Landlord Limbo : Owner Finds Road to Condo Conversion Is More Like a Maze

For almost two years, actor Kenneth Blasor-Wilson has played the role of unofficial poster boy for Santa Monica’s novel condominium conversion plan.

He was the first landlord to apply for permission to convert his rent-controlled apartments to condominiums. He was the first to win approval. He even joined in a press conference last year, smiling broadly as officials cut a ribbon on the front lawn of his modest Virginia Avenue apartment complex.

But Blasor-Wilson is no longer smiling. Five months after the city OKd his application, the 38-year-old actor finds himself in a sort of landlord limbo, unable to secure financial backing for his four-unit condominium conversion and too emotionally and financially committed to the project to back out.

“I don’t know how to explain how bad this has been,” said Blasor-Wilson, who has appeared in “Dynasty” and “Days of Our Lives.” “I would never ever do this again. Nor would I recommend that anyone else do it. All in all, it has been one of the worst experiences of my life.”

Bureaucratic Tie-Ups

Blasor-Wilson has been frustrated by a series of setbacks, some caused by bureaucratic tie-ups and some by financing difficulties. Many of the problems were to be expected, according to people familiar with the law, because he is the first apartment owner to attempt a conversion, the first seeking to use the untested program as a way to escape Santa Monica’s rigid rent control law.

But Blasor-Wilson said he had not anticipated such trouble.

“I feel very much like a victim of circumstance, completely powerless,” he said. “The whole thing sounded easy in the beginning. I thought we would wrap it up in maybe three to six months. That was two years ago.”

Ironically, the conversion law approved in June, 1984, is supposed to provide relief for frustrated landlords such as Blasor-Wilson. In theory, it makes it possible for an apartment owner to sell his units and get out of the landlord business. In practice, it has yet to produce a satisfied customer.

Officials have received conversion applications for about 1% of the city’s apartment stock of 33,000 units. Blasor-Wilson’s is the only project that has received the city’s go-ahead and none of the projects has been financed.

Some contend that the process is so slow because the requirements for converting are so stiff. For example, two-thirds of a building’s residents have to approve a conversion. Half the tenants must agree to purchase their units and negotiate the prices with their landlords. After that, local, county and state officials must approve the plan and the parties must obtain financing.

Santa Monica Mayor Christine E. Reed recently likened the conversion process to an “endless journey through a dark tunnel.” Others have called the program overly complicated.

‘Ken Was the Pioneer’

Paul DeSantis, the leader of a broad alliance of activists who created the program, said officials are trying to streamline it. Someone who applied for a condominium conversion permit today would probably be able to complete the process in less than a year, DeSantis said. But he conceded that Blasor-Wilson, by virtue of being first, has had a difficult time.

“Ken was the pioneer,” DeSantis said. “There were a lot of start-up problems . . . and he has grounds for being frustrated. There’s no question about it. He has had everything happen that could happen.”

Things weren’t always so grim for Blasor-Wilson. Nearly two years ago, when an overwhelming percentage of Santa Monica voters approved the innovative condominium plan, Blasor-Wilson said the program seemed like a godsend. He had purchased his apartment building with his father and brother in 1980, one year after the passage of one of the nation’s toughest rent control laws.

Good Investment

At the time he viewed the $200,000 building as a good investment, Blasor-Wilson said. But with rents limited to $300 a month, the family was unable to turn a profit. And by 1984, when the conversion law passed, Blasor-Wilson said his family was anxious to get out of the apartment business.

Striking deals on his two-bedroom apartments was easy because Blasor-Wilson, his wife and daughter occupied one unit. The others were rented by a sister, a brother and a friend. They agreed that the lower units would sell for $78,900, while the upper apartments would go for $82,400.

Blasor-Wilson got in touch with DeSantis, a conversion consultant, one month after the law was approved. DeSantis said Blasor-Wilson was ready to begin the conversion immediately, but was forced to wait until September, when Santa Monica officials released a 25-page conversion application.

With DeSantis’ help (his company has charged about $5,000 for its services), Blasor-Wilson received tentative approval for the conversion in October, 1984. Afterward, however, it took nearly a year for city, county and state officials to process all of the required forms.

“There were documents that had to be filed by (Blasor-Wilson) that weren’t in existence,” DeSantis said. “Since he was the very first one to apply for a conversion, all of the forms were created as his project went through.” Those included legal forms, subdivision documents and tax statements. Meanwhile, under an agreement reached with his tenants, Blasor-Wilson was obligated to spend about $20,000 on cosmetic improvements to the building.

Became Discouraged

Over the course of the year, Blasor-Wilson said he became discouraged because officials showed little enthusiasm for the conversion project.

“It seemed that everyone we had to deal with threw up road blocks,” Blasor-Wilson said. “In part I guess that’s my fault. Perhaps I didn’t go into this with my eyes wide open. Maybe my attitude was a little too Pollyanna. But I think we suffered from a lot of problems for no reason.”

By December, 1985, Blasor-Wilson said his prospects were finally looking better. His plan received final approval and Santa Monica officials and others who had worked on the project celebrated by holding a pre-Christmas ribbon-cutting on his front lawn. Blasor-Wilson said he agreed to participate in the ceremony because he thought the conclusion of the conversion process was imminent.

But he had yet to obtain financing. A variety of financing schemes are available to apartment owners seeking to convert their buildings. Under one of them, an owner must agree to buy at least half of the units in the building. Blasor-Wilson had applied for a loan to finance two of the condominiums and pay off the remaining $135,000 his family owed on the building.

But Sears Savings Bank said it could not render a decision on the loan until the conversion was approved by the various agencies.

Then the loan’s expiration date passed and Blasor-Wilson was forced to reapply in January of this year. At that time, he said he was fairly confident of obtaining financing. But last month Sears rejected the loan application, according to Blasor-Wilson, saying it could only offer 65% financing, not the 90% that he was seeking.

Considered Risky

A Sears spokeswoman confirmed that the company offered to finance 65% of the project. She refused to give further details, but an executive at another bank said many lenders consider loans such as Blasor-Wilson’s too risky.

“What makes it difficult is that many apartment complexes have a small number of units and those are . . . a higher risk,” said James C. McAllister, a loan agent at First Federal Savings Bank in Santa Monica.

“Many banks will not touch a complex with less than nine units under any circumstances, because the historical data shows that problem loans are connected to buildings with small numbers of units.”

McAllister said the timing is also bad for condominium loans in general and that many banks are especially uncomfortable with the idea of financing condominium conversions. DeSantis said he is still confident that Blasor-Wilson can obtain financing, but conceded that the loan market is clogged with people refinancing their homes now that interest rates have dipped below 10%.

Blasor-Wilson said he will reapply at another bank soon and hope for the best. In order to improve his chances this time, he is spending another $20,000 on new asphalt, landscaping, painting and other cosmetic improvements.

It is doubtful that the loan will go through before June’s second anniversary of the conversion law’s passage. Blasor-Wilson said he never dreamed he would spend so much time on the conversion. But at this point, he said he is committed to completing the project, even though it doesn’t look like he will make much of a profit on the deal.

“We’re just going to have to tough it out,” Blasor-Wilson said. “We have so much invested now, we just can’t let it fall through.”