Irvine Apartment Communities Makes First L.A. County Purchase

In its first Los Angeles County acquisition, Irvine Apartment Communities has purchased the vacant Santa Monica apartments known as Champagne Towers. A massive renovation of the oceanfront properties is planned.

The Newport Beach-based real estate investment trust paid $44.1 million for the high-rise towers on Ocean Avenue just south of Wilshire Boulevard. The seller was a partnership affiliated with Japan-based Fujita.

The complex has been unoccupied since it was damaged in the 1994 earthquake. “It’s an interesting opportunity because it’s midway between a development and an acquisition deal,” said William Thompson, IAC executive vice president.

Instead of taking three years to design and build new buildings from the ground up, he said, this project will take only a year to complete. IAC will spend more than $10 million to retrofit and spruce up the 119-unit property, which was built in 1972. Some brokers say IAC has paid a very high price for a vacant structure, but stock analysts who cover IAC aren’t worried.

“If it wasn’t condemned or empty, they couldn’t add value to it,” said San Diego-based Burland East of Everen Securities Inc. “Rents in markets that offer access to recreation and the water jump faster than other places.”

Thompson predicts the price tag will be justified when the apartments begin leasing next summer. At that time, Santa Monica’s rent control for empty apartments will end, and landlords will be able to charge whatever the market will bear, according to state legislation.

Although Thompson declined to reveal rental rates for the complex, he said similar units in the area are renting for $4,000 to $6,000 a month.

IAC is known primarily for developing apartments at Orange County’s huge Irvine Ranch. But in the last year and a half, the company has made acquisitions in Silicon Valley and San Diego.