600 Long-Term Leases : Harbor Panel Approves 1st Conversions at Marina del Rey Apartments
The county Small Craft Harbor Commission has unanimously recommended allowing the conversion of 600 apartments at the Marina City Club from short-term rentals to long-term, prepaid leases--in effect, condominiums.
The Board of Supervisors is expected to consider the proposal in October, said Eric Bourdon, assistant director of the county’s Department of Beaches and Harbors. It would be the first long-term lease arrangement for individuals at Marina del Rey.
Resaleable Leases
The cost of the 81-year leases would range from $200,000 to nearly $500,000, said Allan Kotin, a real estate consultant for the county. Individuals would be able to resell their leases.
No units can be sold outright as condominiums because the county owns the marina’s 804 acres. The county leases the land to private businesses that build and sublease apartments, hotels, stores, offices, restaurants and boat slips.
The “condominium” conversion is expected to generate $250 million in additional revenue for the county over the next 42 years--above the $190 million the county could expect to take in with no change in its contract with Marina del Rey Properties Ltd., Kotin said. Over 81 years, the county would receive $1.3 billion more than under the current agreement, Kotin said.
The Marina City Club is the larger of two complexes at Marina del Rey that would be allowed to convert under a county policy adopted two years ago. The other is the 230-unit Kingswood Village, which has not sought conversion approval. The two developments are the only high-rise apartments at the marina; they represent about 14% of the 6,000 apartments there.
Scaled Back
Initially, the county considered permitting 40% of the marina’s apartments to be converted, but that plan was scaled back.
The Marina City Club lease on 37 acres expires in 2028. The proposal approved by the harbor commission week before last would extend that contract until 2067.
The Marina Tenants Assn. has fought the conversions, saying that many renters would not be able to pay the high prices for their units. A 1981 county grand jury report said conversions would make the marina “a playground for the very rich.”
“We’re always concerned,” Bourdon said, “I just don’t think there are too many poor tenants in the Marina City Club now.”
Rents there range from $1,500 to $2,000 a month, Kotin said.
A 1985 grand jury report recommended that tenants be allowed to decide by majority vote whether to convert to the long-term leases. “We think it should be democratically handled so that (tenants) don’t get thrown out of there,” grand juror Robert Beckerman said when the report was approved.
Marina City Club tenant Norm Zadeh said he would have concerns about the plan whether he decides to buy his apartment or not.
‘Unpleasant Feeling’
“I get a very unpleasant feeling,” said Zadeh, who has lived at the club for about six years. “I really like it here. I’m willing to buy, but I want to be protected.”
Zadeh said he wonders whether interest payments on money borrowed for long-term subleases would be tax deductible, as mortgage interest payments are. If he decides against buying a unit, he added, he worries that condominium conversion ordinances that require relocation payments and assistance will not apply to long-term lease conversions. “We feel that we are at the mercy of larger powers,” he said.
Bourdon said he believes that banks will finance the long-term lease arrangements but “I’m not an expert” on whether interest payments would be tax deductible. “The laws are changing every day,” he said.
The county would require “a strong disclosure statement,” Bourdon said.
As for relocating tenants, Bourdon said, “the commission got the commitment that the appropriate version of the county condominium law would be extended to the tenants.” He said the developer also plans to offer discounts to tenants who buy their units.
Under the conversion plan sent to the Board of Supervisors, the county would immediately receive $2.5 million simply for agreeing to the changes. The county’s share of rents for all Marina City Club apartments--including 100 low-rise units that will not convert--would increase from 7.5% to 10.5% within a year.
When each long-term lease escrow closes, the county would get 7.5% of the sales price. The $2.5-million payment would be an advance on those fees.
Expecting $10.4 Million
If all 600 units sell, the county expects about $10.4 million as its share, Bourdon said.
The county also would receive 20% of the developer’s profits. The county’s share is projected to be about $1.8 million, Bourdon said.
And the county would get 1% of the resale price each time an individual sells his lease. The county expects to get $300,000 a year from resales after the 10th year of condo operations.
The developer would make a $20-million profit from sales of the units, Kotin said.
Operating the other businesses on the site also would be tremendously lucrative, he added. Besides the low-rise apartments, Marina del Rey Properties also leases two restaurants and 340 boat slips.
The county collects 3% of the restaurants’ gross income and 20% of the lease income from the boat slips--figures that will be renegotiated in 1992.
The extended lease also includes the requirement that the developer build a 308-room, $50-million luxury hotel within five years or return the hotel site to the county, Bourdon said.
Marina del Rey Properties, which is controlled up of Hughes Aircraft executives, has agreed to sell its lease with the county to J. H. Snyder Co. for an undisclosed sum.
The sale is contingent upon approval of the right to convert.
The county also must approve the sale of the lease interest.
