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Conversion Confusion
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| Shawn Mitchell, a web designer who lives and works in Little Tokyo Lofts (with Rom the cat), says he is disappointed about how the building is being turned into condos. Plans have been announced for several Downtown apartment complexes to become for-sale properties. Photo by Gary Leonard. |
Concerns Arise When a Rental Complex Goes Condo
by Chris Coates
When Shawn Mitchell, a two-year resident of the Little Tokyo Lofts, found out last summer that his apartment building was being converted into condominiums, he was excited.
"I had been interested in buying my unit," said Mitchell, who runs the web design firm V1-0 Studios from his second-floor loft. "There were a lot of people who would have loved to buy here."
But that changed quickly. Mitchell and other residents said the process so far has been difficult, with confusion over the precise timing of the transition. While representatives from building owner Hammer Ventures defend their work and say care has been taken to keep everyone informed, the situation exposes the Achilles heel of condo conversions: miscommunication and rumors.
It's something that could be heard with increasing frequency in Downtown Los Angeles, as several building owners have publicly broached plans to turn their rental units into for-sale residences. It's almost a natural occurrence in a real estate market in which prices are skyrocketing and landlords see an opportunity to cash in.
Evan McKenzie, a political science professor at the University of Illinois at Chicago, and the author of a book on homeowners associations and urban developments, said that when an apartment building goes condo, many tenants feel as if they are being kicked out, although myriad state and local laws strictly forbid such a practice. In fact, condo conversions require approval from the city, at least a nine-month process in Los Angeles.
McKenzie said that rumors start when tenants aren't up to date with housing laws or the terms of their lease.
"Sometimes they don't understand what their rights are," said McKenzie. "A lot of times this is confusing because people don't read things or understand them."
Original Vision
When developers John Peterson and Michael Tansey set out to convert the former Westinghouse warehouse at 420 S. San Pedro St. into live-work lofts, they originally planned a for-purchase project. Accordingly, they installed high-end amenities like granite countertops, hardwood floors and a hot tub, and received city approval for condos.
But when the project opened in 2003, the developers believed that it would perform better as rentals. Soon, the units were filled with wedding photographers, graphic designers, galleries and suppliers.
Last year, the property was sold to San Diego-based Hammer Ventures, which planned to turn the 161 units into condominiums as each lease ran out, with the last expiring this summer. Residents would have the first option to purchase their unit.
Mitchell said that most residents he talked to were pleased with the sudden prospect of buying their home. He said that renters were told that the apartments would be sold to existing tenants at below-market rates (these days, condo project prices traditionally start in the $300,000s, with units beginning in the $400,000s in new buildings), and that a portion of their rent could be put towards a down payment.
Another resident, Rachel Elnar, said that she too was interested in buying a unit, although it hinged on whether the lofts would be sold at sub-market rates. Elnar, who runs a design company, said she was told specifics would be provided in the coming months. "A lot of information was supposed to be coming," she said.
Months passed, but Mitchell said there were few answers. Soon, he said, rumors spread, including one that residents were going to be kicked out.
But Anthony Crump, a senior project manager for Consensus Planning Group, an L.A.-based firm retained by Hammer Ventures to help with the transition, said that residents have been kept up to date all along and knew from the beginning that the building was originally intended as condos.
Crump said that he personally delivered forms to tenants in December and answered questions about the process. He said that he was unaware of promises of special offers, aside from current residents having the first option to buy their unit.
Another issue was construction noise. As people left and crews began upgrading the empty units, some existing tenants say the noise became unbearable.
"They would start working on the empty units at 7 a.m.," said Mitchell, who believes some left solely because of the racket.
"There was a mass exodus," adds Elnar, who now lives at the Pacific Electric Lofts. "I left because I was fed up."
Crump denied a mass departure, but confirmed that a handful of residents have moved out. He also noted that some Little Tokyo Lofts inhabitants have pre-qualified to buy their units, although he could not give a number. He added that the owners are honoring every existing lease.
