A rendering of a granny flat (Credit: Home Renovation Hints)

Hundreds of Los Angeles residents are stuck in a legal dispute over secondary units known as “granny flats,” which have been viewed as one solution to the housing shortage, despite having already obtained building permits.

The crux of the problem is that the city and state laws that govern secondary units are at odds with each other.

When state lawmakers enacted a law years ago that made the approval process for granny flats more convenient for property owners, more than 500 Angelenos obtained building permits or occupancy certificates for the small units, the L.A. Times reported. The city of Los Angeles, however, declined to comply, and said in memo the flats would only be allowed in areas where zoning permits them.

Then a court ruling said city officials could not simply ignore the ordinance without doing its own analysis. The ruling also ordered the city to halt the handing out building permits for granny flats in the meantime. It said the city  could clear  the way for granny flats by amending or appealing its old ordinance — neither of which it has done.

As for the homeowners who obtained permits under the state law, the city will allow them to move forward with construction plans but only if they sign a document saying they understand their granny flats could be legally challenged.

While supporters of the state law say granny flats can mitigate the housing shortage without drastically changing the look and feel of a neighborhood, opponents argue that these additional units would congest traffic and build way-too-large houses.

L.A.’s city rules set the size limit of granny flats to be 640 square feet, but the state allows them up to 1,200 square feet. [LAT] — Cathaleen Chen

The property at 900 South Kenmore Avenue

Koreatown is seeing a condo kick as of late.

Plans have been filed for a 29-unit condo complex at 900 South Kenmore Avenue, according to city planning documents.

Family trust representative Jim Choi is the owner of the two lots that total 0.3 acres. He owns another Koreatown multifamily complex on Hobart Boulevard.

He acquired one of them for $1.2 million in October of last year, CoStar shows. A six-unit Class C apartment building currently sits on the property.

Just last week, plans were filed for a 228-condo project at on the block bound by Olympic Boulevard, Vermont Avenue, 11th Street and Menlo Avenue. Compared to other major L.A. submarkets, Koreatown saw the highest price increase as well as the biggest increase in sales between May 2015 and May 2016, according to a Polaris Pacific report.

Benedict Canyon Equities President and CEO Ryan Somers and the property at 21800 Avalon Boulevard

Benedict Canyon Equities has purchased a 150-unit apartment building in Carson for $55 million, The Real Deal has learned.

The seller was the developer of the property at 21800 Avalon Boulevard, Thomas Safran & Associates. Dubbed the Renaissance at City Center, the Class A multifamily complex was fully leased as of the time of the sale, according to a source close to the deal.

In addition to the apartments, the structure features about 12,700 square feet of ground floor retail.

Nearly brand new, the Renaissance opened just three years ago. Its amenities include a spa, pool, media room, fitness studio, game room and barbecue area. Units range from one to three bedrooms and rent varies between $2,000 and $3,200.

Benedict Canyon Equities, a Los Angeles-based investment firm, manages nearly 100 properties in California and Colorado, according to its website.

The price tag, which comes out to be about $367,000 per unit, is significantly above the Carson’s 12-month average of $239,464.

Thomas Safran’s incentive to sell was market timing, according to CoStar notes.

Both the buyer and the seller were represented by Ron Harris and Greg Harris of Institutional Property Advisors.

Neither Benedict Canyon nor Thomas Safran responded to requests for comment.

Jennifer Lawrence and her condo (photo credit: Gage Skidmore via Wikipedia)

From Luxury Listings NYC: Academy Award-winning actress and everyone’s dream best friend, Jennifer Lawrence, is moving on up — in real estate, that is.

She recently sold her Santa Monica two-story condo for $1.15 million, which she bought in 2006 for $879,000 right before she got famous. The 1,413-square-foot, two-bedroom, two-bath-unit, originally on the market for $1.69 million, features wide-plank hardwood floors, a two-car garage, a gas fireplace and a fenced-in patio. And it is a mere 20 blocks from the beach! Clearly, though, as J-Law’s career flourished she needed more room — if only to house her collection of acting awards. [More]

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Joe Dagan and the house at 1810 Rising Glen Road (Credit: Hilton & Hyland)

Joe’s Jeans founder and designer Joe Dagan has sold his Hollywood Hills West pad for $6.1 million, a nice profit over the $4.65 million he paid for the five-bedroom compound a decade ago.

