Student Housing Adjacent To USC ‘Recession Proof’

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The real estate market may be turning sour, but investors looking for a safe haven could find a surprising one south of downtown Los Angeles.

A five-unit, rent-controlled apartment building near USC has changed hands for $1.2 million in a deal underscoring the continued strength of markets near the region’s universities.

L33T Student Housing, the Malibu entity of an unnamed real estate investor, purchased the 1155-1157 W. 27th St. property from Los Angeles real estate investors Circle Park Holdings LLC in a deal that closed March 15.

The 1925 property is located a few blocks from the university campus and has no vacancies. Three of the units are rented out well below their market value to long-term tenants, but the two others are leased to students at much higher rates.

Under the city’s rent control law, landlords cannot raise rents for existing tenants by more than 5 percent annually. However, units that change hands can be brought up to market rates.

At $235,000 per unit, the deal is high for the area, especially given the below-market rents. But broker Omar Ting of Sperry Van Ness said that student housing is “recession proof” and high student turnover allows rents to be raised quickly.

“As long as USC is here, there will be a tenant base that will be willing to pay a certain amount of rent that is effectively sheltered from the rest of the economy,” said Ting, who represented both sides of the deal.

Rents at the 6,800-square-foot building for the long-term tenants range from $476 to $712, while the other student units top out at $2,300. Market-rate student housing in the area is about $3,000 per month for a three-bedroom unit, Ting said.

Jeff Pierce of Sperry Van Ness also represented both sides of the deal.


Off-Market Deal

Local 721 of the Service Employees International Union, which represents local public employees, has sold its 44,000-square-foot, four-story headquarters for $11.6 million.

A group of unnamed private real estate investors bought the Koreatown-area building at 500 S. Virgil Ave. in an off-market lease-back deal that closed at the end of March.

Bart Diener, assistant to the president of the union, said that Local 721, established last year after the merger of six locals, opted to sell the building because the union received an offer that was too good to pass up.

The union is looking for a new location, but in the meantime has a one-year lease with the new owners, with an option for two more years.

The building and its two acres were purchased by Local 660 in 2003; that SEIU branch became part of Local 721 last year.

The deal breaks down to $263.64 per square foot for the Class B building.

Maury Gentile of Grubb & Ellis Co., who represented Local 721 and has represented other unions, said the deal worked out well for the growing local.

“The lease-back gave them the opportunity to sell high and remain in the building,” said Gentile, who is looking for replacement headquarters of 75,000 to 100,000 square feet.

The unnamed new owners are said to be interested in turning the property into a medical office project. While Local 660 had extensively renovated the building, Gentile said medical office use would require further significant upgrades.

Brian Denton of Grubb & Ellis also represented the seller in the transaction and Partners Realty represented the buyer.


Hollywood Spa

Bliss Spa, a subsidiary of Starwood Hotels & Resorts Worldwide Inc., has inked a lease at the forthcoming W Hotel project at Hollywood Boulevard and Vine Street. The W Hotel chain also is a unit of Starwood, with Bliss a preferred W spa provider.

Dallas-based Gatehouse Capital Corp., one of the developers of the massive $600 million mixed-use project, leased 6,139 square feet of space in a deal that closed in late March.

Bliss will have ground-floor space that will provide street access for users not staying or living at the project, with the spa located on the fourth floor inside the hotel. W residents will get certain spa incentives, like discounts and special promotions.

Jeff Cohen, chief operating officer of Gatehouse, said the spa should perform well, given that there isn’t much high-end competition nearby. “There are spas in West Hollywood but that might as well be another country.”

Construction at the 4.6-acre site began in February 2007, with a three-level subterranean parking structure already built. The project is on track to open in fourth quarter 2009, Cohen said.

Gatehouse is developing the project’s 305-room W Hotel, while Foster City, Calif.-based Legacy Partners Inc. is developing 375 apartments. HEI Hospitality LLC, based in Norwalk, Conn., is developing other portions of the project. All three worked together on the garage.

The value of the spa’s 10-year deal was undisclosed but said to be market rate.

Retail expert Matthew May of May Realty Advisors said that market-rate rent for high-end retail/hospitality space in Hollywood is about $6 to $7 per square foot per month.


Staff reporter Daniel Miller can be reached at

[email protected]

or (323) 549-5225, ext. 263.

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