Building a $100-million apartment complex on the tattered fringe of downtown Los Angeles seems like a risky bet. Demand for market-rate housing in the area has been notoriously shallow for years.
But apartment builder Geoff Palmer--who is known as a cautious and methodical developer--is not the gambling type. In fact, as property values and rents rise across Los Angeles, his 658-unit Medici apartment complex--the largest under construction in Los Angeles County--is looking more like a winner with every passing day, said real estate and housing observers.
For the Record
Los Angeles Times Tuesday February 8, 2000 Home Edition Business Part C Page 3 Financial Desk 3 inches; 81 words Type of Material: Correction
CRA buyout--In a Feb. 1 story about the apartment market in downtown Los Angeles, The Times incorrectly stated that the Los Angeles Community Redevelopment Agency in 1991 paid more than $3 million to buy out 32 condominium owners in the Premier Towers project on Spring Street. The CRA had agreed to the deal, but the Los Angeles City Council never authorized the expenditure. In May 1998, however, the CRA was authorized by the City Council to proceed with the buyout and has purchased all but two of the remaining units, according to Donald Spivack, deputy administrator at the CRA.
"He will have no trouble filling it up at all," apartment investment advisor Dean Zander said. "His timing is perfect."
There are about 8,300 apartments and condominiums--most of them located in high-rise towers--within the belt of freeways that encircle downtown. More than a third of the apartments are rent-subsidized units earmarked for elderly and low-income residents. Some developers, including Tom Gilmore, have targeted artists and urban pioneers to populate trendy loft-style units carved out of historical buildings and warehouses.
But Palmer is targeting the middle market of downtown professionals with a low-rise, suburban-style complex complete with swimming pools, a one-acre park and shops. Monthly rents at the privately financed Medici--which is located at the intersection of the Harbor Freeway and 7th Street--are expected to start at about $900 when the first phase opens in June.
"People think there needs to be broader types of housing downtown," said Donald Spivack, deputy administrator at the Community Redevelopment Agency. "If [the Medici] is successful you will see more people wanting to do projects like this."
Palmer, president of privately owned G.H. Palmer & Associates, has plunged into a market that has scared off most residential developers and burned many investors:
* Grand Central Square, which includes 121 apartments above the historical Grand Central Market, received a government bailout in 1997 after falling behind on payments on $44 million in publicly backed debt.
* The builder of the 192-unit Renaissance Tower apartments in the South Park area went bankrupt in the early 1990s while the high-rise was under construction. In 1998, the building was sold for $18 million--45% of its original cost.
* In 1991, the city's redevelopment agency paid more than $3 million to buy out 32 condominium owners in Premier Towers after the owners watched their investment in the Spring Street project vanish as the area continued to deteriorate.