Designed by architect Hal Levitt, the 1969-built property has a sleek, modern look, featuring floor-to-ceiling windows and white terrazzo floors, the L.A. Times reported.

The listing agents were Branden and Rayni Williams of Hilton & Hyland. The buyer was represented by Alec Traub of Redfin.

In addition to an open living space, the 3,726-square-foot residence on the Sunset Strip has five bathrooms and outdoor access from nearly every room. The master bedroom suite has a fireplace and tiled shower. A detached office and exercise room are located in a separate building on the nearly one-acre lot.

There is also a swimming pool and a bamboo grove. [LAT] — Cathaleen Chen

Airbnb founders Nathan Blecharczyk, Joe Gebbia and Brian Chesky

From the New York website: In addition to new government regulations, angry neighbors and the occasional orgy, hosts who rent their homes out on websites like Airbnb have something new to worry about. Lenders may be skittish about providing a mortgage or refinancing a home that produces short-term rental income from such companies.

Traditionally, lenders have been clear on classifying loans for either principal residences or investment properties. But in the age of Airbnb, the line is becoming blurred, the Wall Street Journal reported.

“This is kind of novel,” said Jeffrey Naimon, a consumer finance attorney and partner at law firm BuckleySandler LLP. “I don’t think the market has gotten its arms around it.”

Some borrowers have been reporting income from websites like Airbnb and HomeAway when applying for a new loan in hopes of raising their credit profile and get a better interest rate. Instead the banks, which typically find investment properties to be riskier, have been telling borrowers they either no longer qualify for certain kinds of loans or will have to pay higher interest rates.

A spokesperson for Airbnb said in an email that incidents like these are “incredibly rare.”

A few years ago, similar questions arose about whether traditional insurance policies would apply to a homeowner’s Airbnb activity. The startup reacted by offering hosts free, primary liability coverage of up to $1 million per incident.

When it comes to mortgage refinancing, standards will probably become clearer the more experience lenders have with Airbnb hosts.

“Some of the programs that are new that allow people to rent out their properties short term or in different ways that may not have existed 10 years ago may not be fully understood by every lender across America,” said Greg Gwizdz, a national sales manager for Wells Fargo’s mortgage division. [WSJ] — Rich Bockmann

Stefanie Ridel and Ron Fair, and their home at 499 Halvern Drive

Music executive Ron Fair and his wife, songwriter Stefanie Ridel, have listed their 9,200-square-foot Brentwood home for $15.5 million, the Wall Street Journal reported.

The one-acre property features its own playground, designed with the couples’ four children in mind, and even has a theme song that the couple wrote and recorded.

Fair, the former chief creative officer at Virgin Records, bought the nine-bedroom, 16-bathroom property for $7.25 million in 2008.

The Happy Times play area

The property features an office, a swimming pool, a greenhouse, three kitchens including an outdoor catering kitchen, and two detached guesthouses now used as a studio and soundstage. It even has a gift-wrapping room for all the birthday parties the family attends.

Billy Rose of the Agency is the listing agent.

Fair told the Journal that he’s selling the home because the family is moving to Nashville, Tennessee, where he can focus on discovering new talent.

The home has been featured on Bravo show, “There Goes the Motherhood,” in which Ridel stars. [WSJ] — Cathaleen Chen

A Walmart.com fulfillment center (Wal-Mart)

Unrelenting tenant demand for L.A. industrial properties persisted in the first half of the year, causing rents to skyrocket and cap rates to compress, according to a new report by Colliers International.

Approximately 10.43 million square feet of industrial space was leased in the Greater Los Angeles area in the second quarter of the year, up from just 7.03 million in the first quarter, fueling the 10 million square feet of net absorption reported in the first half of the year, the report shows. The average net effective rent for the region was $5.26 a foot, up from $4.92 a foot a year earlier.

