Developers Pick Their Spots: Urban Infill or Outlying
Infill
Kor Group
Headquartered: Los Angeles
Top Regional Executive: Brad Korzen, Chief Executive
Year Founded: 2000
Summary: Kor Group attached the name Pegasus to its new 322-unit apartment complex in downtown L.A. to symbolize the rebirth of the once-vacant office building designed in the late 1940s by architect Welton Beckett.
City officials said the 12-story building at 612 South Flower St. is the largest adaptive reuse project completed since City Council approved an ordinance in 1999 that relaxed parking, density, height and other codes for historic and other older buildings.
“The Pegasus is a big step forward toward our goal of creating a 24-hour downtown,” said Hamid Behdad, director of adaptive reuse projects for Mayor James Hahn’s economic development office.
Kor pumped in $55 million, including $35 million for renovations of Pegasus, which it purchased in 2001. By the time it received its temporary certificate of occupancy on June 19, the company had leasing commitments on 75 apartments, at $1,000 to $6,000 per month.
Meanwhile, in Hancock Park the company wants to attract tenants looking for a more leisurely lifestyle with its 121-unit Rossmore House Apartments on the edge of the Wilshire Country Club. It is a $34 million project.
Kor Group will begin signing leases in September for occupancy next January of apartments ranging from $1,000 to $5,100 per month, with fifth floor units featuring spiral staircases leading to lofts.
It’s the type of project that has become the hallmark of the Kor Group’s portfolio, which includes 3,500 apartment units, including 2,500 in Hollywood, downtown, Mid-Cities and the Westside.
The company specializes in buying and renovating would-be apartment buildings and hotels, rather than buying occupied structures in the hopes that the market sends rates up.
That strategy, in part, prompted Kor Chief Executive Brad Korzen to part ways with his former partner, Jeff Elowe, in 2000, a decade after the two formed Elkor Reality Group in Chicago. Korzen kept all of the California properties while Elowe kept everything outside the state.
“We wanted to pursue higher-risk, higher-return investments,” said Gregory Schem, president of Kor. “We recognized that the market was getting saturated with people doing the same thing.”
David Greenberg
PCS Development Inc.
Headquartered: Los Angeles
Top Regional Executive: Paul Jennings, Chief Executive
Year Founded: 1995
Summary: Joseph Fryzer and Paul Jennings, owners of a payphone management firm whose customers are jails, saw an opportunity to invest in rebuilding neighborhoods hit hard by the 1994 Northridge Earthquake.
Their PCS Development, formed in 1995, has grown into an umbrella group of companies, including acquisition, development, construction and property management. The focus is on luxury multi-family and senior living residential projects in Southern California.
Riding a wave of mixed-use projects, PCS Development Inc., which owns and manages 1,632 luxury apartment units in L.A. County, built 312 units in the last year. It also has 172 rental units under construction and will see tenants occupying another 221 units this summer as part of its section of the massive CityPlace redevelopment in downtown Long Beach.
CityPlace, on the site of the former Long Beach Plaza Mall, is being shepherded by city development agencies and business improvement districts intent on invigorating downtown by encouraging mixed-use residential and commercial projects.
“Premi & #269;re, PCS’s residential component, is an integral part of the CityPlace project,” said Kraig Kojian, president and chief executive of Downtown Long Beach Associates, which manages the two downtown Long Beach business improvement districts. “This is really a byproduct of our advocacy two or three years ago when we sat down with the city to talk about the redevelopment of the old Long Beach Plaza Mall.”
PCS’s 221 luxury apartments, a $30 million joint venture with Urban Pacific Builders LLC, covers 200,000 square feet on the second, third and fourth floors in five contiguous buildings. The lower floors are leased to Ross Dress for Less, Nordstrom Rack and Wal-Mart.
PCS will break ground in July on its other L.A. County project, a residential, 35-unit luxury apartment building on Burton Way and Robertson Boulevard. The one and two bedroom units will rent for between $2,000 and $3,500.
Matt Myerhoff
Shea Homes
Headquartered: Walnut
Top Regional Executive: Bert Salva, Chief Executive
Year Founded: 1881
Summary: J.F. Shea Co. has grown from a small plumbing company in 1881 to become the nation’s largest privately owned homebuilder. Its Shea Homes subsidiary creates master planned communities from scratch, as opposed to buying land that has already been graded with access roads in place.
All told, 150 single-family homes and condominiums are slated for sale in L.A. County this year, including the Mount Calabasas development off Las Virgenes Road and the Paraiso at Playa Vista.
