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Wednesday, Dec 6, 2023

Developer Bets On Home Run

It’s been a busy year for Burbank’s Cusumano Real Estate Group, signing a 100,000-square-foot tenant in Thousand Oaks in the second quarter and then breaking ground on its Whole Foods-anchored Talaria at Burbank mixed-use project early this month. Cusumano also has major projects in Kern and Orange counties and is not slowing down on its home turf of Burbank, where it has a $200 million mixed-use project, Premier on First, on the drawing board. That premium residential rental community could be a game-changer for the area. For while neighboring Glendale is in the process of adding 4,000 multifamily units to its bustling urban core, Burbank has lagged behind on residential development. The city has added little housing to its sleepy neighborhoods, filled with 1,000-square-foot, post-World War II bungalows, even as it has served as the headquarters for top media and entertainment brands including Walt Disney Co., Warner Bros. Entertainment Inc., Cartoon Network and Nickelodeon. “There have been virtually zero (apartment complex) deliveries in Burbank over the past decade,” said Dean Zander, a senior partner at brokerage Berkadia and an expert on the San Fernando Valley multifamily market. “They have so much in the way of entertainment and tech employment there, (Premier on First) would provide something the city is sorely lacking and desperately in need of.” But the timing on Cusumano’s project might be tricky. Still in the early stages of environmental review, it could take as long as eight years to get the development entitled and constructed. That leaves plenty of uncertainty around the economic climate by the time the project fully comes on line. If it wins approval from the Burbank City Council, the two-building complex in the heart of the city’s downtown would be Burbank’s first high-rise residential complex. The prospect, however, doesn’t worry Michael Cusumano, the firm’s managing director. “We’ve been in this business a long time and we move projects forward no matter the economic cycle. In fact, we don’t pay a lot of attention to that,” he said. Key to his confidence are the firm’s extensive diversification – it does everything from office to multifamily, retail and hospitality projects – and its ability to self-fund many developments. Two-phase towers Burbank city planners are working on a draft environmental impact report for Premier on First, but the project is unlikely to be scheduled for public hearings before summer. In a perfect world, Cusumano said, the EIR would be approved late next year so groundbreaking could be held in late 2017 – about the time his 425,000-square-foot Talaria at Burbank project is scheduled to open. For Premier on First, Cusumano has proposed twin 14-story buildings sitting on nearly two acres at 103 E. Verdugo Ave., along the east side of First Street between Tujunga and Verdugo avenues. Cusumano Real Estate Group, co-founded in 1959 by Michael’s father, Chuck, and uncle Roger, has owned the land since the 1970s. It houses a two-story brick office building and a surface parking lot leased by ridesharing service Uber for automobile safety checks. What Cusumano would like to see on the property is a 400,000-square-foot development, to be built in two phases. The first would comprise 154 multifamily units on 10 floors sitting above 11,078 square feet of ground-floor retail space. The residential tower would include three stories of parking above the ground floor and two levels of underground parking for a total of more than 450 spaces. Proposed residential amenities would include a fitness center, outdoor swimming pool and spa, a combination yoga and multipurpose room and community room. A luxury project like that, particularly a high-rise with San Fernando Valley views, could attract tenants willing to pay a premium, Zander said. “We’re projecting 4 to 7 percent rent growth in this market, which has occupancy above 97 percent,” he said, adding that he doesn’t foresee demand tempered even with the rent hikes expected in the next few years. The second phase of the project is a bit more up in the air, however. “We’ll see where there’s demand,” Michael Cusumano said, adding that he plans either an office building or hotel to round out the site. If he goes with a hotel, which seems the likelier option in today’s market, it would be a 230-room, 126,000-square-foot property with three stories of parking above a 7,100-square-foot ground-floor retail or restaurant space as well as a 7,100-square-foot restaurant on the top floor. If the office market heats up and he decides to go that route, Cusumano foresees 159,000 square feet of office space, three stories of parking above the ground floor and two levels underground as well as a 14,000-square-foot retail or restaurant space on the ground floor. Hotel potential The Premier on First construction site is within Burbank’s downtown overlay zone, which allows for higher-density development, said Patrick Prescott, deputy city planner. “We would never want to see a 14-story building along our Magnolia Boulevard corridor, but this seems like a more appropriate place for it,” he said. In fact, with a Metrolink train station a couple of blocks away and plenty of local restaurants and shops, Premier on First could take advantage of downtown Burbank’s underutilized walkable urban core. But the site is virtually surrounded by hotels now, with a Marriott Residence Inn directly across First to the west, a Holiday Inn directly across Tujunga to the north and the future Hilton Garden Inn under construction across Verdugo to the east. Can the market support even more hotel rooms? Rod Apodaca, senior vice president at CBRE Hotels, thinks it could. While the travel and hospitality industry suffered in the aftermath of the Great Recession, it has made a major comeback in the past five years, Apodaca said. According to a Los Angeles County Economic Development Corp. report released earlier this year, hotel occupancy rates in Los Angeles hit a low of 67.7 percent in 2009 but were running at 77.6 percent by 2013. Hotel occupancy in the Valley was 75.2 percent, with the average daily room rate at nearly $111 in 2013. Another common hotel metric, revenue per available room, or RevPAR, has grown 9 percent annually over the past three years, Apodaca said. RevPAR takes total room revenue and divides it by the total rooms in a hotel. With its proximity to Bob Hope Airport and centralized location, the Burbank submarket has room for more branded, high-quality hotel product if it’s built in the right places, Apodaca said. “You don’t see an overabundance of building in that market and there are plenty of brand choices” that could be successful, he said. “There’s still opportunity for hotel development out by the airport and in the downtown core.” Most Burbank hotel guests are business travelers, but the city might also attract overflow leisure travelers visiting Universal Studios Hollywood and its adjacent retail center, Universal CityWalk. They are among the top 10 most-visited L.A.-area attractions, according to a 2013 TravelsAmerica survey completed by London research consultancy TNS Global. The theme park, which is adding a highly anticipated Harry Potter attraction next April, had an estimated attendance of 6.2 million in 2013, making it the ninth-most-visited theme park in North America. Having grown up in Burbank and spent his entire career there, Cusumano said the city’s evolution over the past two decades has been inspiring. For instance, rather than get mired in a downturn, the business community pivoted quickly after aerospace giant Lockheed Corp. left town in the mid-1990s. The city was very quick to understand its potential as an entertainment hub, he said. “We are fortunate to have such a strong employment base. In the last 10 or 15 years, the city has truly emerged as an exciting live-work-play environment.”

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