In L.A. County, most of that growth was driven by activity in the South Bay area, which currently has a less than 1 percent vacancy rate. Among the biggest deals was Goodman Birtcher’s purchase of a pair of massive distribution centers in Santa Fe Springs and the San Gabriel Valley city of El Monte. Together, they comprise 133 acres of land with just 2 million square feet of distribution space.

CoStar estimated that Goodman paid approximately $240 million, or roughly $115 per square foot, for the two sites.

The rise in rents comes despite a major uptick in the number of industrial facilities being built. A record-breaking 45 big-box facilities totaling 22.5 million square feet were added to the total inventory in the Greater L.A. area over the past 12 months, the report shows.

Nationwide, approximately 53.7 million square feet of industrial space was leased in the first half of the year, up 10.7 percent from 2015. Effective rents were also up 13.1 percent, to an average of $4.77 a foot, compared to the same period last year. The average cap rate on a sale was just 5.5 percent.

Meanwhile, record 98 big-box industrial facilities totaling 60 million square feet were added to the total U.S. inventory in the first half of the year, a record amount.

Rendering of LaTerra’s Silverlake town homes at 2753 Waverly Drive

Taking a lead from Koreatown’s burgeoning condo market, Los Angeles-based firm LaTerra Development has requested a vesting tentative tract for the construction of 221 condo units between Westlake and Koreatown, The Real Deal has learned.

The step is very preliminary, LaTerra’s VP of acquisitions and development, Chris Tourtellotte, told TRD. More details will emerge as the project takes shape. 

The project will either be condos and apartments, he told TRD, with a maximum of 221 units. LaTerra acquired the site at 235 North Hoover Street in April. The vacant land spans nearly three acres.

LaTerra’s project is the third Koreatown condo complex proposed to city planning this week. Just Monday, private property owner Jim Choi filed for a 29-unit condo complex at 900 South Kenmore Avenue, TRD previous reported. Meanwhile, Hankook Properties filed plans for a 228-unit condo complex on Olympic Boulevard Friday.

There were 80 condo units under construction in Koreatown, as of July 31, according to a recent market report from Polaris Pacific.

LaTerra focuses on residential and mixed-use developments in Southern California. Nearby, LaTerra developed 63 town homes in Silverlake that opened in 2014. One of the its bigger projects in the works is a $125 million mixed-use complex just a block from Sunset Boulevard. The firm is partnering with Chinese developer Gemdale Properties to build it.

A McMansion in Salinas, California. (Wikimedia Commons)

In the late 1990s to mid-2000s, there was perhaps no better indicator of affluence than the McMansion, a cookie-cutter suburban home that typically measures between 3,000 and 5,000 square feet.

In this era of speculative homebuilding before the 2008 financial crisis, bigger was considered better, and buyers sought homes with the same general list of features: five or more bedrooms, a three-car garage, and cathedral ceilings in the master bedroom or living room, for example.

It used to be the case that although McMansions would cost more to construct, they would also sell for more than a typical starter home.

But according to a new report from Bloomberg, that just isn’t the case anymore. Bloomberg cites data from Trulia that shows that the premiums paid for McMansions have declined significantly in 85 of the country’s 100 biggest cities.

To cite one example, in Fort Lauderdale, Florida, the extra money that buyers were expected to be willing to pay to own a McMansion fell by 84% from 2012 to 2016.

In that same city in 2012, a typical McMansion would be valued at $477,000, about 274% more than the area’s other homes. Today, a McMansion would be valued at $611,000, or 190% above the rest of the market.

McMansions are often despised for their mishmash of architectural styles and general ostentatiousness.

“People used to buy a home under the assumption that they would be living there until the end of a long, nebulous concept of time. A house was for life, a marriage of sorts,” the anonymous writer of McMansionHell, a tongue-in-cheek blog that criticizes the design flaws inherent in the American McMansion, told Business Insider.

“The McMansion was never designed to last forever … [it] was built cheaply in order to get maximum items checked off the check-off list for the lowest cost. The designing of houses from the inside out caused the rooflines to be massive and complex.”

The author of McMansionHell — whose ire for the home style began when they saw their rural North Carolina neighborhood be transformed into what they called “Anywhere USA” — said that they hope their criticisms of the McMansion will help bring an end to this architectural era.

