Real estate: Developing downtown for residential use

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The most-filmed location in Los Angeles this year wasn't the dramatic Pacific coastline or the bustling boardwalk in Venice -- or even the mansions of Beverly Hills. Instead, it was the burgeoning landscape of downtown, an area that, much to the joy of its developers, no longer resembles something out of 1980's "Mad Max."

In fact, it's quite the opposite. Billions of dollars and nearly a decade of improvements later, Los Angeles is finally getting a cityscape that will allow it to compete with the country's most elite, pedestrian-friendly urban centers. "We have the most-filmed corner in the world, which is Fourth and Main (Streets)," developer Tom Gilmore of Gilmore Associates says, "because after all this time, we can look like we're anywhere in the world. In (Sony's) 'Spider-Man 3,' we even pass for New York."

If Gilmore sounds like a proud parent, he's got reason to be: As one of the original developers who threw himself into downtown's adaptive reuse movement, he found himself the subject of scorn in 1999 when he converted the 1906 San Fernando Building into 230 residential units. But aided by an adaptive reuse bill meant to promote such projects and encouraged by the construction of the Staples Center in 1999 and the Walt Disney Music Hall in 2003, Gilmore continued to invest in the area. Today, he owns much of the neighborhood, including the Regent Theatre and Saint Vibiana's Cathedral, built in 1876 and currently being reimagined as a performance, residential and retail space.

Another original builder, Linear City partner Len Hill, also struggled when he began adapting the 1924 Toy Factory building into lofts that would become one of downtown's signature residences and an epicenter of the denim industry. "When I bought the Toy Factory, everyone thought I was crazy. We were told there was too much housing, and we would oversaturate the building market," he remembers. Hill persevered, borrowed $7 million from banks when private investors turned him down, and within 30 days of its completion in 2004, had sold every unit in the building.

As Gilmore says, describing the journey he and his colleagues have made over the last decade, "Now, I'm a visionary. But the difference between being an ass and a visionary is a dollar sign. I'm as stupid as I was then, but now I have money."

The loft owners who bought downtown's first residences are feeling equally flush. Apartments in the Toy Factory, which boasts a rooftop pool and a lower-level garden, originally sold for about $300 a square foot, or $300,000 for a 1,000-square-foot loft. Now, the same apartment sells for $510,000. In another Linear City building, the new Biscuit Co. Lofts conversion, prices run closer to $530 a square foot, while one of the penthouses, which has several thousand feet of private outdoor space, is on the market for $4.8 million.

Far from being oversaturated, the market in downtown continues to grow, aided by its unique ability to offer dual work-live spaces and by an influx of new inhabitants to the city. Gilmore's properties alone have been at 100% occupancy for the last four years. As Hill says, "There were 40,000 new residents in L.A. city last year and only 10,000 housing units built. And that makes a continued demand for housing."

Developers are responding en masse: According to Carol Schatz, president and CEO of the Downtown Center Business Improvement District, "Since the beginning of 1999, when the boom started, we have built 8,200 new units, and we currently have anothzer 8,100 under construction. Additionally, there are another 1,700 with permits and still another 5,800 in the pipeline."

So, who's moving in? Pro Listing Realty Group's Reuben Pacheco, who specializes in the downtown market, cites a recent study that determined residents have a median income of a little less than $100,000, with 80%% possessing college degrees. According to John Given, senior vp development at the CIM Group, which is involved in the development of nine downtown residences including the Flower Street and Gas Company Lofts as well as a new building on Ninth and Hope, the age of the population runs the gamut. "It's younger households entering the market," he says, "but it's also empty nesters scaling down. It's heavily driven by baby boomers who are in their active-adult stage."

Schatz says that downtown also is beginning to draw nuclear families with small children, "Although we're wondering whether or not we can ultimately keep them," she admits. "But that's a question for another day."

What does downtown's population have in common? A desire to ditch their cars. "There's a growing appreciation for living in dense, mixed-use environments," Given says. "The movement is about people fundamentally enjoying urban housing and having places they can walk to. They're looking for places where a critical mass of people creates a way of living that includes convenience and amenities."

In the past, that meant that downtown's residents had to sacrifice a quality of outdoor living in favor of a cement sidewalk, but no longer: Developers are now focusing as intently on their plans for public spaces as they are on the schematics for the lofts themselves. While there's no direct financial benefit in the form of city funding, developers are embracing the idea that the more green they can offer people, the better for everyone. When it came to outdoor planning, Schatz says, "We simply asked developers to think about how a building related to the street, and we said to them, 'You have a hand in building your projects so they can either help downtown or hurt it.'"

