An unusually large development opportunity is expected to come onto the market this week in Central City West and could provide a crucial impetus to the revitalization of the area near downtown Los Angeles.
Good Samaritan Hospital is hoping to sell a full city block bounded by Wilshire Boulevard, South Bixel Street, West Sixth Street and Lucas Avenue to a residential developer who would build a large community on the 4.1 acres.
The hospital has not set an asking price, but the property is just west of the Harbor (110) Freeway in the growing Central City West area. There have been 2,400 housing units recently built there, more than 1,000 units under construction and another 2,000 units planned.
"This whole area is going through a complete revitalization," said hospital Chief Executive Andrew Leeka.
Although it's unusual for such a large parcel to come onto the market in that area, a 4.6-acre property across Figueroa Street from Staples Center was sold Aug. 11, fetching about $80 million. The Moinian Group bought that parcel and plans a 700-unit residential development.
However, the Good Samaritan property is coming onto the market amidst a pullback by downtown developers. Last month, the Business Journal reported that developer Sonny Astani had shelved plans to build a 30-story downtown condominium tower, while real estate brokers suggested that between 10 and 15 residential developments have been canceled in the area.
Industry officials are blaming over construction of condominiums across the country as well as a robust downtown supply for making investors wary of putting money into new developments. Also to blame: sharply rising construction costs.
Still, downtown boosters say that over the long term Central City West needs more housing to meet the area's growing population. Some envision the neighborhood as a middle-class haven close to downtown in contrast to more upscale neighborhoods directly downtown such as South Park.
"It is within walking distance to central downtown, the area is the definition of live-work," said Carol Schatz, executive director of the Central City Association. "It is being transformed with market rate middle class housing and you can't revitalize a neighborhood without your middle class."
Central City West
The lot features several structures that would likely be razed for the development: a parking lot, warehouse, visiting nurse dormitory and a 1920s office building the hospital uses. Future development would likely be a cornerstone of the Central City West area.
Real estate broker Mark Tarczynski, the listing agent for the property, said that because of its large size, a diversified development can be built there, with the existing office building possibly incorporated into any development as an adaptive reuse element.
"You could do some low rise and you could do high rise; you could do condos and rentals the whole spectrum," said Tarczynski, a senior vice president at CB Richard Ellis Group Inc. "It's large enough to have a variety of product and a very diverse community, some of which being affordable. You really could have a high impact project on these four acres that could change the community for the better."
The property is in Councilman Ed Reyes' district, an older part of the city where it is more difficult to assemble large parcels. That it is available as one large block has prompted the councilman to support the sale and future housing development.
"To have an assembled parcel is a great opportunity," said Gerald Gubatan, chief planning deputy for Reyes.
The property is part of the Central City West Specific Plan area, which requires a 15 percent set aside for affordable housing. Developers can opt out of building affordable housing by paying a fee of $97,000 per affordable unit they opt to not build. That money is put into the area's housing trust fund, which could then go to build affordable housing in the area.
"With flow of investment and infusion of new development west of the 110 freeway some developers have opted to pay the in-lieu fee," Gubatan said.
And while there are some high-end developments in the area, such as the 1100 Wilshire condo tower, more typical are moderately priced developments, such as Astani Enterprises Inc.'s Vero, which has about half of its 200 units in the $400,000 range.
"The market has been relatively strong west of the freeway it's a completely different price point and product than near Staples Center," said Rich Mayo of O'Donnell/Atkins, who represented Moinian Group in its August deal. "I think the Good Samaritan property is a great piece of property."
According to sources familiar with the downtown real estate market, the lot directly east of the hospital will fetch between $30 and $50 million.
Leeka said that Good Samaritan will use the profits to build a medical office building with an outpatient pavilion. He said that the hospital is growing and needs space for expansion.
The new building, which could rise as high as nine stories, would be located next to a nine-story medical office building the hospital owns across the street from Good Samaritan Hospital.
Leeka said the hospital waited to sell the four-acre parcel until it was ready to expand. "The trustees, over the course of decades, had the foresight to assemble properties for a day like today," he said.
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