LOS ANGELES | Downtown Project Rundown 6.0

[citywatch]

labusinessjournal.com

A succession of defaults on towers has unfolded as demand for space drops in the downtown Los Angeles office market.

Brookfield corp., one of the largest office owners in downtown Los Angeles, defaulted on $784 million worth of loans on two towers. According to a Feb. 10 sec filing, the firm failed to pay a $465 million loan package for the Gas Company tower at 555 W. 5th st. And $319 million in loans for 777 S. Figueroa St.

Those aren’t the only ones. In January, Oaktree foreclosed on Coretrust Capital Partners’ 48-story, 914,000-square foot tower 444 S. Flower St.

And last year, the Broadway Trade Center at 801 S. Broadway was foreclosed upon as an affiliate of Starwood Capital, a lender on the property, acquired the building through a public foreclosure auction.

From an investment and lender perspective, the view of the downtown Los Angeles market is negative, according to Sean Fulp, vice chair and head of office capital markets at Colliers.

“There’s a lot of value deterioration that’s happened,” Fulp said. “What’s happening right now is a bit of a house of cards. You have a portfolio that’s been over-leveraged based upon where property values are today, and you have an interest rate environment that has risen to a level that no one had anticipated.”

The tower woes come as demand for office space in downtown Los Angeles has been sinking in the wake of the pandemic’s shift to remote work. According to a Jones Lang Lasalle Inc. Report for the fourth quarter of last year, downtown Los Angeles vacancy is hovering at 22.7%, which roughly matches Los Angeles county’s 22.5%. asking rents in downtown Los Angeles averaged $3.86 per square foot in the quarter, on par with the previous year. Los Angeles county, by comparison, had an asking rent of $4.14 per square foot for the quarter.

Chris Rising, chief executive officer of downtown-based real estate developer Rising Realty Partners, counts 1200 W. 7th St., the Trust Building and the Cal Edison building among its downtown assets. he described downtown in the years 2020 through last year as resembling a “dystopian nightmare.”

“Over those two years, the homeless population moved from a more contained area in skid row and expanded throughout,” Rising said. “Then you add the crime element. Downtown was desolate. I came to work every day and i can tell you, it didn’t feel safe.” Rising said the former downtown Los Angeles, which attracted westsiders to its art walks and restaurants, has been “decimated.”

“I think 2023 is going to be pretty bloody, there’ll be more defaults and a complete price reset,” Rising added. “But our infrastructure system is getting finished so the regional connector and the connection to the airport is almost done. If people felt safe that they could ride the metro and walk in their neighborhoods, downtown L.A. Could make a screaming comeback.”

Brian Saenger, chief executive of the company, said that the shift from office to work from home during the pandemic had a huge impact on downtown Los Angeles and the office market in general.

“You’ve got decreased demand in the office space,” Saenger said. “Fewer people are coming down to downtown Los Angeles on any given day. Pre-pandemic, the numbers were in the 500,000 range (compared to half that population now). And then you’ve got this rising interest rate market.”
lending for DTLA.

“It really depends on the business plan for the project,” said Vishal Vanjani, managing director of Century City-based Dekel capital. “There’s been a lot of discussion because there’s been so much of an extra supply of office space downtown that what would be the best use of the projects. There’s a lot of discussion of conversion of some of these office buildings into multifamily and other asset class uses.”

Projects converting buildings into creative office space are not immune to the issues.

“Renovations were fairly expensive and costly so the rents they need to make those deals pencil just don’t exist right now in downtown L.A.,” Shlomi Ronen, managing principal and founder of Dekel, said.

Vanjani believes that a central problem for downtown is that it became too developed. “a lot of this has to do in downtown specifically with the overdevelopment that has happened in the last cycle,” he said. “you have an over-supply of office space that was developed in the past cycle into a market that didn’t have extremely strong metrics to begin with.”

“The office environment downtown is not appealing,” Ronen said. “I don’t know of a single company CEO who wakes up in the morning, has a home in Beverly Hills or in the Palisades or Pasadena and says my goal is to go spend my day living and working in downtown.”

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The pandemic, politics...at LA city hall & elsewhere....& the long-time history of LA, with wealth gradually moving away from dt since the 1920s, has thrown dtla for a loop.

