Some not-so-good, but not end-of-the-world developments, from the
Los Angeles Business Journal.
Is Anybody Willing To Take the ‘Fifth’?
REAL ESTATE: The towering Park Fifth project goes up for sale.
By DANIEL MILLER
Los Angeles Business Journal Staff
It is still possible that Park Fifth, the long-stalled 76-story mixed-use project across from Pershing Square in downtown Los Angeles, will get built. But its current ownership group won’t be involved.
Park Fifth LLC, the venture led by Israeli investment company Africa Israel Investments Ltd. that also includes bankrupt local investment company Namco Capital Group Inc. and local developer Houk Development Co., put the property up for sale this month. The nearly 99,000-square-foot property at 427 W. Fifth St. currently operates as a surface parking lot but has entitlements for hundreds of condos, a hotel and retail space.
If built as planned, Park Fifth would be the tallest residential tower west of Chicago and one of the biggest developments in L.A. history.
Jona Rechnitz, director of acquisitions and dispositions for the U.S. arm of Africa Israel, said in an e-mail interview that the property is being marketed by brokerage Cushman & Wakefield Inc. without an asking price. Given the recession and the frozen state of capital markets, it’s unclear what the property might fetch.
But Carl Muhlstein, the executive vice president of Cushman & Wakefield who is spearheading the sale effort, said the site’s development approvals, which were granted by the city last summer, differentiate it from other projects being shopped.
“It’s got to be one of the finest residential and mixed-use sites in the Western United States,” said Muhlstein, who was to begin marketing the property on June 29. “It bridges Pershing Square with Bunker Hill and is served by mass transit and has great access. It will be unique in that area.”
Ever since the project was announced in spring 2007, Namco’s involvement has raised eyebrows. The company, which is the main business of bankrupt Brentwood businessman Ezri Namvar, had never previously been involved in such a high-profile development.
While Namvar had a local real estate empire valued at $2.43 billion last summer, his various businesses began collapsing in the last half of 2008 amid the real estate downturn. He’s since been accused of stealing money from investors and running a Ponzi scheme to prop up his failing ventures. According to bankruptcy filings, Namco owes more than a half-billion dollars to 464 creditors. Namvar’s attorneys did not return calls seeking comment.
In December, David Houk, who heads his namesake development company, told the Business Journal that Namco’s stake in the project was being shopped because the company was no longer able to fulfill its role in the venture – supplying capital and financing.
In 2006, Houk, who has owned the site for about 30 years, brought in equity partners Namco and Africa Israel, which is headed by international billionaire Lev Leviev and has interests in construction, real estate and other businesses.
While Rechnitz said that Namvar’s financial troubles are unrelated to the decision to sell, Houk said that Namvar’s problems are part of the reason, though he would not elaborate.
“I have nothing but good things to say about Ezri,” Houk said. “He helped us a lot until he ran into trouble.”
The 1.29 million-square-foot project has approvals for 790 residences, a 212-room hotel with 10,485 square feet of hotel function and meeting rooms, and 19,035 square feet of retail space. It would cost $1.3 billion.
For comparison’s sake, Park Fifth would be bigger and much more expensive than the $350 million W Hollywood Hotel & Residences project, which will have 143 condos and 305 hotel rooms plus retail space and nightlife options. It is slated to open in December. But Park Fifth would be smaller and much less expensive than the $2.5 billion L.A. Live project, which when completed next year, will include a 1,001-room, two-hotel tower, 224 condos, and shops and restaurants, along with a 14-screen movie theater.
But unlike those two projects, Park Fifth’s construction has not gotten started. It was slated to break ground in October 2007, but was delayed several times when the owners had troubled obtaining construction financing. In the current recession, it has become very difficult to finance large construction projects, a problem that has also delayed the planned Grand Avenue development, just blocks from the Park Fifth site.
Like the $3 billion Grand Avenue project from developer Related Cos. of New York, Park Fifth had widely been viewed as a key part of the downtown renaissance, which has stumbled during the recession.
“It is right in the center of downtown Los Angeles and it is a prime site and has been a parking lot. I love parking lots but it has been a parking lot for too long,” said Carol Schatz, president of the Central City Association, a downtown and business advocacy group. “So hopefully somebody who is positioned to develop this can be ready to come out of the ground when things turn around.”
Renderings of Park Fifth as designed by executive architect Chris Dikeakos Architects Inc. of Vancouver, Canada, show a sleek twin-tower development connected by a bridge section that includes swimming pools on and under the bridge along with landscaped outdoor space. The 76-story tower would house condos while the 41-story building would contain the luxury hotel and more residences.
Prior to his efforts with Africa Israel and Namco, Houk made an attempt at developing the property in the late 1980s and early 1990s. In 1990, he secured city approval to build a similarly sized office tower, but the project never materialized when the downtown office market collapsed amid another deep recession.
Houk said that he has a right of refusal that allows him to match or better an accepted offer to purchase the property. He hopes to stay involved in a future version of the project if possible.
“We will work with Cushman & Wakefield and whoever they bring to the table to see if there is some way to accomplish that,” Houk said.
The value
In terms of making a sale, both local and international buyers are being targeted, Rechnitz said.
While Muhlstein wouldn’t discuss what he thought the property would fetch, he did say that despite the recession, real estate deals are still getting done, albeit in a market far different from the boom years.
“There are deals coming together, they are just at new economics and new expectations,” he said.
A November list of Namvar holdings created by Namvar and/or his company as part of an attempted out-of-court settlement with his creditors valued Park Fifth at $80 million. However, commercial broker Mark Tarczynski, a downtown expert, said the property is worth “far less,” but noted that its value is unclear.
“At the end of the day it’s impossible to value because there is no market for development land today,” he said.
Muhlstein said the project’s approved status should make it enticing to prospective buyers, noting that nearby at Wilshire Boulevard and Figueroa Street, Thomas Properties Group Inc. and Korean Air Lines Co. Ltd. are “starting from scratch” in getting approvals for their $1 billion mixed-use project at the current site of the Wilshire Grand Hotel. That should take about two years. Meanwhile, the Park Fifth site is ready to go.
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