Old Bank District Los Angeles, California
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Old Bank District Los Angeles, California Project Type: Mixed-Use/Multi-Use Case No: C033003 Year: 2003 SUMMARY Located in the heart of downtown Los Angeles’s historic core, the Old Bank District comprises three historic office buildings that were converted into 230 market-rate, rental loft apartments with 102,840 square feet (9,520 square meters) of ground-floor retail space. The first project completed under a city program designed to promote the development of downtown housing by relaxing building code requirements, the Old Bank District serves as a model for other adaptive use projects in Los Angeles. Redevelopment of the historic buildings along Fourth Street between Spring and Main streets has attracted national attention. Planning for the $33.5 million project began in 1998, and the loft conversions were completed in 2001. FEATURES Adaptive use First to use the city’s 1999 Adaptive Reuse Ordinance Pioneering market-rate rentals Public/private financing Historic preservation Old Bank District Los Angeles, California Project Type: Mixed-Use/Multi-Use Volume 33 Number 03 January–March 2003 Case Number: C033003 PROJECT TYPE Located in the heart of downtown Los Angeles’s historic core, the Old Bank District comprises three historic office buildings that were converted into 230 market-rate, rental loft apartments with 102,840 square feet (9,520 square meters) of ground-floor retail space. The first project completed under a city program designed to promote the development of downtown housing by relaxing building code requirements, the Old Bank District serves as a model for other adaptive use projects in Los Angeles. Redevelopment of the historic buildings along Fourth Street between Spring and Main streets has attracted national attention. Planning for the $33.5 million project began in 1998, and the loft conversions were completed in 2001. SPECIAL FEATURES Adaptive use First to use the city’s 1999 Adaptive Reuse Ordinance Pioneering market-rate rentals Public/private financing Historic preservation PROJECT ADDRESS 400 South Main Street (Fourth Street between Spring and Main streets) Los Angeles, California 90013 DEVELOPER/OWNER Gilmore Associates 636 South Broadway, Suite 400 Los Angeles, California 90014 213-622-4949 Fax: 213-622-4818 www.laloft.com ARCHITECT Killefer Flammang Architects 1625 Olympic Boulevard Santa Monica, California 90404 310-399-7975 Fax: 310-399-8545 www.kfparchitects.com CONSTRUCTION MANAGER Prudential Construction and Management 431 West Seventh Street, fourth floor Los Angeles, California 90014 213-625-7600 Fax: 213-625-7606 www.pcmla.com GENERAL DESCRIPTION AND SITE The Old Bank District consists of three historic buildings—the Hellman, the Continental, and the San Fernando—and a parking garage located at the northern end of downtown Los Angeles’s historic core. Built between 1905 and 1914, the Hellman building at 411 South Main Street was developed by one of California’s leading financiers, Isaias W. Hellman, founder of the Farmers & Merchants National Bank, and its neoclassical facade is a landmark in the National Register–designated Spring Street Financial District. Built in 1904, the Continental building at 408 South Spring Street, a 12-story example of beaux-arts architecture, was the tallest structure in Los Angeles for almost 25 years. Although referred to as separate buildings, the Hellman and the Continental are interconnected and span a full city block on Fourth Street between Main and Spring streets. Built in 1906, the San Fernando at 400 South Main Street was originally six stories high, with a seventh and an eighth floor added in 1911. It is directly across the street from the other buildings. The Old Bank District was the first project to be completed under the 1999 Los Angeles Adaptive Reuse Ordinance, the goal of which is to encourage the development of downtown housing by reducing the length of the permitting and approvals process. The Old Bank District lies in a mostly commercial area and is surrounded on all four sides by several other districts, each with a distinct identity. To the north lies the Los Angeles Civic Center, the second-largest civic center in the nation. To the northeast is Little Tokyo, a prosperous ethnic community. To the east is the toy district, a strong economic environment that is fully leased with high rents. Sharing space with the toy district, however, is the 12-square-block skid row area, filled with missions and single-room occupancy hotels. To the south lies the fashion district, the largest concentration of fashion-related industries in the United States. To the immediate west is Broadway, a thriving Hispanic shopping street, and just beyond Broadway to the west is the central business district. Although the developer considered a number of other historic sites available in downtown Los Angeles, Gilmore Associates chose to redevelop the Old Bank District, believing it forms a nexus for connecting