[scania]

Made the mistake to unblock two people…I’ll redo the settings back. He mentions the article and doesn’t show how at the end of the article, the writer expresses optimism and that he sees the office market in DTLA having a demand within a few years. Downtowns all over the U.S. are having a difficult time. But no matter what these articles tell you…other than the financial distric…. DTLA is booming more now, than ever before. I know some of you who have actually visited DTLA have alluded to this fact. Others who have such an envious attitude who don’t even live in LA or California will sent in their grandmother’s basement and look for any and every article to try to speak negative of our city. I know DTLA isn’t perfect…but there’s definitely a lot of good going on and being developed.

[craigs]

I was in downtown LA just before Valentine's Day, and all the usual spots were busy, especially the Central Market. Love that place.

Plinko--great panorama! That spot is the best for really taking in the sweep of the skyline. I had hoped to take my Dad there last month when he visited, but there wasn't time.

Another favorite spot of mine, when you want to be within the skyline a bit but still able to see a grand sweep, is the top of the parking garage at the Grove.

[Ptown2downtown]

https://at.tumblr.com/xarmycorpsofarchitectsx-blog/710494871811653632/rbzbbsaaalc6

Here are some height plans of the 60 story 1000 Hill tower. Can't figure out how to post images here so my apologies. Anyone's welcome to post the images back up here for me.

[LAnative61]

So according to this the building will rise 760 feet above street level. I believe this would make this #4 in DTLA.

[LA21st]

Originally Posted by scania

Made the mistake to unblock two people…I’ll redo the settings back. He mentions the article and doesn’t show how at the end of the article, the writer expresses optimism and that he sees the office market in DTLA having a demand within a few years. Downtowns all over the U.S. are having a difficult time. But no matter what these articles tell you…other than the financial distric…. DTLA is booming more now, than ever before. I know some of you who have actually visited DTLA have alluded to this fact. Others who have such an envious attitude who don’t even live in LA or California will sent in their grandmother’s basement and look for any and every article to try to speak negative of our city. I know DTLA isn’t perfect…but there’s definitely a lot of good going on and being developed.

Yea, I was in Chinatown recently on a Saturday and it looks better than ever with all the new construction and new retail. Alot of people out and about too.

Same with Grand Central Market. Packed like pre covid, tourists enjoying all the energy.

Every downtown isn't doing great. Anyone who says otherwise is lying. There's dc people on here who were saying downtown dc is coming back. bullshit. It's deader than downtown la. easily.
Same with Chicago. nowhere near what it it was.

I saw these places in person. Arlington VA has a dead mall next to Regan National in one of their job centers.

[colemonkee]

Ptown2downtown, here are those images. You have to use the image tags. And correct that this will rise 760 feet, making it the 4th tallest in Los Angeles, 10 feet taller than 2 California Plaza. Due to it's lower base elevation, it will appear shorter than 2 Cal Plaza from pretty much every angle but when viewed from the south.

[citywatch]

this new conversion apt proj, of a bldg in sad shape until a few yrs ago, dropped another vid recently. I don't know how its ground floor retail will do...I'm sure keeping the security roll down doors free from graffiti will be a continuous task for the owner. But the renovation helps activate the corner of 6th St & Broadway.


westsiderentals.com

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[LAsam]

^It's great how many of these obsolete post-war office buildings can be repurposed into residential. Given the current state of downtown office vacancy, I wonder if we'll start seeing some of the more modern office buildings consider conversion as well. I think it's challenging to convert these, but it sounds like some other cities have seen it executed.

[colemonkee]

^ There was a plan to convert 611 Place (the William Pereira-designed tower at 6th and Grand) over a decade ago, but that was abandoned. Would love to see that picked back up with interiors designed by SHoP.

[BrandonJXN]

I remember there being a proposal floating around that would convert the top 5 or so floors of the Aon Center into condo units.

But 611 Place is a prime candidate for a renovation to a mixed use hotel/condo building.

[citywatch]

^ I don't get how landowners like the Cherit group, which owns 611 & the Embassy & clark hotel bldgs, can hang onto properties for yrs & yrs, letting them collect dust & not care about being a lifeless part of dt. They pay the property taxes on bldgs that don't generate any money.

The embassy hotel almost 40 yrs ago showed promise in an earlier version of it being converted into a hotel. I thought USC owned it back then & it never had been run as an active hotel. The restaurant shown here was in a small bldg to the south of the main bldg...it was torn down several yrs ago & is now just a narrow vacant lot.