“Among the general population, a positive trend is emerging: People are starting to see that bigger isn’t always better — this is evidenced by the tiny-house phenomenon that’s been sweeping the nation the last couple of years,” they said, adding that McMansions could be declining in value in part because millennials are waiting longer to buy homes.

“However, I started McMansionHell with the goal of educating people about architecture and making them aware of the flaws of these houses (both architectural and sociological) through a combination of humor and easily digestible information in a way people who wouldn’t otherwise care about architecture can get engaged with. If my work can stop just one person from bulldozing a forest to build an oversized house that’s a blight on the environment, then I would call McMansionHell a very successful project.”

The town houses at 18179 West Terra Verde Place

Kennedy Wilson has acquired a 157-unit townhouse complex in Santa Clarita for $61 million, The Real Deal has learned.

The seller of the 12.5-acre property at 18179 West Terra Verde Place was Resmark Apartment Living, an asset management firm based in Los Angeles. Resmark’s former development partner Archstone, which ceased to exist when it split into Equity Residential and AvalonBay, developed and mapped the site for condos several years ago. But the units were ultimately rented out as townhomes instead. 

Dubbed the Townhomes at Lost Canyon, the Class A complex features units with three bedrooms, three bathrooms and a two-car garage. Amenities include a swimming pool and spa, fitness center and playground.

Kennedy Wilson invested $19 million of equity to acquire the asset and secured a $43 million 10-year fixed rate loan through Fannie Mae.

“It’s a high quality asset in a location that appeals to families who want high-quality living with an easy commute to Los Angeles property,” Kennedy Wilson’s director of multifamily investments Nicholas Bridges told The Real Deal. “This is going to be a long-term hold.”

The listing agent was Mike Murphy of Moran & Company.

At $388,535 per unit, the Townhomes’ price tag is more than twice as expensive as the 12-month submarket average sales price of $165,113 a unit, according to CoStar. The complex is 98 percent leased right now, according to Bridges.

This brings Kennedy Wilson’s multifamily unit count in Southern California to 2,958 units, he added.

Steven Salas and Brad Feld (via Madison Partners)

Newmark Grubb Knight Frank is continuing the poaching spree that began with its nabbing of capital markets bigwig Kevin Shannon from CBRE earlier this year. NGKF hired four new brokers on the leasing side this month, two from local brokerage Madison Partners and two from Cushman & Wakefield, The Real Deal has learned.

Brad Feld, a partner at Madison Partners, will join NGKF as a vice chairman. In his six years at Madison, he specialized in tenant and landlord representation in leases for the likes of Disney, Nickelodeon and Viacom. He worked alongside the firm’s president, Bob Safai, who declined to comment. Before Madison, he had a 20-year run at Cushman & Wakefield. 

Feld, who will be based out of NGKF’s Downtown Los Angeles office could not immediately be reached for comment.

Commercial leasing broker Steven Salas, who specializes in medical and entertainment industry transactions, is joining NGKF’s West L.A. office as an executive managing director. He has been an executive vice president at Madison Partners since 2005, before which he spent 20 years at CBRE. His list of clients has included the David Geffen company, CIM and the LeFrak organization. 

“I wasn’t expecting to make any changes but a great opportunity presented itself,” he told The Real Deal. “It was the opportunity to go back to a multinational firm with resources and support, to focus on new landlord business which Newmark needs, and to better serve my global clients.”

In this new role, Salas will lead NGKF in establishing a landlord agency team on the Westside and throughout the L.A. area while maintaining his focus on medical, entertainment and corporate services leases. 

Cushman & Wakefield’s John McMillan is joining NGKF as executive managing director, along with Jeff Sanita, who will be a senior managing director. At Cushman, McMillan was an executive vice president dealing with industrial leasing and Sanita was a senior director of industrial leasing.  

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Ori Allon and Robert Reffkin

From the New York site: Compass has leapfrogged past a $1 billion valuation after raising a $75 million Series D round, according to Bloomberg. The round, led by Wellington Management Capital, means the residential brokerage has raised $210 million from venture investors.