Plans call for the remaining 19 homes in the 69-unit Calabasas complex to be completed by the end of the year, while 20 of the 81 Playa Vista dwellings are already done. Prices begin at about $1 million per home in Calabasas and $650,000 at Playa Vista.
“We’re fortunate enough to be a homebuilder in one of the best housing markets in the nation right now,” said Les Thomas, president of Shea Homes. In the first quarter, 65 housing units were sold, including 24 townhouses and 10 condos.
J.F. Shea also is working as a development consultant on the proposed construction of 1,431 apartment, condominium and townhouse units at the 45-acre Ambassador College site in Pasadena, owned by Worldwide Church of God.
One challenge is devising a way to construct the units without disrupting the half dozen turn-of-the-century mansions on the site. Another is traffic congestion in a city that has seen 1,500 housing units completed in the past two years.
Meanwhile, Shea Properties, a sister company of Shea Homes, is working its way through complex entitlement process for construction of the 304-unit Trio Apartments complex on a 3.8-acre East Colorado Boulevard site in the historic Playhouse District Section of Pasadena.
Though the property contains the historic eight-story First Trust Bank building and the state’s first multi-level parking structure (both built in 1927), it has taken years to take up improvements in the area. At least two other developers have tried and failed in the past 15 years, due to preservation issues or the collapse of the housing market in the early 1990s.
David Greenberg
Forest City Residential
West Inc.
Headquartered: Los Angeles
Top Regional Executive: Greg Vilken, President
Year Founded: 1971
Summary: The West Coast residential unit of Cleveland-based Forest City Enterprises Inc. has overseen projects in Los Angeles and Denver areas since the 1970s.
Forest City, founded in 1921 and public since 1960, has evolved into a master developer and property owner of urban and suburban real estate projects with assets of nearly $5 billion.
Forest City’s three residential projects in L.A. County, which will bring 541 rental units to downtown, read like a promotional pitch for adaptive re-use and mixed-use residential support.
Forest City’s largest project, Metro 417, will transform the Subway Terminal Building on Hill Street in downtown Los Angeles. When it was first completed in 1925, the building was the largest in Los Angeles, and it served as the eastern terminus of the 1-mile underground segment of Pacific Railway’s Big Red Car system until 1956.
Forest City got the Subway Terminal Building on the National Register of Historic Places, which made the developer eligible to be reimbursed 20 percent of the $60 million restoration and preservation costs on the 500,000 square foot building.
“If it weren’t for the reimbursement, Forest City couldn’t do this kind of building,” said Kevin Ratner, senior development manager of Forest City Residential West, the entity created to develop Metro 417 and Met Lofts, at 10th and Flower streets near Staples Center.
Forest City also benefited from the city’s adaptive reuse ordinance, and the Subway property is eligible for a significant reduction of property taxes.
“When you compare the hard costs of the Subway building, a pre-existing building, and Met Lofts, a totally new construction, they have roughly the same costs,” Ratner said.
Restoration of the Metro 417 building will begin in mid-July, and Forest City expects the 271 market-price loft-style apartments, renting for between $1,400 and $2,400, to be completed in September 2004.
Construction of Met Lofts will bring 264 loft-style apartments, 80 percent of which will rent at market prices ($1,400 to $2,400), and 20 percent of which are reserved for affordable housing. Construction is scheduled to begin this month, with completion planned for December 2004.
Matt Myerhoff
Urban Partners
Headquartered: Los Angeles
Top Regional Executives: Paul Keller and Dan Rosenfeld, principals
Year Founded: 2000
Summary: Founding partners Paul Keller, Dan Rosenfeld and the late Ira Yellin, all with extensive experience in both commercial and residential real estate development, began Urban Partners in 2000. Named for its commitment to urban in-fill projects, the company is known for making inroads into downtown revitalization with projects like the Million Dollar Theater and the Bradbury Building under its belt. Over the past few years, Urban Partners has been tackling complex mixed-use projects.
Its most recent project is the $89 million mixed-use Central Park Market, which wraps around the Gold Line Del Mar Station in Pasadena. Working with Pasadena-based architect Stefanos Polyzoides, the City of Pasadena and the Gold Line Authority, Urban Partners broke ground in September 2001 and expects completion in the first half of 2004.
The project, on 3.8 acres, will include 347 apartments units, an underground garage with 1,200 spaces, retail shops and the renovation of the historic Santa Fe Station for retail and restaurant use.
