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The following story appears in the current issue of The Hollywood Reporter on newsstands now. Subscribers can read the issue online here.
From private elevator vestibules and personal wine cellars to a fitness center designed by Equinox, a spate of recently built condominium buildings in Los Angeles have some of the most luxurious amenities ever.
On Westwood’s Wilshire Corridor, “nanny condos” are available at the recently opened Carlyle, allowing owners’ staff to be housed on a separate floor — the better to attend to their employers’ wishes and whims. In Hollywood, the modern units at the W Hollywood Residences come with VIP access to Drai’s nightclub, and buyers at Beverly Hills’ Montage Residences can get room service 24/7 from an adjacent five-star hotel.
But those special features can’t save these new projects from the realities of a cratered market.
The crop of buildings — which also includes the Century in Century City, the Ritz-Carlton Residences downtown and Beverly West on the Wilshire Corridor — had the misfortune of being conceived before the economic downturn took hold, when there seemed to be a limitless appetite for luxury residences. In those days, upscale condos were in demand, especially at buildings like the flashy Sierra Towers in West Hollywood, where Elton John, Lindsay Lohan and Cher bought units between 2005 and 2007.
Post-bust, selling at the top end has become a serious challenge, especially when units at the new buildings run as high as $10 million or more. Despite being open for as long as a year, the developments range from 6% to 45% sold, though several of the developers’ original projections called for the units to sell out before opening. The sales volume is even more grim when one considers that prices have been slashed by as much as 30% at some properties. “The volume is very low, considering all the new inventory,” Hilton & Hyland agent Drew Fenton says. “My outlook on it is that they still haven’t hit their bottom with prices.”
Real estate brokers say that developers who counted on droves of wealthy foreign buyers overestimated demand. And it hasn’t helped that the decline in residential values has made luxury homes more affordable. “When you think of L.A., you think of swimming pools and views from the house in the hills. You don’t think of condos,” says Kurt Rappaport, co-founder of the brokerage Westside Estate Agency.
But not everyone wants the upkeep a mansion requires. Take Candy Spelling, who is downsizing from her 56,000-square-foot, 123-room Spelling Manor in Holmby Hills to the convenience of a condo at the Robert A.M. Stern-designed Century. Not that her new digs will be cramped: In December, Spelling closed on a 15,555-square-foot, two-story penthouse at the building, which opened in the summer. The price: $35 million, or $2,250 a square foot.
However, that sale appears to be an outlier. According to Multiple Listing Service data, only three other condos in Los Angeles County have sold for more than $5 million since September: a $10.4 million unit at the Montage, a $9.2 million unit at the Remington on the Wilshire Corridor and a $5.2 million unit at 101 California Ave. in Santa Monica.
At the W condo development, prices across the board have been lowered 30% during the past year. One penthouse unit, for example, has been reduced from about $5 million to $3.5 million; condos once in the $700,000 range now start at $450,000. “We are absolutely one of the best bargains in town,” says Sotheby’s International agent Russ Filice, director of sales for the property. He says nine of the 143 units have been sold and seven are under contract at the building, which was built by Dallas’ Gatehouse Capital, developer of the adjacent W Hollywood hotel. Buyers get access to the dance floor at Drai’s, full-time concierge service and discounts at Starwood hotels.
Other developers also are hoping the allure of hotel amenities will help move units. The downtown Ritz-Carlton condo project — situated at L.A. Live atop JW Marriott and Ritz-Carlton hotels — offers perks such as access to a luxury suite at Staples Center and priority reservations at neighboring restaurants. According to Laurie Miskuski, director of sales and marketing at developer AEG, those features have struck a chord with prospective buyers. About 130 of the development’s 224 units are under contract, and as many as 30 sales were expected to close in February, when move-ins began. However, prices were cut at the building by an average of 20% last year, she says.
Elsewhere, developers are dealing with the downturn in different ways. Some units have been leased at the Carlyle tower in Westwood — presumably to help developer Elad Properties ride out the tough market. However, Valerie Fitzgerald, the property’s sales director, says only a handful of units have been rented. She declined to discuss sales volume and prices but said things have “definitely picked up.”
When it comes to cutting prices, there is one holdout: Beverly West. Under construction since 2007 and owned by Dubai’s Emaar Properties, the project has not fallen in line with competitors. The 22-story tower is about two years behind schedule but is expected to be completed in March. A majority of the units are priced at more than $1,500 a square foot and top out at $3,495 a foot. Real estate agent Bill Simpson, Emaar’s director of sales, still believes there will be buyers at those prices. “We are going to hold steady,” he says.
If there is a project that could be deemed a success so far, it’s the Montage Residences, a collection of 20 European-style condos built atop the Montage Beverly Hills hotel. According to industry research firm Mark Co., nine units have been sold at the property, with an average sale price of $2,250 a square foot — the highest of the new developments.
One thing the properties have going for them is owners who have been able to see the projects through. Several highly publicized luxury projects — including a 45-story, Jean Nouvel-designed tower in Century City — were either mothballed or scrapped after developers ran into financial troubles. “Would everybody like to be completely sold out right now? Of course,” Miskuski says. “I am pleased that we’ve weathered the storm.”
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