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Thursday, Mar 28, 2024

REAL ESTATE QUARTERLY: Trending North

Real estate developer Victor Svilik is so bullish on the North Hollywood Arts District that he wants to build a 124-unit, mixed-use apartment complex at its heart. But as a San Fernando Valley native, he knows there was a time when the trendy neighborhood wasn’t hip or cool. “I remember it when it wasn’t ‘NoHo,’” said Svilik, of BurKill LLC in Encino. “It was just North Hollywood and nobody wanted to go north of Magnolia (Boulevard).” Stacy Vierheilig-Fraser, a Charles Dunn Co. Inc. broker who represents many local properties, said she remembers those days well. “Pretty much all that used to be there besides the theaters were some crummy businesses and (sushi bar) Tokyo Delve’s,” she said. But that motley collection of small office complexes, auto repair shops, community theaters and dated storefronts is fading. In fits and starts over the past two decades, spurred on by redevelopment funds but delayed by two recessions, North Hollywood has become NoHo: a transit-oriented, arts-rich urban core that is unique in a Valley better known for backyard barbecues and suburban sprawl. Trendy restaurants and bars, playhouses, national retailers, movie theaters and mixed-use developments line Lankershim Boulevard around the Los Angeles County Metropolitan Transportation Authority’s Red and Orange lines terminus at Chandler Boulevard. The office market is thriving, too. A new property opening this fall at 10800 Burbank Blvd. was fully leased within three months by tenants who appreciate the lower rental rates of NoHo, which are in the $1.65 to $2.40 per square foot range for up to 5,000 square feet, as compared with Ventura Boulevard in Studio City and Sherman Oaks, where rents run between $2.35 and $3.00, said Roger Beck, senior managing director at Charles Dunn’s Sherman Oaks office. “It’s more affordable and there are a lot of interesting, creative people who don’t want to go into standard office space. They’re looking for funky, innovative spaces that tend to make them more unique,” he said. Thanks to a steadily improving economy, low interest rates and plenty of capital, infill projects are popping up around the NoHo core. Developers are buying up aging bungalows and small apartment complexes to turn them into mixed-use buildings. And the neighborhood might be on the cusp of its largest transformation yet. Metro is seeking a developer for the nearly 16 acres it owns in and around the transit hub – land that is zoned for high-density buildings that could rise as high as 17 floors. Redevelopment redux On block after block, green construction fencing has become ubiquitous as the NoHo transformation moves forward. Parcels housing one-story industrial buildings and two-story duplexes are going vertical, with luxury apartments aimed squarely at millennials who work at nearby entertainment studios and thrive on urban spaces and easy access to mass transit. The change has been striking, Vierheilig-Fraser said, considering failed earlier attempts to jump-start area development. “They thought it was going to be hot as early as 1991 but it never really took,” she recalled. “But finally – finally – it has caught on. And now it’s on fire.” Proof of the NoHo boom is in the pricing: A year ago, Chicago apartment developer Equity Residential paid $126 million for a 308-unit luxury apartment complex called the Hesby. The deal amounted to the largest multifamily purchase in the greater Valley area during the last two years. Early bets are starting to pay off. The NoHo Commons retail center kick-started NoHo’s transformation when L.A. developer J.H. Snyder Co. opened it in 2004 as one of L.A.’s first mixed-use, transit-oriented developments. The property sold this year for $43 million, or about $680 a square foot, to JH Real Estate Partners Inc. of Newport Beach. Seller RedRock Noho Retail purchased the 65,000-square-foot property in 2007 for $30.5 million, or about $483 a foot. The Los Angeles Community Redevelopment Agency had partnered with Snyder on NoHo Commons and several other local developments, so there were serious questions raised about the area’s viability after Gov. Jerry Brown abolished redevelopment agencies across the state in 2011. Many feared that NoHo development could screech to a halt once government money dried up. “The entire genesis of revitalization here was the CRA. They infused a tremendous amount of capital into the neighborhood near the Metro station and that was a game-changer,” said Don Chandler, president of Burbank-based developer Chandler Pratt & Partners. The fears of a collapse appear to have been misplaced, however, with private development continuing at a steady clip in the post-CRA years. That includes Chandler’s latest project, Studio 77, a 156-unit building with 11,000 square feet of ground-floor retail at 5077 Lankershim. The developer knows NoHo well. The neighborhood’s Chandler Boulevard is named after his grandfather, an executive with California Bank who financed much of the Valley’s valuable agricultural land in the early part of the last century. “North Hollywood was the ground zero of the San Fernando Valley in the early 1900s, but it got skipped over and left behind as the Valley developed farther and farther to the west,” said Don Chandler. “Now it’s come back and we’re seeing the original core of the Valley revitalized.” Metro properties A lingering concern is whether demand can truly keep up with the pace of development, particularly in the multifamily sector that dominates NoHo real estate. Ronald Mayhew, principal of Ronald C. Mayhew Development Consulting of Los Angeles, said it’s possible. Mayhew is working with L.A. developer Stephen Samuel, who has assembled 1.2 acres at Otsego Street and Vineland Place, and last month filed for city approval to build a 144-unit apartment complex there. “This is the time to build apartment units in the Valley,” said Mayhew. “You could be building apartments as much as the industry possibly could and you could never keep up with the pent-up demand.” With L.A.’s rental market one of the costliest in the nation, there is particular demand for low-income units, which Samuel plans to include in his building. Affordable housing development is also a priority for Metro, said Jenna Hornstock, deputy executive officer for the transit agency’s countywide planning department. The agency opened the NoHo station in June 2000 as the northern terminus of its Red subway line. Today, that line in conjunction with the Purple line sees an average of 143,000 weekday boardings. The Orange bus line, with a NoHo terminal that opened in October 2005, averages nearly 28,000 boardings each weekday, according to Metro data. The agency owns 15.6 acres in four separate land parcels around the twin transit stations and is in the process of selecting a master developer to build out the sites. “This is one of the biggest and most valuable Metro parcels in the county,” said Hornstock. “This is a really great, exciting opportunity.” In a series of community meetings, local residents have expressed interest in maintaining the arts character of the district, ensuring adequate parking space as well as bringing in local businesses and restaurant operators rather than national chain tenants, she said. The next stage in NoHo’s ongoing transformation might begin as early as next year. The agency has developed a confidential short list of interested developers and is writing development guidelines that are expected to go to the Metro board for approval by the end of this year. A request for proposals should go to developers on the list early next year, Hornstock said.

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