• Video Link

therealdeal.com

After more than a decade of flying below the radar, Clark Hotel, one of the Los Angeles properties associated with the powerful New York-based Chetrit real estate family, has come under public criticism.

Advocacy group Housing is a Human Right, a division of nonprofit AIDS Healthcare Foundation, ran a full-page ad in the Los Angeles Times Aug. 14, urging the city of Los Angeles to open the vacant Clark Hotel at 426 South Hill Street in the city’s Downtown, to the unhoused. The Clark is owned by a Chetrit family business

The ad follows a statement that Housing is a Human Right ran in July demanding the city take action and open up to the unsheltered another downtown hotel, The Cecil. Owned by Baron Property Group and Simon Development, The Cecil recently announced it would devote its 601 units to permanent housing for the homeless. Susie Shannon, policy director of Housing is a Human Right, said her group is campaigning for vacant hotel buildings in the Downtown area to house the unsheltered.

The Chetrits reacted to the advertisement in a characteristic way: Silence. The press-shy family made no public statement.

Clark Street Realty Associates, a LLC managed by Jacob Chetrit, a brother of Chetrit Group founder Joseph Chetrit, took over the hotel around 2006. Efforts to contact Chetrit family members and associates were unsuccessful.

There were plans to turn the Clark Hotel into an operating hospitality business. In 2013, Clark Street Realty Associates applied for a conditional use permit to sell alcohol at proposed lobby bars and a banquet facility.

The Ace Hotel company was the first in a string of luxe hotels to open in Downtown Los Angeles in the past decade. It made a big splash in January 2014 when it made an official debut in a remodeled early 20th century building less than a mile away from the Clark.

Several other prominent downtown Los Angeles hotels that opened in the past decade were The Proper, The Hoxton and the Freehand. There was also the NoMad, which was located in a former Bank of Italy building owned by The Chetrit Group. Located at 649 South Olive Street, it was sold to the Sydell Group for $39 million, according to media accounts. The NoMad opened in 2018 and shuttered in 2020, due to the pandemic. In 2022 it opened under different management as Hotel Per La.

Joseph Chetrit also led plans to turn giant Downtown building The Trinity Auditorium into a luxury hotel at 851 South Grand Avenue. As late as 2019, there was a news report which said plans to open a hotel at The Clark were going forward.

The Garfield bldg at the nw corner of 8th & Hill St is another property that I don't know why has remained in limbo. The ppl in this vid never went through with plans to convert it into apts or condos. Maybe the cost of retrofitting the bldg to meet today's codes spooked off the investors?

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dtla in 1985 & 2009 was way less filled in...& in fairly sketchy shape...compared with today, so it was a more obvious example of a work in progress. In turn, ppl 10 yrs from today will look back at dt in 2023 and sense it wasn't filled in enough, as it hopefully will be by 2033. But Covid, an increasingly jittery economy & today's govt & politics are slowing things down.

[craigs]

From LA Reddit, the downtown skyline is almost overshadowed by nature's winter skyline:

[LAsam]

Originally Posted by citywatch

I don't get how landowners like the Cherit group, which owns 611 & the Embassy & clark hotel bldgs, can hang onto properties for yrs & yrs, letting them collect dust & not care about being a lifeless part of dt. They pay the property taxes on bldgs that don't generate any money.

These properties generate tax losses which are valuable to an extent. Perhaps the tax losses and cash required to cover the holding costs outweighs the potential benefit of improving the buildings and the capital required to do so.

[caligrad]

Originally Posted by scania

Made the mistake to unblock two people…I’ll redo the settings back. He mentions the article and doesn’t show how at the end of the article, the writer expresses optimism and that he sees the office market in DTLA having a demand within a few years. Downtowns all over the U.S. are having a difficult time. But no matter what these articles tell you…other than the financial distric…. DTLA is booming more now, than ever before. I know some of you who have actually visited DTLA have alluded to this fact. Others who have such an envious attitude who don’t even live in LA or California will sent in their grandmother’s basement and look for any and every article to try to speak negative of our city. I know DTLA isn’t perfect…but there’s definitely a lot of good going on and being developed.