Central Park Market is one of a string of residential developments in Pasadena over the past few years that resulted from a change in the city’s zoning regulations. Responding to increased housing demand, the city of Pasadena changed its zoning codes in the central district in the early ’90s to promote urban in-fill in exchange for protecting its hallmark single-family neighborhoods.
Urban Partners has another transit line development in the works: the seven-acre site at the Wilshire/Vermont Red Line Subway Station. The project includes 448 units of mixed-income, multi-family housing and 30,000 square feet of commercial space. Construction will begin later in the year. In addition, the Los Angeles Unified School District has retained Urban Partners to develop a 739-seat middle school next to the Wilshire/Vermont project.
Urban Partners is also in the early stages of the development of the 10-acre mixed-used University Gateway near the University of Southern California. The project is expected to include 1,060 housing units, parking garages and ground floor retail space.
Nicole Taylor
MJW Investments
Headquartered: Santa Monica
Top Regional Executive: Mark Weinstein, Chairman, President
Year Founded: 1983
Summary: One of the early downtown residential developers, MJW got into the game with the $19 million purchase of 10 aging industrial buildings in L.A.’s Fashion District in 1998. The 780,000-square-foot site is now in the midst of a $120 million development as a mixed-use residential/retail project. The development, on Los Angeles Street between 7th and 8th streets, is now known as Santee Court.
“Manufacturers are moving out of the area and the need for affordable housing is great,” said Mark Weinstein, chairman of MJW Investments.
The biggest challenge has been attracting lenders downtown to finance the conversion of aging industrial buildings to apartments, even as more of these buildings come available.
“Because rents and permits are cheaper elsewhere, the trend is manufacturers vacating central L.A.,” said Joe Rodriguez, executive director of the Garment Contractors Association of Southern California. “Many are shutting down because production is moving offshore.
Those involved with business improvement in the area see mixed-use development as a blessing.
“It will be much more pedestrian-oriented with better facilities and connections to trains,” said Kent Smith, executive director of the L.A. Fashion District’s business improvement district.
Santee Court’s first phase, comprised of three high-rise apartment buildings, will have 165 loft-style rental units with an average rental price of $1,400. There will also be 40,000 square feet of retail space on the ground floor. Phase One is scheduled to open early next year. The second and third phases will have a similar apartment/retail mix, and both are scheduled to open within 18 months. A portion of the yet to be completed apartments will be for-sale condos.
Michael Thuresson
Centex Homes
Headquartered: Valencia
Top Regional Executive: John Bertero, President, Los Angeles-Ventura County
Division
Year Founded: 1950
Summary: Centex Homes has taken an aggressive approach to the strong housing market, building opportunistic developments that fit the needs of the areas they are in.
In its repertoire of projects planned, completed or under construction are single family homes, townhouses and condominiums, in Carson, Torrance and the Santa Clarita Valley.
“Our success can be attributed to focusing on the diversity of the markets that our division serves, said John Bertero, president of Centex’s Los Angeles and Ventura county division.
Revenues are projected to reach $227 million the fiscal year ending March 31, 2004, up from $114 million last fiscal year.
“We were able to acquire more lots to build upon due to a heavier investment in the area approved by the corporate office,” said Kurt Altergott, the company’s regional controller. “Market conditions justify it.”
The major focus has been single-family home development in the Santa Clarita Valley, where five projects in Saugus, Westridge and Canyon Country have produced 548 units costing $430,000 to $650,000.
Centex also plans a yet-to-be named complex of 100 attached townhouses to be priced in the low- to mid-$500,000 range at Torrance Boulevard and Prairie Avenue in Torrance.
Also in Torrance, the last of the 128 condominiums in the Breakers at Del Amo complex at Plaza Del Amo and Monterey Street has just sold. Each unit was sold for about $620,000.
In Carson, Centex has sold 16 finished condos that are part of the plan to build 147 units retailing for about $340,000 each in the Arbors at Avalon at 516 Catalina Lane in Carson.
Developers Tom Lively and Ira Rupley founded Centex Corp. in 1950, a year after creating their first large subdivision near Dallas. Centex Homes went through a major expansion in the 1970s, buying general contractors in the California, Florida and Washington D.C. markets.
David Greenberg
CIM Group Inc.
Headquartered: Los Angeles
Top Regional Executives: Avi Shemesh, Shaul Kuba, Richard Ressler,
Co-Founders, Principals
Year Founded: 1994
Summary: Shaul Kuba, Richard Ressler and Avi Shemesh founded CIM 1994 to focus on opportunities in underserved districts of high density L.A. CIM and its partners have invested in 33 projects.