several disparate elements of downtown. Gilmore Associates is a California-based limited liability company (LLC) founded in 1998 to pursue the acquisition and development of available historic buildings in downtown Los Angeles and Hollywood. Tom Gilmore joined with Jerri Perrone and Charles Loveman to form Gilmore Associates. Gilmore was formerly the head of Gilmore Design Associates, a New York architecture firm, and the president of the Hertz Group, a real estate development firm focusing on commercial development in downtown Los Angeles. Prior to joining Gilmore Associates, Perrone was a vice president at Sentinel Real Estate in New York and Loveman was an urban planner with the Community Redevelopment Agency of Los Angeles. Gilmore Associates is a small, privately held firm of 15 employees that handles both development and property management. DEVELOPMENT PROCESS Downtown Los Angeles historically has suffered from low numbers of residential units that do not meet the high demand for housing. When planning for the Old Bank District began in 1998, census estimates put the number of downtown residents at well below 10,000. The downtown residential market consists of two extremes: high-rise luxury apartments and low-income, affordable, and transitional housing. Between July 1998 and June 1999, only 1,940 net new housing units were built in the city of Los Angeles while the population increased by 65,000 people, according to the Los Angeles Housing Crisis Task Force Summary Report. The developer saw that there were few market-rate residential opportunities and no true urban housing in the downtown area. Gilmore points to his love of New York’s vibrant urban areas and his shock and dismay at the underdeveloped urban areas in Los Angeles as his inspiration for redeveloping the Old Bank District. The historic core provided economic opportunities for the developer to renovate blighted buildings that did not interest other developers. At the time, Gilmore began focusing on the historic core, where he found structures that were underutilized and prime for redevelopment. The buildings in the Old Bank District remained intact through what Gilmore calls “an incredibly fortunate error.” In the 1920s, the Los Angeles business district arose around the residential base of Bunker Hill, the current location of the central business district. During the late 1960s through the 1970s, downtown Los Angeles experienced significant deterioration and blight due to suburbanization. When the residents of Bunker Hill moved to the suburbs, the city, instead of reinvesting in the original commercial core, decided to build the current central business district on top of the blight of Bunker Hill. City planners demolished the deteriorated residential components of Bunker Hill and relocated the businesses and retail tenants from the historic center. Once the commercial businesses abandoned the historic core there was no economic incentive to tear it down, so it was left intact. From the late 1960s through 1998, the historic core remained largely vacant, or served as a movie set. FINANCING In the early stages of development, Gilmore Associates hired the Los Angeles office of Robert Charles Lesser and Company to conduct a market study. At the time, there were no reasonable “comparables” for market-rate housing in downtown Los Angeles. Because of this, the developer and market analysts looked at models from Denver, Portland, and Seattle. Once the residential buildings in the Old Bank District were completed, the development community discovered a new niche market. Residents were willing to pay significant rents of $1.40 to $1.80 per square foot ($15.05 to $19.35 per square meter), which has since risen to almost $2 per square foot ($21.50 per square meter) in some spaces, for minimal amenities. These rental units have attracted the 25- to 35-year-old professional target market that many developers, prior to the completion of the Old Bank District, never thought would move downtown. The Old Bank District is now the comparable that other developers use to obtain funding. The banks that initially funded Gilmore Associates became the banks that supported the next round of similar adaptive use projects in the area. Gilmore Associates is happy to “open their books” and share their lessons with other developers—the firm knows that the health of the Old Bank District is directly related to continued residential development in downtown Los Angeles. Gilmore Associates financed the project with the assistance of equity partners as well as city and federal agencies. After the sales contract was signed, the properties were placed in escrow in 1998. Because there was virtually no demand from other buyers for the buildings, the developer was able to continue to hold them in escrow for over a year while financing was arranged. Total rehabilitation costs of $33.5 million were paid by $2.5 million in developer’s equity and $31 million in debt financing. The bulk of the financing—$26 million—came in the form of U.S.