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Carlyle Group Buys Into Beverly Hills Conversion Project

While converting office buildings into residences is common in downtown Los Angeles, it’s been slow to catch on in Beverly Hills.


Though the Beverly Hills City Council approved the only such conversion slated for the city nearly two years ago, the owners of 8601 Wilshire Blvd. have decided to sell the 11-story building.


The Carlyle Group, a New York-based private equity firm, purchased the building from Southbrook Equities, whose principal is local developer Alan Joelson, for $11.5 million.


Kitty Wallace, a Sperry Van Ness broker who represented both buyer and seller, confirmed the sales price but wouldn’t disclose the names of the buyers.


Joelson’s partner in the project, local developer and investor Rafi Cohen, has retained his stake in the building. Messages left for Cohen weren’t returned.


The Los Angeles County Assessor’s Office listed a June 2000 recording date that valued the 34-year-old building at $6.2 million.


Carlyle intends to move forward with city approvals that would allow conversion of the 47,000-square-foot building into a 37-unit apartment building to be called Le Formentor.


The units will range in size from 733 to 1,268 square feet. When the project was approved in November 2003, the developers expected to get rents of $3.50 a foot for the apartments.


Amenities in the tower, which will be six stories taller than any other residential building in the city, will include a media and conference center, a gym, ground-floor shops, valet parking and 24-hour doorman and security services. There will also be a rooftop garden and patio.


It’s unlikely that the building could be converted into condominiums. During the contentious approvals process, the building’s owners and the city agreed to enter into a covenant that the property could only be converted into rental housing. The owners also agreed to remove balconies facing residential neighborhoods.


Attorney Robert P. Silverstein, who represented a group of neighbors living near the building, said it was possible for the City Council to allow the units to be condos but it would open up another round in the battle.


“We have a settlement reached in court,” Silverstein said. “I expect them to abide by that agreement.”


Real Estate Finance & Investment, an industry trade publication, first reported the deal.



Mid-Wilshire Conversion


While Forest City is moving full steam ahead with its residential conversion of downtown’s 1100 Wilshire Blvd., the company is decamping from a similar project in Wilshire Center.


The company hired Mark Tarczynski of CB Richard Ellis Inc. to sell the former Getty Oil headquarters at 3800 Wilshire Blvd. Tarczynski expects Forest City can get about $95 million for the 343,000-square-foot building.


The company paid $75 million in February for the building, which is on the southwest corner of Wilshire Boulevard and Western Avenue. The previous owner, Calabasas-based Upside Investments Inc., intended to convert it into high-end apartments.


Forest City then changed the project’s entitlements to convert the building into 220 condominiums. The company also had to remove asbestos and re-engineer plans for the pool and deck slated for the building’s roof.


“It has stamped plans,” Tarczynski said. “A developer could buy it tomorrow and start pounding nails the next day.”


The 22-story building is the second-tallest residential conversion project in Los Angeles, after Forest City’s 1100 Wilshire Blvd. development.


Ratner said the project still contained all the elements the company looks for in projects.


However, Forest City decided to sell the building because it could already make a sizeable profit without having to take further risk, according to Tarczynski.


“If a market rewards you enough for the risk you’ve already taken on a project, why take more risk?” he said.



Plan B


Residential is where the action is, but not every downtown site is a candidate for conversion.


A building at 910 S. Los Angeles St. that Tarczynski and colleague Ed Rosenthal were marketing as a possible conversion has sold to a buyer who intends to continue renting the building’s showrooms to fashion designers.


The Gerry Building, as it’s also known, was purchased by LaeRoc Partners for $14.3 million. The seller, MJW Investments, purchased the Streamline Moderne building and renovated the property in 2001 to compete with the nearby showrooms of the California Market Center.


Tarczynski said the building’s structure and location didn’t lend themselves to residential conversion. However, even though the building is about 20 percent vacant, he believes space will lease quickly.



*Staff reporter Andy Fixmer can be reached by phone at (323) 549-5225, ext. 263, or by e-mail at

afixmer@labusinessjournal.com

.

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