Rising demand for downtown loft-style apartments, commitment by redevelopment authorities to rejuvenate neglected districts and long-term demographic changes have all played into CIM’s strategy.
CIM Group broke ground in May on a downtown mixed-used development anchored by a Ralphs, the first new supermarket downtown in decades.
The $247 million project, which will include 1,200 loft-style apartments and 127,000 square feet of retail shops and restaurants, is located on a 7.2 acre parcel bounded by 8th and 9th streets and Flower and Hope streets (just six blocks from where Ralphs was founded 130 years ago).
The former Southern California Gas Co. building, a vacant historic landmark on the site, will be converted to lofts in the first phase of development, with the first units available for occupancy in September. The project was aided by L.A.’s adaptive re-use ordinance, passed in 1999.
CIM Group also is in partnership with Lee Group Inc. to build 91 loft units at 100 S. Flower St., a former four-story UPS distribution center, and 66 lofts on 11th Street and Grand Avenue, a new construction on a former parking lot. The 157 units are the only new homes for sale downtown.
After the city extended application of the adaptive reuse ordinance to Hollywood, CIM acquired the long-dark Sunset/Vine Tower on Sunset Boulevard and Vine Street. CIM is considering building 80 to 100 apartment or condo units in the tower, which sits across from the planned Sunset and Vine project. CIM also plans an adjacent retail building with a ground floor restaurant and entertainment component.
John Given, CIM’s senior vice president of development, expects to break ground on the project by the end of the year. “We’re working on fixing up a pretty dead area on a very important corner,” he said.
Matt Myerhoff
Bond Capital Ltd.
Headquartered: Santa Monica
Top Regional Executive: Larry Bond,
Chairman
Year Founded: 1987
Summary: Bond’s mixed-use development at Sunset and Vine broke ground last July and is scheduled to open in the second quarter of 2004. The 750,000 square foot building will house retail tenants on the ground floor with 300 loft-style apartment units above.
The aim is to attract entertainment industry workers between the ages of 25 and 45. The project will have studios, one- and two-bedroom units.
The retail portion, comprising 100,000 square feet, is expected to open by the end of the year and will house tenants including a reprised version of Schwab’s Pharmacy, the heralded show biz meeting spot whose original location was at Sunset and Crescent Heights boulevards. Others include Bed, Bath and Beyond and Borders.
“The shopping center will open up 100 percent leased and we are bring in other boutique retail to make it a hangout,” said Bond.
The project originally was planned as a three-story retail center to be developed by Regent Properties. But after neighboring business owners filed lawsuits over parking rights-of-way, commercial tenants dropped out and Bond Capital acquired controlling interest from Regent.
The reconstituted project has a privately financed garage, while Regent had originally proposed using parking revenue bonds to fund the facility.
The $125 million project is a partnership between Bond and several other investors, including HW Marketplace, Canyon-Johnson Urban Fund and the California State Teachers Retirement System.
The firm is also working on a mixed-use project in Chinatown called Blossom Plaza that will have a cultural center, as many as 250 apartments and small retail shops. Construction is expected to start in 2004.
Bond has built several mixed-use projects in San Francisco, and is working on a mixed-use project in the Palm Springs area.
Michael Thuresson
G.H. Palmer Associates
Headquartered: Los Angeles
Top Regional Executive: Geoff Palmer, President
Year Founded: 1975
Summary: The developer has been lauded as a pioneer for downtown housing but has also drawn criticism for driving low-income housing out of the area.
Its Medici, a 632-unit apartment building at 7th Street and the Harbor Freeway, opened in July 2000 and is more than 90 percent leased, according Bob Gardner, managing director at Robert Charles Lessor and Co., a real estate consulting firm that worked on the development.
A portion of the Medici’s units have since been set aside for moderate-income tenants, in accordance with an agreement between city officials and G.H. Palmer.
The Orsini, a mixed-use project at the corner of Figueroa Street and Sunset Boulevard, has 330 apartment units and was originally planned for 40,000 square feet of commercial space on the ground floor.
The first phase of the Orsini is scheduled to open on Aug. 1 while construction continues on the second phase, said Donna Rosen, business manager for Legacy Partners, which manages the Orsini and Medici.
The city didn’t require moderate-income units at the Orsini project, because it falls within the boundaries of the Chinatown redevelopment area, which has a need for market-rate housing.
