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Thursday, Sep 28, 2023

PCS Rethinks Apartment Complex as Condo Project

After years spent assembling the parcel and working with the city and community PCS Development has decided to put its Sherman Oaks property up for sale instead of developing the land itself. The company is marketing Camino Real, entitled for a 118-unit apartment complex with 16,000 square feet of retail space, to condominium developers with an asking price of $16,750,000. L.A.-based PCS, which is a developer of mostly luxury apartment complexes, many of them in the San Fernando Valley, decided to bow out of this project because its scaled-back size coupled with the recent increases in construction costs, made it more feasible as a condo development, a property type the company does not build. “In order to work with the community, we reduced the size by about 22 units, which of course makes it a little less profitable for apartments,” said Paul Jennings, CEO of PCS. “Then when construction costs went up, it started making the project a little more marginal. We would have still built it, but in the last six or nine months, (the rise in condo prices means) a condo developer can get a much higher value out of the building than we can get.” So far, Jennings said the company has had interest from about 30 condominium developers, but he added that if the company does not get its asking price, PCS will not sell. PCS paid about $8.5 million for the land, which runs from Ventura Boulevard to Moorpark Street in Sherman Oaks, but has since poured millions into engineering fees and the entitlement process, Jennings said. At the current prices for condominiums – $352,000 a condominium developer may even be able to reconfigure the project with fewer units and still turn a tidy profit. PCS hired Gregory S. Harris at The Harris Group of Marcus & Millichap to market the property. Office Market Tightens Further The San Fernando Valley office market continued to show improvement in the first quarter of 2005, with overall vacancies dropping to 7.8 percent for the region, according to data released by Grubb & Ellis. Only two submarkets, Santa Clarita and Glendale, experienced negative net absorption. Net absorption in Santa Clarita was a negative 12,243 square feet for the period. Glendale registered a negative 125,853 square feet. Asking rents for class A properties inched up to $2.19 per square foot, from $2.15 per square foot in the fourth quarter of last year and $2.14 for the same period a year ago. According to the Grubb & Ellis data, the Central San Fernando Valley and the Conejo Valley were the strongest performing markets in the quarter with vacancy rates of 6.4 percent and 6.3 percent respectively. Vacancies in the Central Valley were down from 7.8 percent in the fourth quarter of 2004 and 9.3 percent for the first quarter of 2004. Vacancies in the Conejo Valley were down from 8.6 percent in the fourth quarter of 2004 and 10.6 for the first quarter of 2004. The West Valley, Glendale and Burbank were the only Valley submarkets with a vacancy rate in excess of 10 percent in the period. Vacancies in the West Valley were at 10.7 percent, up from 10.1 percent in the fourth quarter of 2004 and down from 14 percent in the first quarter of 2004. Vacancy rates in Glendale stood at 14.8 percent for the first quarter, up from 13.1 percent in the fourth quarter of 2004 and up from 14.6 percent in the year ago period. Net absorption in Glendale registered a negative 125,853 square feet. In Burbank, vacancies declined to 11.1 percent versus 12.9 percent in the fourth quarter of 2004 and down from 12.6 percent in the year ago period. Burbank and Glendale were not included in Grubb & Ellis’s overall vacancy rates for the Valley. The market is likely to tighten further as only 37,813 square feet of office space is under construction in the Valley as of the first quarter of the year. Another 80,000 square feet of office space is under construction in Burbank. The Valley’s industrial market continues to be extremely tight with a vacancy rate of just 3.5 percent. Apartment Growth Slow but Steady The market for apartment rentals in the San Fernando Valley cooled somewhat in the first quarter of 2005, but with occupancy rates still running at very high levels, asking rents continued to climb. Occupancy rates for the Valley overall stood at 96.1 percent in the first quarter of the year, down from 96.7 percent in the fourth quarter of 2004 and up just slightly from the year ago period, according to data compiled for the Business Journal by RealFacts, a Novato-based research and tracking service. Average apartment rents rose 4.2 percent over the year ago period to $1,328 a month for the area. The largest rental rate increases were seen in three-bedroom, two bath units, which averaged $1,891 a month in the period, up 5.2 percent versus the year ago period, RealFacts found. There was very little difference in occupancy rates across the Valley’s different communities in the period, with the exception of Glendale, which has seen a nearly 9 percent increase in occupancy rates over the year ago period. The change brought the market in line with most others in the Valley, which generally saw occupancy rates rise by one- or two-percentage points. The one exception was Sherman Oaks, which reported a 2.7 percent decline in occupancy rates to 91 percent. Both the decline and the occupancy levels for Sherman Oaks were more dramatic than in any other Valley community, and may reflect the preponderance of very expensive units in the area, which have not moved as quickly as other apartment units. The largest increases in asking rents for the first quarter period were seen in Glendale, with an 11.4 percent rise in rents to an average $1,662, and Northridge, with a 7.6 percent increase in rents to an average of $1,276. The smallest rent increases for the period were seen in Studio City, where rents inched up by 0.2 percent to $1,621 in the first quarter, and in Van Nuys, where rents rose just 1.2 percent to an average of $1,060 in the period. Glendale Sale A 16,000-square-foot office building in Glendale has sold for $3.6 million. The property, at 350 Arden Ave., was acquired by First Capital Financial Resources Inc., for use by a subsidiary company, LGM Escrow Services, which will occupy about 12,000 square feet. Mark Miller, senior vice president at Stevenson Real Estate Services represented the buyer and seller. Senior reporter Shelly Garcia can be reached at (818) 316-3123 or by e-mail at sgarcia@sfvbj.com .

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