintraub Financial Services. "We're not having to negotiate."
Foster City, Calif.-based Legacy Partners has responded to lagging rentals by cutting rents substantially.
"Once the market slows down, you have to take a more aggressive approach and offer concessions," said Dennis Cavallari, senior vice president at Legacy.
"From April through July, we had very strong activity," said Cavallari, who estimated that the Legacy leased about 25 units a month during that period. But in the last half of the year leasing activity slowed considerably, causing Legacy to drop asking rents from $3.15 a foot to about $2.90, he said. Units at the project range from 750 to 1,800 square feet.
While Cavallari attributed the slowdown to economic conditions, Michael Genthe, development partner for Trammell Crow Residential in Costa Mesa, said that the drop in interest rates may have been a factor as well.
"You've got a lot of 20 to 30-year-old product in that vicinity where these rents are (equal to) a mortgage payment," said Genthe, whose company broke ground on a luxury apartment complex in Marina del Rey last month.
Holding the line
Developers building Golden Mile condos have held the line on prices, figuring the appeal of the market to empty nesters eventually will result in sales.
"There's a real scarcity of good inventory and good product, and that's what's kept the prices high," said Jeff Hyland, president of Beverly Hills-based Hilton & Hyland Real Estate. One Westside broker who has brought buyers to the Grand said Crescent Heights has received its asking prices at the building, where units range from $600,000 to $940,000.
Joe Babajian, chairman of the estates division at Beverly Hills-based Prudential California Realty Estate Properties and broker for Venezia, estimated that condominiums in the three Westside condo markets the Wilshire Corridor, Santa Monica's Ocean Avenue and Century City have appreciated by about 15 percent over the past year. Driving this demand are empty-nesters selling longtime, equity-heavy houses on the Westside as well as corporate executives needing a local, maintenance-free base.
"There's always somebody who wants new," agreed Murray Weisberg, associate manager at Coldwell Banker's Brentwood Court office. "The people who buy into those things are the international types or they've sold a big house and they want a place where their possessions are safe."
While Cavallari estimates that the current activity will lead to a full lease-up for the Legacy by April, Weintraub's expectations for the demand for luxury residences along the Golden Mile are even greater, as he is planning to develop 105 condo units across the street from the Venezia.
"Good units in good buildings are selling," said Weintraub. "People want large units."
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