But the Medici and the other planned project with an Italian theme, the Piero, are in a zoning area that has affordable housing requirements for each residential building. The Piero, located at St. Paul and 6th streets, will have 225 apartment units with 10,000 square feet of commercial space on the ground floor.
The city has required G.H. Palmer to provide 27 affordable housing units either on-site or within a three-mile radius.
Michael Thuresson
Gillmore & Associates LLC
Headquartered: Los Angeles
Top Regional Executive: Tom Gilmore, Chief Executive
Year Founded: 1998
Summary: Gilmore launched its first conversion development downtown after the City of Los Angeles approved the Adaptive Reuse Ordinance, which made such conversions easier.
In downtown’s old banking district, Gilmore completed reconstruction on a 230-unit loft housing and retail project in three buildings in late 2001. Loft apartments ranging from 507 square feet to a 2,675-square-foot penthouse atop the Continental Building went quickly.
“The buildings came online sequentially and each one filled up within two to three months of opening,” Gilmore said. “We had nothing on the ground floor, no stores or restaurants (at the time). The people who moved in were real pioneers.”
With 100 percent occupancy, lofts that initially went for an average price of $1.50 per square foot now average between $1.65 and $1.75 per square foot. There remain only a few commercial spaces open, Gilmore said.
Gilmore Associates is working on a handful of historic reconstruction projects, including St. Vibiana’s Cathedral, the former seat of the Archdiocese of Los Angeles, with residential unit reconstruction set for September. It will also be breaking ground on the Little Tokyo Bank Library between now and September, which will include 300 housing units.
The Rowan Building, built in 1911 and situated at Fifth and Spring streets downtown, is a mixed-income project, with 20 percent of the 209 units designated as affordable housing.
Despite the city reuse ordinance, converting historic buildings is still difficult and time-consuming. The $40 million Rowan Building project is a year behind its targeted schedule.
“We are constantly making decisions specific to the building,” Gilmore said. “The seismic work, sprinklers and mechanical systems have to fit into the framework of the old building.”
The office market slump is also an obstacle. With the main building systems completed on the Hollywood Equitable Building project at Hollywood and Vine, the developer decided to scrap its plans for office space amid weak demand and go residential about four months ago. Construction on the 90 units is estimated to begin in the next four to six months.
Nicole Taylor
Casden Properties LLC
Headquartered: Beverly Hills
Top Regional Executive: Alan Casden, Chief Executive
Year Founded: 2001
Summary: Since getting into real estate in 1975, Alan Casden has built or sponsored partnerships that developed 90,000 apartment units nationwide. Casden sold his entire portfolio to Denver-based real estate investment trust Apartment Investment & Management Co. in 2001, and started up Casden Properties LLC to develop multi-family urban infill rental properties in Los Angeles.
Casden Properties has more than $1.8 billion worth of projects underway across the country. The only one under construction in L.A. is the extension of the massive Park LaBrea apartment complex it developed under its old ownership structure. Park LaBrea Palazzo contains 521 luxury apartments designed by L.A. architects Van Tilburg Banvard & Soderbergh. The project has one- and two-bedroom apartments and two-story townhouses ranging from 720 to 2,060 square feet, and renting from $2,000 to $5,800. The first phase, which opened in March, is 65 percent occupied.
The second project, Palazzo East, at the northeast corner of the site, is under construction and will bring another 610 apartments of similar design and dimension. Rental rates for that phase, scheduled to open toward the end of 2003 and be completed in 2004, have yet to be determined.
The opening of the nearby Grove has exacerbated traffic congestion. But Roger Wolf, the architect at Van Tilburg who oversaw the design of the Park LaBrea projects, believes traffic problems can be alleviated because residents are close enough to walk to shopping.
Casden recently reached an $83 million settlement in litigation with former investors stemming from the 1998 consolidation of 98 properties into a real estate investment trust he controlled, National Apartment Investment Co.
Casden last month sued the now-defunct New York law firm that put together the deal, seeking $100 million in damages.
Matt Myerhoff
Mixed
Legacy Partners
Headquartered: Foster City
Top Regional Executive: Preston Butcher, Chief Executive
Year Founded: 1968
Summary: After years of legal wrangling, the 19-acre Warner Ridge property at the corner of De Soto Avenue and Oxnard Street in Woodland Hills is finally being developed.
Last October, Legacy Partners completed a 125-unit apartment complex sitting on five acres of the land. The complex is currently 95 percent leased and will be followed by a second phase, a 265-unit complex, due to open in October.
