Developers have hunted all over the Warner Center area of Woodland Hills for older retail and restaurant centers that they could replace with apartments. Now they have widened their search to put industrial buildings in their crosshairs. BCEGI International Co. Ltd., the U.S. subsidiary of a Beijing real estate investment firm, has bought a 3-acre site in Woodland Hills with a vision to raze two vacant industrial buildings and build 274 apartments and an office building. The industrial buildings at 6041 Variel Ave. total about 84,300 square feet but their owner, Selective Real Estate Investments in Encino, saw the potential in entitling the land to hold apartments and selling it, said Laurie Lustig-Bower, executive vice president with L.A.-based CBRE Group Inc., who brokered the deal on behalf of Selective along with Senior Sales Director Kamran Paydar. BCEGI paid nearly $19 million for the property in an apartment market that has a 96 percent occupancy rate and 6.2 percent year-over-year rent growth, according to CBRE. “That whole area is really transforming,” Lustig-Bower said. “There were tenants interested (in the industrial buildings), but what would bring a higher value to the property was redevelopment for multifamily. We’re seeing that across the county – multifamily seems to be driving one of the top values for redeveloping properties.” The property’s value lies in its location about a mile from the Village at Westfield Topanga, the Westfield Topanga and the Westfield Promenade retail centers, as well as current and future public transportation stations. However, the Promenade shopping mall has its own limited life span as its owners hope to replace it with a mixed-use development with plenty of apartments. As envisioned, the Variel Avenue site would hold a five-story apartment complex with a mix of studio, one- and two-bedroom units and live/work units above two stories of ground-level parking and one level of underground parking, according to the marketing brochure for the property. The site also is approved for a 12-story, 66,500-square-foot office building, which, if built, would be part of a second phase. Lustig-Bower said the Southern California real estate market has been increasingly attracting Chinese investors but historically they have preferred sites entitled for condominiums, and sometimes a hotel, rather than parcels approved for just apartments. Interest Impact Last month’s long-anticipated interest rate hike for loans is starting to take a small bite out of real estate transactions, according to brokers. The Federal Reserve raised interest rates by a quarter point in December to between 0.50 percent and 0.75 percent. It was the central bank’s second rate hike in 10 years. Brokers are already starting to see an impact on transactions that were underway when the hike took place, said Jim Markel, regional manager of the Encino office for Calabasas commercial real estate brokerage firm Marcus & Millichap Inc. “It’s an adjustment – it’s been almost 10 years,” Markel said. “So, with the two bumps, and with talk of many more in the next months, it’s kind of unnerving to the industry.” Rates in the 3 percent range are now “very hard to get,” he added, and they typically range between a low 4 percent and a low 5 percent. Raising interest rates can impact real estate borrowers and deals because the hikes tend to trigger banks to increase other loan conditions, Markel said, such as required down payment amounts. In one recent deal Markel’s brokers were negotiating, an investor planning to purchase a 16-unit apartment building in Los Angeles received quotes of 3.8 percent interest on a five-year, fixed-rate loan before the Fed rate hike. That soared to 5 percent for the same loan after the hike, Markel said. Then the banks raised the amount of money required from the borrower to $595,000, compared to $425,000 the bank initially required. That stalled the deal, Markel said, and the potential buyer has gone back to the seller to ask for a discount on the sale price. The interest rate hike quashed another deal, this one in West Hollywood, Markel said. There, investors chose to pull back from a potential $4.1 million purchase because higher interest rates would have lowered the rate of return on the deal they agreed upon with their investment partners. The seller had to put the property back on the market. Borrowing rates are still relatively low – for now, but all parties will have to adjust to the new parameters, he added. Staff Reporter Carol Lawrence can be reached at (818) 316-3123 or firstname.lastname@example.org.