When downtown Los Angeles real estate pioneer Tom Gilmore renovated the previously vacant San Fernando Building in 2000, he transformed the run-down historic office tower into lofts, but didn't include tenant amenities such as a gym, lounge or theater.
Even so, the development was considered revolutionary, with many in real estate circles scoffing at the notion of market-rate apartments along a stretch of Main Street widely considered part of skid row.
But now with the area bustling with hip restaurants and bars, a new owner has stepped in with plans to upgrade the turn-of-the-century building yet again – part of what some expect will be a second wave of redevelopment of previously rehabbed historic structures in an increasingly luxurious downtown.
"We are going to see more and more of this as the market continues to mature and becomes more sophisticated," said Carol Schatz, president of the Downtown Center Business Improvement District and Central City Assn.
MWest Holdings of Sherman Oaks, which acquired the Italian Renaissance Revival building at the corner of 4th and Main streets for about $37 million, plans to spend $2 million more to make improvements, including putting in a gym and residents lounge in the vacant basement.
MWest will also upgrade the hallways, repaint the facade and renovate apartments as tenants move out. In addition, the company wants to add a mural on one side of the building and a mini-theater in the basement. It is also exploring whether it can put new retail space along 4th Street.
The improvement should allow the developer to raise monthly rents, which now average about $2,500.
Part of the reason for the revamp is competition.
Andrew T. Kirsh, founding partner of Sklar Kirsh, who represented MWest in the sale, noted buildings that were rehabbed in the early 2000s must now compete with a flood of new buildings that have recently opened or are underway.
They include AvalonBay Communities' Ava apartments in Little Tokyo and Holland Partner Group's upcoming apartment towers on Spring Street. Near Staples Center, cranes dot the sky, at work on large-scale luxury condo projects, including Greenland Group's Metropolis.
"If you take a look where downtown was in 1999 and where downtown is in 2016, the expectations of residents, customers for retail is just so different," Kirsh said.
And although there are still many vacant older buildings that have not been touched, there are increasingly fewer that are obvious candidates for housing conversions.
Ken Bernstein, manager of the city's Office of Historic Resources, said that, as of spring 2011, 76 buildings downtown had been rehabbed under the city's 1999 adaptive reuse ordinance, creating more than 9,100 new housing units.
The purchase of San Fernando is part of a larger strategy for MWest, which is looking to acquire aging buildings in and around the city center to renovate and take advantage of rising rents in the increasingly popular neighborhoods.
Last year, it acquired the Wilshire Royale, one of L.A.'s most well-known historic apartment buildings near MacArthur Park.
"Los Angeles, versus a city like London, Paris or Chicago, tends to look forward all the time," MWest President Karl Slovin said. "We firmly believe we also have a lot of wonderful things to look back upon."
One of those things, he said, is the San Fernando building, constructed in 1907 for James B. Lankershim, a leading San Fernando Valley land owner. Lankershim, whose last name graces a major Valley thoroughfare, put his headquarters in the penthouse of the building, which also served as a recruiting station during the two world wars.
In 2000, Gilmore converted the vacant eight-story office building into 70 apartments, using the newly passed adaptive reuse ordinance that's credited with revitalizing the historic core. Gilmore replicated that in two nearby towers as well.
The projects, known as the Old Bank District, helped spark a transformation along Main and Spring streets.
In 1999, they were the subject of a cover story in the Los Angeles Times Magazine, which reported that "Gilmore believes he can make downtown into a living city again. No fooling."
"Everybody thought they were nuts," said Justin Weiss, a senior associate with Kennedy Wilson, the brokerage that represented Gilmore Associates in the sale to MWest.
But Gilmore proved his skeptics wrong.
The San Fernando's ground floor is now home to the popular restaurants Ledlow and Baco Mercat, which will remain open. And at night, Main and Spring buzz with activity, as people flow in and out of a growing number of bars and restaurants.
The change in the neighborhood is reflective in the money Gilmore made in the $37-million sale. In 1998, the Times reported that he agreed to pay $7.5 million for not only the San Fernando Building but also the Farmers & Merchants Bank complex across the street.
One reason Gilmore sold the San Fernando was to raise money for the Main Museum of Los Angeles Art he's planning at the bank complex, Slovin said. He's also looking to unload the 12-story Continental building on Spring and 4th streets. Gilmore was out of the country and could not be reached for comment.
The museum will be a "three-dimensional space that weaves" through the Farmers & Merchants Bank building, the Hellman Building and the Bankhouse Garage – all buildings owned by Gilmore Associates, according to the architect's website.
On the Bankhouse Garage's rooftop, plans include a sculpture garden, cafe, amphitheater and water features.
Slovin said those plans will further revitalize the area. As for the San Fernando, he said he simply wants to pick up where Gilmore left off.
"What we are hoping to do is build on the legacy he created," Slovin said.