System Property Development Co. Inc. might be giving up one downtown redevelopment project to get into a grander one right next door.
The developer is in negotiations with Commonwealth Partners to sell its Subway Terminal Building on South Hill Street for a reported $12 million. Unloading that property, which System Property had planned to turn into loft apartments, would allow the developer to focus on building a $40 million luxury hotel on the parking lot it owns at Fifth Street between Hill and Olive streets, adjacent to the Subway Terminal Building.
David Damus, general counsel and project manager at System Property, said the developer is planning what would be downtown’s first five-star hotel.
“There are some great hotels in downtown L.A., but there is no five-star product,” Damus said.
Still being designed by architects AC Martin Partners Inc., the hotel would be a 500,000-square-foot project of 350 guest rooms and a 1,000-seat live theater topped by 100 condominiums. The footprint of the project covers 110,000 square feet, Damus said.
Officials at Commonwealth did not return calls seeking comment on the pending acquisition, but sources said the company is planning to see through the planned conversion of the Subway Terminal Building into apartments.
The Subway Terminal Building is the original home of the Los Angeles Red Cars, the long-defunct network of rail lines and electric streetcars that once connected L.A., Orange, Ventura, San Bernardino and Riverside counties. System Property bought the 500,000-square foot building in 1996 for $1.5 million. The developer’s plans to convert the red-brick building, which has been empty since the last red car came to a stop in 1961, into residential units has gotten hung up by calls from preservationists concerned about proposals to make it more seismically correct.
Damus said the hotel proposal plays into the overall downtown revitalization efforts even if all the other development has to come first to make their project financially feasible.
“We think it’s a good investment, and we’re ahead of the curve,” Damus said. “It breaks down the perception that the Westside is the only place you can stay in a five-star establishment.”
There’s reason for that perception, according to Wayne Williams a principal at Williams & Associates, a local asset management company for the hotel and resort industry. Williams said several five-star projects proposed for downtown, including one by The Ritz-Carlton, all have fallen through for one reason or another.
“There has been very little interest in the last few years,” he said. “But with some of the revitalized interest in generating new business, and with Staples (Center), there might be some new people interested.”
Williams said West L.A. and Beverly Hills offer the high-end lodging experience, which means rates of $275 to $300 per night. For that rate, a guest can take advantage of amenities that include fine dining, a spa and health facilities and 24-hour room service.
“For a five-star (hotel) to flourish in a downtown environment, there needs to be an overall demand for hotel rooms, and there’s always a sliver that would demand that upper-end hotel room,” Williams said.
A five-star rate would be a nearly 300-percent increase over the average downtown hotel rate, which runs around $120, Williams said. Such attractions as the Staples II retail/entertainment district, Disney Concert Hall and Cathedral of Our Lady of the Angels are expected to help elevate the tide that should raise all boats.
“The more attractions or amenities that create a real sense of downtown, the better,” Williams said. “Currently, the demand isn’t consistent enough.”
Downtown Leasing
It seems like every week there’s more good news about downtown leases and new development. This week’s downtown doings include a 103,000-square foot lease at Infomart’s Terminal Annex facility
Dallas-based Infomart inked Sprint Corp. to a deal with undisclosed terms for 102,951 square feet for Sprint’s E-Solutions Internet Center. The deal marks the third at the planned 479,000-square foot technology community, which officials say is 57 percent leased.
Infomart has said it will spend $60 million on the purchase and renovation of the building, which formerly was the city’s primary postal operation.
Also signing a downtown lease was a West Coast subsidiary of the New York insurance brokerage Frenkel & Co., which signed a 10-year, $2.2 million lease for 8,154 square feet of space at Ernst & Young Plaza on Figueroa Street. Nico Vilgiate of Insignia/ESG represented the insurance brokerage, Frenkel of California, in the deal. Andrew Stewart was the in-house representative for landlord TrizecHahn Corp. Frenkel of California will move from its current offices on Olive Avenue in Burbank.
Chatsworth Complex Sold
In a big-ticket property sale, a partnership of two limited liability corporations paid $32 million for Chatsworth Business Park.
The 230,000-square foot, two-building office campus on eight acres on Plummer Street is fully leased to tenants Los Angeles County and Sanyo Fisher.
The buyers, Chatsworth Investors LLC and Chatsworth Associates LLC, were represented by Dave Margulies of Urban Residential Partners LLC. The seller, CT Realty Corp., was represented by a team of brokers from Cushman Realty Corp.
CT Realty had bought the property from the Singapore government in 1999 and spent more than $11.3 million on renovations to the buildings and property.
Expansion and Renewal
In a Westside deal bucking recent market trends, Business Wire, the online business news service, is expanding and moving into new digs in West Los Angeles.
The company signed a five-year deal for 9,000 square feet on the 10th floor of 12121 Wilshire Blvd., which is owned by Lowe Enterprises. It will move out of 5,000 square feet at 1990 Beverly Drive in August.
Rick Buckley, Chris Houge, Jake King and Hunt Barnett of Insignia/ESG represented Business Wire in the $2 million deal. Mitch Stokes of Madison Partners represented the landlord in the transaction.
Staff reporter Christopher Keough can be reached at (323) 549-5225 ext. 235 or at [email protected].