The complexes were developed in partnership with Equity Residential, a Chicago-based real estate investment trust. A planned third phase would bring the total number of residential units to 579.
Earlier developers had been trying to build a mixed-use project on the land since the mid-1980s, but ran into entanglements with the city of L.A. over zoning and environmental regulations.
Legacy, which became involved in 1998, proposed a purely residential project. The neighborhood homeowners’ association raised concerns over the heights of buildings, traffic access and land grading, forcing further design changes.
“The concerns included placement of driveways on the street and the grading of a slope between the site and Los Angeles Pierce College. It was all worked out in time,” said Frank Qwon, city planning associate and manager of the Warner Ridge project at the L.A. Department of City Planning.
Legacy built another residential development on a piece of vacant land in Westwood near the corner of Wilshire Boulevard and Glendon Avenue. The Legacy at Westwood, sold last year for $85 million to TIAA-CREF, a teacher’s pension fund based in Washington D.C., is a 187-unit complex.
Michael Thuresson
Forecast Homes/K.Hovnanian
Headquartered: Rancho Cucamonga
Top Regional Executive: Frank Glankler, Chief Executive
Year Founded: 1959
Summary: Affordability is the watchword for K. Hovnanian/Forecast Homes. It has three new developments in the northern part of L.A. County, with prices ranging from less than $200,000 to just below $400,000.
Housing affordability in the High Desert stands at 64 percent, according to the California Association of Realtors, meaning that more than two-thirds of households can afford to buy in the area. By contrast, affordability is 39 percent in the Inland Empire and 29 percent in Los Angeles.
Forecast Homes’ Starpoint Ranch in Acton has three- to five-bedroom homes at 2,200 to 2,800 square feet in the upper $300,000 range. In Palmdale’s Belle Maison, three to six bedroom, 2,300 to 3,000 square foot homes start in the mid $200,000s.
“We know we’re not going to dazzle ’em with spectacular architecture,” said Mike Dwight, Forecast’s vice president of sales and marketing. “All we want to do is make the finals. The average buyers look at 12 new home neighborhoods. If they narrow it down to two or three, we’ll get our share.”
Dwight estimates the company closed 78 homes in the first quarter of this year. Forecast plans to add 250 homes to these communities this year. Further demand is driving the development of five more communities totally 680 homes: two in Palmdale, one in Lancaster and two in Quartz Hill.
Forecast is taking advantage of market forces drawing first-time buyers to northern L.A. County, said local broker Lou Bozigian of Coldwell Banker/Bozigian Realty in Lancaster.
“Prices are quite low up here, so you can get better homes in good neighborhoods,” said Bozigian, Lancaster’s former mayor.
To keep costs down, the developer negotiates aggressively with subcontractors and vendors, about the only opportunity for price breaks. “The challenge for us in Southern California is the cost of economically buildable land and the explosion in fees,” Dwight said.
Margot Carmichael Lester
J.H. Snyder Co.
Headquartered: Los Angeles
Top Regional Executive: Jerry H. Snyder,
Managing Partner
Year Founded: 1949
Summary: J.H. Snyder Co. has developed individual residential, retail and office projects over the course of its business. Now, the developer is combining that expertise to create several mixed-use developments countywide.
Snyder’s adaptability is evident in his latest project, Oak Creek in Agoura Hills. “I’d originally planned a high-tech office park there,” said Managing Partner Jerry Snyder. “But the market wasn’t there. The demand for rentals was.” So he retooled the development and broke ground in March.
The $80 million project features 335 one- and two-bedroom apartments that will rent from $1,500 to $2,400 per month, 35,000 square feet of retail and restaurant space, and 11 acres of open space. Negotiations are also underway to land a hotel for the site.
Looking to re-purpose existing office space, Snyder and Goldrich & Kest Industries LLC are putting the final touches on five luxury penthouse apartments on the 27-floor ArtistDirect building at 5670 Wilshire Blvd. Four two-bedroom and one one-bedroom units will go for $3 to $4 per square foot, well above the average asking rate of around $2 for office space and the average rent of $2.25 at nearby apartments.
Further west down Wilshire, Snyder recently began construction on an 88-apartment building as part of a mixed-use Wilshire Boulevard and Crescent Drive. “These are the first new rental apartments in Beverly Hills in 25 years,” Snyder said.
The development will also feature 150,000 square feet of office and retail space and a parking structure. The apartments will be available for occupancy in mid-2004.