Needless to say, developers, who have millions of dollars at stake, are choosing the former. "We really believe in what we call emerging neighborhoods," says Kate Bartolo, senior vp development at the Kor Group, whose myriad downtown projects include a $52 million conversion of Pegasus apartments on Flower Street; the vintage Eastern Columbia building, Los Angeles' finest example of the art deco era's zigzag modern style; and the Barker Block, a group of seven 100-year-old buildings that are being converted into a loft community. "But," she continues, "it's also a social responsibility. When you come into an area like downtown, you're not trying to recreate a neighborhood as much as you're trying to fit within it. You need to bring in service, retail and amenities. You want people to come out of their homes and into the street to mix because that's what makes a neighborhood: pedestrian activity."

The majority of downtown's residential buildings have outdoor pools with sweeping vistas; at the new 1100 Wilshire, the tallest residence in the area (and home to contestants on the NBC summer reality series "Age of Love"), the pool area also has private cabanas and a barbecue pit. At the Medallion, which will break ground later this year, the plans for the block-long building include multiple outdoor spaces intended to draw residents out of their apartments. "I'm really excited about the public gathering spaces, which in L.A. are generally parking lots," muses architect Andrew Cox, a partner with Milofsky Michali & Cox, the firm behind the project. The Medallion will include a two-level plaza and a grass roof about the size of Venice's Piazza San Marco. "We're definitely encouraging socializing," Cox says.

That's good news to Cedd Moses, a nightclub and restaurant developer and owner and president of the company 213 Ventures. "I'm the person doing the nightlife downtown," he says. "The people moving downtown are entrepreneurial, with a lot moving from New York and San Francisco, and they go out to socialize."

In the last six years, Moses has bought and renovated Golden Gopher, which first opened in 1905 and is the only Los Angeles bar licensed to sell liquor to go, as well as the Broadway Bar next to the Orpheum Theatre, Pete's Cafe & Bar and 7 Grand, which has the largest selection of whiskey on the West Coast. Moses also has plans for several more restaurants and bars, including Doheny, a private club that will open later this year. The club, which will offer a smoking patio, high-end cocktails and concierge service, will cost $3,000 a year for individuals and $10,000 a year for corporations; 10% of the dues will be funneled back into charities that support downtown.

The area's coffers are already well-lined thanks to property taxes that Schatz estimates provide downtown with $70 million every five years. Two-thirds of that, she says, is earmarked for funding a private patrol that works as "the eyes and ears" of the police and for paying cleanup crews. "You can't attract investors to a place that is perceived as unsafe or unclean," she explains. The remaining third of the budget is dedicated to encouraging economic development.

Not that all is perfect in downtown, which even the developers readily admit. "Right now, we've got probably eight or nine good clubs and 10 or 20 good restaurants," says Gilmore, who is partnering with Moses on several projects. "But we're the second-largest city in America, so we should have a lot more than that."

Adds Pacheco: "Shops aren't going in fast enough at all. There's going to be a branch of Ralph's opening at the end of the year, but that will be the only food market downtown where you can park and shop for your gourmet foods as well as groceries."

Those missing links might change dramatically as early as this fall, when ground is broken on the Grand Avenue project, a $2 billion development designed by Frank Gehry. According to Nelson Rising, chairman of the Grand Avenue Committee Inc., a nonprofit organization that is overseeing the project, the first phase is a 50-story building that will house a Mandarin Oriental hotel as well as 250 condo units and 250,000 square feet of retail space. The plans for the project also include a 16-acre park that will stretch from City Hall to the Music Center.

Far from making competing developers nervous, the prospect of the increased foot traffic and amenities that the Grand Avenue project will offer bolsters their confidence. As Hill, a former producer, says, "When I was in the movie business, when someone picked up a movie, my heart broke a bit because that meant there was one less for me. That's not true in development. You want a neighborhood of successful projects."

And unlike in many cities, developers say the success of downtown is beneficial to all its residents, past and future. "This isn't gentrification like in Chicago or New York," Hill says. "We're not moving out the poor people and putting in the rich. We're taking derelict warehouses and unused spaces and bringing them back to life. It's a net win for L.A."

Adds Schatz: "With the projects that are done or will be done by 2007, we have created 57,000 full-time jobs. We have created $28.5 million in city tax revenue, and that doesn't even include the shops."

With downtown finally coming into its own, developers acknowledge that not long from now, their work will be done. "We'll probably do another $200 million-$300 million of development over the next five years," Gilmore says of his company, "and then, well, then I'll get a street named after me and call it a day."

In the meantime, the growth continues, with resounding applause from the city. "It's the most fabulous thing that L.A. has ever seen," Schatz says. "Sure, we have some great things here, but you can't define a city by a beach, two theme parks and the Hollywood sign. Think about Manhattan, Paris and London," she says. "That's what we're creating."   



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