This is the first investment in Compass for Wellington, an operator of mutual funds that has bet on companies such as Jessica Alba’s Honest Company, Warby Parker and Joshua Kushner’s health insurance startup Oscar. Repeat investors in the Series D round include Institutional Venture Partners and Kushner’s Thrive Capital.

In July, The Real Deal first reported that Compass was looking to raise the funds, seeking a valuation of between $1.2 billion and $1.3 billion.  The brokerage last raised a $60 million Series C financing in September, at which time it was valued at $800 million.

“This funding will provide us with additional resources to accelerate our growth into new markets and inject transformative technology to improve the experience for consumers and agents,” Ori Allon, the co-founder and chairman of Compass, said in a statement.

It’s not clear how much equity Compass’ founders gave away in this round. In prior rounds, Compass handed investors nearly 44 percent of its shares, according to data from PitchBook.

Compass, which launched in New York in 2013, now has a presence in Washington, D.C., Miami, Boston, the Hamptons, Cambridge, Beverly Hills, Malibu, Pasadena, Santa Barbara, and Aspen. It’s slated to open in San Francisco later this year.

In New York, the company has recruited top brokers including Leonard Steinberg and Kyle Blackmon.

The latest round comes as the market for venture capital has tightened. Even successful startups have been raising “down rounds,” which give them lower valuations than prior rounds.

For Compass, lingering skepticism about its business plan has been a focal point for critics, particularly at rival firms.

Earlier this summer, CEO Robert Reffkin told TRD that growth, rather than profitability, was the immediate goal of Compass’ fundraising effort. “The luxury of our capital base is that we can think long-term,” he said. “[Investors] are making an investment alongside the management team.”

Reffkin didn’t rule out an IPO, but said going public is “more likely than not,” though it’s “not the goal.”

One thing TRD discovered at the time was that the firm’s performance metrics — it claimed its agents generate over $6 billion in sales volume annually, a number that’s now pegged at $7 billion — were heavily based on historical performance of those agents, in many cases from well before they joined Compass.

Chicago’s Tribune Tower

L.A.-based CIM Group has agreed to buy Chicago’s iconic Tribune Tower for close to $240 million, Tribune Media announced Tuesday.

The deal, which is part of Tribune’s ongoing $1 billion real estate sell-off, is slated to close by the end of September, the New York Times reported. CIM’s plans for the 1920s-era, 35-story  landmarked property were not immediately clear. 

The $240 million price comprises $205 million paid in cash at closing plus an additional payment of up to $35 million contingent upon the satisfaction of certain conditions. The building totals 740,000 square feet, which equates to a sale price of $324 a foot.

“Monetizing the significant assets of Tribune Media’s real estate portfolio is a strategic priority for the company and we are extremely pleased with the outcome of this sales process,” said Peter Liguori, Tribune Media’s President and CEO. “Importantly, we’re achieving prices consistent with the $1 billion valuation of our portfolio.”

In L.A., Tribune is looking to sell 25 acres of developable land in downtown’s Arts District and made a deal in June to sell the Los Angeles Times headquarters, at at 202 West 1st Street, to Canadian real estate investment firm Onni Group for an undisclosed sum.

Meanwhile, CIM has been actively in development mode over the past year. The mid-Wilshire-based firm recently broke ground on a mixed-use project on the 1.3-acre West L.A. site at 11800 West Santa Monica Boulevard. The 147-unit development, dubbed Westgate Santa Monica, will have 40,000 square feet of retail and amenities.

Avi Shemesh, co-founder and principal of CIM, said the company is now looking to expand in the Windy City.

“After being active in the Chicago market for more than a decade, we have recently made several compelling investments that have expanded our growing presence in the city,” he said in a statement. [NYT]

From the New York website: Home prices across the nation continued to climb in June, even as more prospective buyers decided to sit on the sidelines.

The S&P CoreLogic Case-Shiller Indices rose 5.1 percent in the 12 months ended in June, the Wall Street Journal reported. That was the same increase reported a month earlier in May.

The 10-city index – which covers places like New York City, Los Angeles and Miami – climbed 4.3 percent on the year, a slight dip from the 4.4 percent increase recorded in May.