Snyder’s biggest project is NoHo Commons, scheduled to break ground this fall. The 16.7-acre, $218 million mixed-use development includes 810 multi-family residential units, retail and office space, a community clinic and a child care center. It will connect directly with the MTA Red Line terminal.
Proponents of high-density housing applaud Snyder’s projects. “Most developers are taking us in the wrong direction for the region,” said Bill Corcoran, the Sierra Club’s regional representative. “Projects like these renew and re-invigorate existing communities.”
Margot Carmichael Lester
Western Pacific Housing Inc.
Headquartered: El Segundo
Top Regional Executive: Evan Knapp, SVP California Homebuilding
Year Founded: 1993
Summary: Flexibility is one reason Western Pacific has developed a large market presence in L.A. County, and why D.R. Horton Inc., the nation’s largest homebuilder, was so anxious to purchase the company last year.
“We don’t have a product or price market niche,” said David Harding, vice president of Western Pacific. “We offer first-time buyers homes in the high desert, age-restricted condominiums in beach communities and everything in between.”
The company currently has several large projects mostly single-family homes in various stages of development.
Its most ambitious is Horizons West, a 203-home development at J and 45th streets in Lancaster. To date, seven homes are occupied with the remainder of the $209,000 to $260,000 structures to be completed a year from now.
The 51-home Carlyle project at Topanga Canyon Boulevard and Owensmouth Drive was sold out a month before construction finished last September. Houses sold for $200,000 to $300,000 each. “What we try to be is entrepreneurial and design product that is so superior it sells very quickly,” said Harding.
Available land for large-scale developers is not easy to come by, however. Besides the cost of access roads and basic improvements, such as water and sewer lines, there are environmental mandates and frequent public opposition.
“Sometimes the expense of these improvements can make it too expensive for them to develop the property,” said Tom Hoagland, assistant deputy director in charge of land development at the L.A. County Department of Public Works.
Western Pacific merged with Schuler Homes Inc. in 2001, doubling its size overnight. The firm was sold to Horton a year later. The parent company keeps the original names of its acquisitions to leverage their brands and foster competition between the units.
Western Pacific generated $113.6 million in revenues from home sale closings in L.A. County during the fiscal year ended Sept. 30, 2002. The amount will drop to about $85.3 million in the current fiscal year because the company is placing more of a focus on Ventura County, where Western Pacific expects to finish 257 homes this year, a 100 home increase.
David Greenberg
Outlying
KB Home
Headquartered: Los Angeles
Top Regional Executive: Jay Moss,
Divisional President, Greater Los Angeles
Year Founded: 1957 (entered the
California market in 1963)
Summary: Known for its highly customizable home designs, KB maximizes choices by selling homes before they’re finished. Buyers can tour a model home or take a virtual tour at the KB Home Web site. Prospective purchasers are able to create their own floor plan, adding features like bonus rooms, fireplaces, vaulted ceilings, wall and floor finishes, appliances, cabinets and countertops.
“This enables a buyer to virtually customize the home to his tastes,” said Moss. KB Home models showcase the full range of custom options on the standard floor plan.
Some brokers complain that the system could lead buyers to underestimate the final cost, after options they see on the models are added in. Moss likens the process to buying a car. “We know what they can spend based on their loan or the pre-qualification and we go through it with them,” he said. “In most cases the options can be financed into the loan.”
At any rate, the system appears to be working.
KB Home sold 92 homes in Los Angeles County in the first quarter of this year alone. Its Belmont at Hasley Hills development has one of the highest resident-referral rates in the company, with around 20 percent of buyers being referred by other KB Home customers. The average for a KB community is between 15 and 16 percent.
The project, situated just south of Castaic Lake, has more than 100 homes starting from $365,990 for 1,800 square foot models to $418,00 for 2,900 square feet. “They can’t build them fast enough,” said Jim Magnassarian, a broker with Realty Executives, noting Castaic’s popularity.
KB Home plans to develop three new projects in the coming 12 to 18 months, including Belmont at West Lancaster with homes up to 2,788 square feet; and Ana Verde, where the company will develop 400 homes as part of a master planned community.
The only obstacles Moss sees are land costs and infrastructure. “The land side of the business is very challenging in California,” he said. “It’s just going to get more challenging in the years to come.”
Margot Carmichael Lester
Beazer Homes USA Inc.