"No one is being evicted or kicked out or forcibly relocated as a result of the purchase," he said.
Top of a Trend
Low interest rates have made condominium conversions highly attractive to owners across the country. The practice is especially hot in the Western United States, which is experiencing a blazing real estate market and a housing shortage.
In Downtown, the practice has picked up in recent months, and reports are swirling about other properties going condo. Earlier this month Kor Group, the owner of the Pegasus Apartments in the Financial District, said it is considering converting that property to condominiums.
The biggest Downtown conversion so far is the Savoy. Developer Trammell Crow Residential originally built the $65 million project at First and Alameda streets as apartments, but then decided to convert the 303 units to condos. Within a few months, the company sold it to another developer, Intracorp Los Angeles, for $114 million, or $376,238 per unit.
In that case, the property had not opened yet. But in instances with existing residents, the transition can be rocky.
Case in point is the 135-unit Higgins Building at Second and Main streets. In 2004, some residents of the property were angered when they were told they had to vacate their units within 60 days. That prompted several to charge unfair housing practices by owner Barry Shy. After a long dispute, many residents moved out - and Shy went on to develop a handful of other projects.
McKenzie, the professor from Chicago, said that mix-ups with condo conversions usually boil down to a difference between renters and buyers.
"Property owners typically [are] more attuned to the need to read things and understand what's going on and safeguard their interests while renters are in this status of being taken care of by a landlord," he said. "You're talking about a big transition in people's lives from being renters to being property owners."
In the case of Little Tokyo Lofts, Crump said the owners are trying to ensure a smooth transition. He thinks the confusion comes down to a general apprehension about the changeover.
"Whenever things change, it's disruptive to people's lives," Crump said. "We're working with them to make it as comfortable as possible. The process is somewhat of a complicated one."
That's about the only fact on which everyone agrees.
Contact Chris Coates at chris@downtownnews.com.
page 1, 2/20/2006
© Los Angeles Downtown News. Reprinting items retrieved from the archives are for personal use only. They may not be reproduced or retransmitted without permission of the Los Angeles Downtown News. If you would like to redistribute anything from the Los Angeles Downtown News Archives, please call our permissions department at (213) 481-1448.
"I had been interested in buying my unit," said Mitchell, who runs the web design firm V1-0 Studios from his second-floor loft. "There were a lot of people who would have loved to buy here."
But that changed quickly. Mitchell and other residents said the process so far has been difficult, with confusion over the precise timing of the transition. While representatives from building owner Hammer Ventures defend their work and say care has been taken to keep everyone informed, the situation exposes the Achilles heel of condo conversions: miscommunication and rumors.
It's something that could be heard with increasing frequency in Downtown Los Angeles, as several building owners have publicly broached plans to turn their rental units into for-sale residences. It's almost a natural occurrence in a real estate market in which prices are skyrocketing and landlords see an opportunity to cash in.
Evan McKenzie, a political science professor at the University of Illinois at Chicago, and the author of a book on homeowners associations and urban developments, said that when an apartment building goes condo, many tenants feel as if they are being kicked out, although myriad state and local laws strictly forbid such a practice. In fact, condo conversions require approval from the city, at least a nine-month process in Los Angeles.
McKenzie said that rumors start when tenants aren't up to date with housing laws or the terms of their lease.
"Sometimes they don't understand what their rights are," said McKenzie. "A lot of times this is confusing because people don't read things or understand them."
When developers John Peterson and Michael Tansey set out to convert the former Westinghouse warehouse at 420 S. San Pedro St. into live-work lofts, they originally planned a for-purchase project. Accordingly, they installed high-end amenities like granite countertops, hardwood floors and a hot tub, and received city approval for condos.
But when the project opened in 2003, the developers believed that it would perform better as rentals. Soon, the units were filled with wedding photographers, graphic designers, galleries and suppliers.