Nothing but facts. Over the past few months, I've been lucky enough to travel the country to see family I haven't seen in years, all I'll say is overall LA is heading in the right direction. What the mayor needs to do next is start putting these squatter landowners on blast for their underutilized buildings downtown. Politicians can't complain about a housing crisis and changing building codes for single family districts to be upzoned when 70% of downtown is severely underutilized. I've always wondered why Mayors and Politicians have been scared to touch/alter downtown, especially everything east of Broadway as if its political suicide to demand that an abandoned factory be torn down for something else.

[scania]

Originally Posted by caligrad

Nothing but facts. Over the past few months, I've been lucky enough to travel the country to see family I haven't seen in years, all I'll say is overall LA is heading in the right direction. What the mayor needs to do next is start putting these squatter landowners on blast for their underutilized buildings downtown. Politicians can't complain about a housing crisis and changing building codes for single family districts to be upzoned when 70% of downtown is severely underutilized. I've always wondered why Mayors and Politicians have been scared to touch/alter downtown, especially everything east of Broadway as if its political suicide to demand that an abandoned factory be torn down for something else.

Especially once you get to Main/Los Angeles St. With that being said...if the Skid Row was to ever get fully cleaned...DTLA to the Arts District would easily rival some of best cities internationally. My opinion of course.

[scania]

Originally Posted by LA21st

Yea, I was in Chinatown recently on a Saturday and it looks better than ever with all the new construction and new retail. Alot of people out and about too.

Same with Grand Central Market. Packed like pre covid, tourists enjoying all the energy.

Every downtown isn't doing great. Anyone who says otherwise is lying. There's dc people on here who were saying downtown dc is coming back. bullshit. It's deader than downtown la. easily.
Same with Chicago. nowhere near what it it was.

I saw these places in person. Arlington VA has a dead mall next to Regan National in one of their job centers.

Facts...I was in DC and it was DEAD. I haven't been to Chicago, but I've two reliable sources and both told me it's been a snooze for the most part.

[zonedgreg]

Originally Posted by LAsam

These properties generate tax losses which are valuable to an extent. Perhaps the tax losses and cash required to cover the holding costs outweighs the potential benefit of improving the buildings and the capital required to do so.

Yeah the lower property values will eventually affect property tax income for the city, which most of the city's general fund revenues is sourced from.

The city will be forced to do something about creating more flexibility in land use not just downtown but city-wide to spur more development and increase property tax revenues. I have a wonderful idea - why not approve the proposed DTLA community plan!!! it increases density in many areas, increases land use flexibility and eliminates parking requirements which can significantly decrease project development costs which can create cheaper market rate units. All good news for DTLA!

Oh wait, KDL wants to duck and dive every city council meeting he can for the remainder of his term, sooooo that's not going to happen.

I bet the pending DTLA community plan is one of the main reasons (other than the economy, high financing and construction costs) a lot of development is holding up in DTLA.

[citywatch]

dtla going through the march of time....20 yrs ago, then almost 30 yrs before that.

• Video Link

Kent Nishimura / Los Angeles Times

Walt Disney Concert Hall, the Frank Gehry-designed home of the Los Angeles Philharmonic, celebrates its 20th anniversary this year with a 2023-24 season that will pay tribute to the hall and its architect, the orchestra is expected to announce Tuesday — on Gehry’s 94th birthday.

This fall’s Disney Hall lineup will call back to Oct. 24, 2003, when a Times article titled “Disney Hall opens to fanfare” began: “With a parade of stretch limos and the sort of celebrity buzz that Los Angeles usually reserves for Oscar night, a black-tie crowd of the powerful and socially prominent threw a Thursday night coming-out party for the city’s most highly anticipated debutante in decades: the new Walt Disney Concert Hall.”

Have to kind of lol at my assumption that the ppl managing the dwp bldg decades ago, such as in early 1974, at least didn't shrug off keeping the bldg's geyser fountains on, particularly when dtla was hosting an event broadcast to the country & world....

https://youtu.be/F3sM_Fn_Q90

now in 2023, keeping the major tunnels in dt from looking too much like a spray paint test lab is next to impossible....at least not too many homeless tents are visible.

https://youtu.be/RwzZcx-8rjs


^ the march of time shows that dt has gone through different phases, ups & downs, & sideways too. dtla overall is a more complete area in 2023 than it was in 2003 & certainly 1974, but in other ways the area's level of cleanness & criminality are worse today. You win some, you lose some.

[BrandonJXN]

I didn't know that Disney Hall opened on my birthday. Cool I guess. Lol.