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3/29/16
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Eretz Properties, a Los Angeles-based investment firm, recently closed on the $22.4 mil purchase of Pico Gateway Apartments, a mixed-use complex in Los Angeles’ Pico-Robertson neighborhood. Located at 8525 W. Pico Blvd, at Corning St, the property consists of 39 apartment units on four levels above 7.5k sf of ground floor retail space.
The highly stylized and fully occupied building totals 48.3k sf of space along with 135 underground parking spaces. It is located within a two-block walk to the heart of Beverly Hills and is accessible to other parts of the city and region by every mass transit system currently in service, including the Metro.
Built in 2010, the apartments include studio, one-, two- and three-bedroom floor plans, with high-end interior finishes and upscale amenities. The units are extra bright and feature high ceilings, maple hardwood flooring, large private patios and balconies, central air and heating, high-tech wiring and fiber optics for entertaining, and double-paned windows to keep the surrounding street noise to a minimum.
Executive Vice President Kitty Wallace of Colliers’ West Los Angeles office represented both the buyer and the seller, 8525 Pico LLC, a local investment firm that owns a variety of properties.
“Multiple bids, all-cash offers and six-figure non-refundable deposits are all becoming commonplace among potential buyers as demand for well-located and maintained apartment developments continue to outstrip supply,” said Wallace. “New apartment developments are being built to meet growing demand, but construction of new product is met with ever increasing restrictions on development, which keeps supply low and buyer interest strong in core high-barrier markets.”
In this transaction, Wallace guided Eretz Properties through a rapid succession of strategic moves that would ensure it would end up with the property. These included the immediate posting of $200,000 as a non-refundable deposit, an agreement to conduct an abbreviated due diligence period of just five days, and a pledge to close the transaction within 30 days by paying all cash and the pre-payment penalty on the current loan. Eretz won the right to buy the property, at a price of $574.4k per apartment unit for the strikingly contemporary, mixed-use property.
“When this development was in the planning stages, the developer made it clear to the architects and designers that there was a reason he was insisting on high-end amenities found more often in condominium projects than in standard apartment developments,” said Wallace. “He was affirming the fact that somewhere down the road, if market conditions changed or for other reasons, they could easily be converted into high-end condos. We saw it happen in the 1990’s and we may likely see it again before the current commercial real estate cycle has run its course. He was just being smart and, in the meantime, tenants get to live in condominium quality units with the flexibility of living in a rental.”
Featured amenities include quartz countertops, custom European cabinetry, stainless steel appliances, and Fisher & Paykel dish drawers.
“Nothing was left to chance when this building was going up, either,” added Wallace. “The traditional and large Jewish population that has for decades made Pico-Robertson and other nearby neighborhoods enclaves of Jewish social, cultural, religious and commercial life, much like Koreatown to the east, Little Saigon in Westminster, or Little Tokyo in downtown, will be pleased to note the building is also ‘kosher friendly.’”
Each unit’s kitchen includes double sinks used in kosher meal preparation, dual dish-drawers and an optional Shabbat elevator for residents’ use if they desire on the Jewish Sabbath. Tenants also have access to secured storage rooms, three levels of subterranean parking, three elevators, an open air common deck on the fifth floor, as well as a fitness center. Pico Gateway has 120 parking spaces, with 37 allocated to retail customers on three levels underground.
According to Wallace, the Westside is so densely populated now – and demand keeps growing – that the only alternative may soon become these high-profile, mixed-use residential and retail developments. She cites a recent study that shows population growth on the Westside during the next five years projected to grow by a conservative 3.4%.
“With that projected growth in the population,” added Wallace, “this investment becomes even more valuable than it is today.” Coupled with high barriers to entry which is keeping inventory growth low (five-year forecast for West LA is 0.5%) for the near future which has proven to keep West LA rents 59% higher than Los Angeles.
Wallace also said the “walkability” of the neighborhood, convenient access to freeways, major thoroughfares with bus lines and access to the Metro as key selling points for the property. The central location has afforded the area a 90-plus “Walker’s Paradise” rating by WalkScore.com, as most daily errands can be accomplished on foot.
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