Last year, the property was sold to San Diego-based Hammer Ventures, which planned to turn the 161 units into condominiums as each lease ran out, with the last expiring this summer. Residents would have the first option to purchase their unit.
Mitchell said that most residents he talked to were pleased with the sudden prospect of buying their home. He said that renters were told that the apartments would be sold to existing tenants at below-market rates (these days, condo project prices traditionally start in the $300,000s, with units beginning in the $400,000s in new buildings), and that a portion of their rent could be put towards a down payment.
Another resident, Rachel Elnar, said that she too was interested in buying a unit, although it hinged on whether the lofts would be sold at sub-market rates. Elnar, who runs a design company, said she was told specifics would be provided in the coming months. "A lot of information was supposed to be coming," she said.
Months passed, but Mitchell said there were few answers. Soon, he said, rumors spread, including one that residents were going to be kicked out.
But Anthony Crump, a senior project manager for Consensus Planning Group, an L.A.-based firm retained by Hammer Ventures to help with the transition, said that residents have been kept up to date all along and knew from the beginning that the building was originally intended as condos.
Crump said that he personally delivered forms to tenants in December and answered questions about the process. He said that he was unaware of promises of special offers, aside from current residents having the first option to buy their unit.
Another issue was construction noise. As people left and crews began upgrading the empty units, some existing tenants say the noise became unbearable.
"They would start working on the empty units at 7 a.m.," said Mitchell, who believes some left solely because of the racket.
"There was a mass exodus," adds Elnar, who now lives at the Pacific Electric Lofts. "I left because I was fed up."
Crump denied a mass departure, but confirmed that a handful of residents have moved out. He also noted that some Little Tokyo Lofts inhabitants have pre-qualified to buy their units, although he could not give a number. He added that the owners are honoring every existing lease.
"No one is being evicted or kicked out or forcibly relocated as a result of the purchase," he said.
Low interest rates have made condominium conversions highly attractive to owners across the country. The practice is especially hot in the Western United States, which is experiencing a blazing real estate market and a housing shortage.
In Downtown, the practice has picked up in recent months, and reports are swirling about other properties going condo. Earlier this month Kor Group, the owner of the Pegasus Apartments in the Financial District, said it is considering converting that property to condominiums.
The biggest Downtown conversion so far is the Savoy. Developer Trammell Crow Residential originally built the $65 million project at First and Alameda streets as apartments, but then decided to convert the 303 units to condos. Within a few months, the company sold it to another developer, Intracorp Los Angeles, for $114 million, or $376,238 per unit.
In that case, the property had not opened yet. But in instances with existing residents, the transition can be rocky.
Case in point is the 135-unit Higgins Building at Second and Main streets. In 2004, some residents of the property were angered when they were told they had to vacate their units within 60 days. That prompted several to charge unfair housing practices by owner Barry Shy. After a long dispute, many residents moved out - and Shy went on to develop a handful of other projects.
McKenzie, the professor from Chicago, said that mix-ups with condo conversions usually boil down to a difference between renters and buyers.
"Property owners typically [are] more attuned to the need to read things and understand what's going on and safeguard their interests while renters are in this status of being taken care of by a landlord," he said. "You're talking about a big transition in people's lives from being renters to being property owners."
In the case of Little Tokyo Lofts, Crump said the owners are trying to ensure a smooth transition. He thinks the confusion comes down to a general apprehension about the changeover.
"Whenever things change, it's disruptive to people's lives," Crump said. "We're working with them to make it as comfortable as possible. The process is somewhat of a complicated one."
That's about the only fact on which everyone agrees.
Contact Chris Coates at chris@downtownnews.com.
page 1, 2/20/2006
© Los Angeles Downtown News. Reprinting items retrieved from the archives are for personal use only. They may not be reproduced or retransmitted without permission of the Los Angeles Downtown News. If you would like to redistribute anything from the Los Angeles Downtown News Archives, please call our permissions department at (213) 481-1448.
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