The 20-city index – which adds like Atlanta, Dallas, and Portland, Ore., into the mix – recorded a gain of 5.1 percent in June, down from May’s 5.3 percent jump.

Over the past two years, home prices have grown around 5 percent “without any signs of slowing,” said David Blitzer, managing director of S&P Down Jones Indices.

As pricing continues to grow, however, the number of homes trading hands is down as buyers express concerns over affordability.

The pace of existing home sales dropped 3.2 percent in July from the previous month, according to the National Association of Realtors.

Economists are expecting that demand will continue to cool through the second half of the year, which will likely result in a chilling effect on price growth. [WSJ] – Rich Bockmann

Bill Hoffman of Trigild (credit: Business Wire) and the Malibu Golf Course

The Malibu Golf Club, which went bankrupt for a second time last year, has sold in a receivership sale for $30.5 million.

The 18-hole property on a 650-acre site at 901 Encinal Canyon Road, nestled in the Santa Monica Mountains Recreational Area, sold to Shinhan Golden Faith International Development Limited, a holding company with major shares held by M.O. Company of Beijing, according to the Panama Papers.

The site is fully entitled for future development as a health and wellness golf institute, according to Fred Cordova of Kennedy Wilson, who represented the property’s court appointed receiver, Trigild CEO Bill Hoffman, in the receivership sale.

“This property presented a number of complex obstacles, so the receivership sale was a complicated and lengthy process with various moving parts,” Hoffman said in a statement.  “We are fortunate to have selected a solid buyer and are excited to see what the future holds for the site.”

Dick Fuld, the former CEO of Lehman Brothers, bought the $100-a-round golf club with his partners in Malibu Associates for $33 million in 2006. The partners buried themselves in debt while attempting to give the course a restoration makeover and entitling it for development. Malibu Associates defaulted on a $46.7 million loan from U.S. Bank, which tried to seize the property, according to a report last year by the L.A. Business Journal. The partners filed for Chapter 11 protection last April.

Receivership sales are an increasingly popular tool, Hoffman said.

“Because they allow properties to be sold prior to foreclosure, receivership sales often result in faster results and a higher recovery — but they can be complicated and require an extensive understanding of the court system,” he said in a statement.
Ed Sachse, Ryan Eddy, Michael Puleo and Jake Sachse of Kennedy Wilson also represented Hoffman.

The site at 5050 West Pico Boulevard

Los Angeles developer Premier League Inc. is planning a five-story, 65-unit apartment complex between West Pico and Venice Boulevards in Mid-City, The Real Deal has learned.

Dubbed Kentish Town, the project is also slated to comprise about 1,300-square-foot of ground floor retail and commercial space. Six units would be reserved for very low-income households in exchange for a 35 percent density bonus, according to city planning documents.

Amenities would include a courtyard, a recreation room and additional outdoor space on the top floor, according to Premier co-founder and architect Peter Wilson. The units would be a mix of studio and one-bedroom apartments.

The site on West Pico Boulevard is currently occupied by a single-level retail strip, which would be demolished. Premier and its partners acquired the 5,797-square-foot property in June for $3.35 million.

Premier specializes in mixed-use developments between West L.A. and Downtown, Wilson told TRD. He and his partner, Darius Khakshouri, have worked on between 40 and 50 projects in the past two decades. Their multifamily buildings range between 20 and 100 units, and each one has utilized L.A.’s density bonus incentive.

“It tends to be a streamlined process,” Wilson said.

The Real Deal is picking up stakes and heading out west! The inaugural edition of our Los Angeles Market Report will arrive in L.A. in early September, with additional distribution in the New York market.

Our newest special issue will shine a spotlight on the City of Angels, with in-depth coverage of the residential and commercial real estate scenes in neighborhoods from Downtown to the ocean, and from Hollywood to Beverly Hills. We’ll rank the area’s top brokerages and biggest commercial developments, while profiling key local players.

We’ll also be diving into a hotel building boom that is slated to put thousands of new rooms on the market, and chronicling  celebrity homes trades.

To receive your copy of the Los Angeles Market Report, email subscriptions@therealdeal.com. And, for daily coverage of the L.A. market, visit TRD LA. — TRD