Headquartered: Irvine
Top Regional Executive: Gerald Gates, Regional President, Southern California Division
Year Founded: 1952
Summary: Beazer is regularly among the top 10 homebuilders in the nation. The company’s net income grew 57 percent in the second quarter of 2003, to $38 million. Revenues rose to $665.6 million from $503.3 million.
Some of Beazer’s financial success stems from its Northern L.A. County developments, where it sold 113 single-family homes in the first quarter.
The company has two communities in Santa Clarita. The homes in high-end Festivo at Tesoro del Valle start in the $500,000 range. Residences in Tango at Tesoro del Valle are among the lowest-priced in the area, starting at around $360,000.
Beazer’s four golf-centric projects in Palmdale Country Club Ridge, the Greens, Le Reve and the Fairways at Rancho Vista range from $250,000 to $290,000. These communities attract homebuyers seeking to combine an active lifestyle with comfortable homes, as well as homebuyers wishing to move up from smaller single-family and attached housing.
They also attract the ire of environmentalists.
“There are few developments that cause as much land disturbance as golf courses,” said Bill Corcoran, regional representative for the Sierra Club. “They wipe out habitat, consume massive amounts of water and dump sediment, pesticides and herbicides into the waterways.”
He said building one in the Antelope Valley was irresponsible. “We need to start ensuring that we use increasingly scarce and expensive resources in a wise way,” he said.
Officials from Beazer did not return calls.
Margot Carmichael Lester
Richmond American
Headquartered: Irvine
Top Regional Executive: Bob Shiota, President
Year Founded: 1977
Summary: There’s little secret to the popularity of Richmond American’s communities in the Antelope and Santa Clarita Valleys. The houses are fairly large and relatively affordable.
“Our primary focus is the first-time, move-up buyer,” said Gary Reece, chief financial officer of MDC Holdings, Richmond American’s parent company. “We try to have multiple price points in all the markets we’re in.”
In the first quarter, the company sold 102 homes in its entry-level projects in Antelope Valley, plus “move-up” developments in the San Fernando and Santa Clarita Valleys.
Prices start in the mid $400,000s for a 2,532-square-foot in Castaic’s Hasley Hills development. Larger, more expensive homes start between $500,000 and $600,000 at the Ranch and Esperance in Tesoro del Valle and Sundance at Westridge in Valencia.
The company has grown by acquiring smaller parcels that can accommodate 125 to 150 lots. “We don’t want to be exposed in one location at any time,” Reece explained, so the strategy is to get in and out quickly. “From first sale to last sale is two years or less, so absorption levels are very important to us.”
Additionally, Richmond American will not buy unentitled real estate and wants to see a preliminary plan before picking up a parcel.
“We buy from Lennar and other developers and let them develop the master-plan community,” Reece said. “We’ll buy the lots at retail. We prefer finished lots, but that’s very hard to come by and I don’t anticipate many of those sites in the future.”
For the near-term, Richmond American has projects underway in Lancaster and at Providence in Palmdale. And with several other master-planned communities in the works in the north county, opportunities should arise for further growth.
Margot Carmichael Lester
Greystone Homes
Headquartered: Irvine
Top Regional Executive: Jon Jaffe, President, South Coast Region, Lennar Homes
Year Founded: 1991
Summary: While demand for homes soars in northern L.A. County, so does the price of land, creating a challenge for homebuilders and developers.
Greystone, part of the Lennar Corp. family of homebuilders, has one of the best land positions in the region, largely due to the 4,000-acre Stevenson Ranch project. Homes in two developments, Crescent Moon and Northstar, start in the $400,000 to $500,000 range.
With no-growth sentiment running high among existing residents, Greystone is not producing as much as it is capable of, said Jon Jaffe, regional president for Lennar Homes, Greystone’s parent. “We clearly need to have the right balance between higher density and single-family communities and better planning that takes into account all these views,” he said.
Greystone’s lowest priced offerings are in the mid- to high-$400,000 range in Santa Clarita’s Cheyenne at Stone Crest and Tapestry at Pacific Crest. The developments feature 2,835- to 3,233-square-foot homes.
Slightly larger homes are found at Saratoga, a golf course community in Glendora. Homes from 2,988 to 3,412 square feet start in the high $600,000 range.
In the first quarter, Greystone sold 70 homes at its local developments. McGuire attributes the sales in part to a program in which prospective buyers are given various options for wall and floor finishes, appliances and the like. “It’s a real competitive advantage for them,” said Pam McGuire, a broker with Realty Executives of Valencia.
Margot Carmichael Lester
