To hear Mark J. Weinstein tell it, his plan to turn 10 Fashion District buildings into residential lofts, design showrooms and a cobblestone promenade of fountains and coffee shops will prove the tipping point in downtown Los Angeles' efforts to reinvent itself.
"It's a once-in-a-lifetime opportunity to create a destination and serve a multitude of different needs--affordable housing for the work force and penthouses for the more affluent--and they can all share the same amenities," Weinstein said. "It's a city within a city."
The enthusiasm is typical for the 43-year-old developer, who often sleeps just a few hours a night and is prone to leave rambling pre-dawn telephone messages espousing his vision--sometimes in rhyming verse--for anyone who will listen.
Still, Weinstein's proposed 790,000-square-foot Santee Court development, named for the street that ends at the project site on 8th Street, is not out of the woods yet. The developer has not secured construction financing for the $120-million project, although he said he is in talks with six potential lenders--including Wells Fargo Bank, East West Bank and San Diego National Bank.
Others who have sought to turn aging downtown properties into modern living spaces and shops can attest to the challenges of mixed-use projects in areas where problems include a shortage of parking spaces and a perceived crime threat.
On the upside, Weinstein's Santa Monica-based MJW Investments Inc. owns all 10 of the buildings, along with the alley that connects eight of them. That gives him the ability to control the project's ambience and influence the neighborhood in a way other developers--including downtown loft pioneer Tom Gilmore--could not, Gilmore, other developers and architects said.
In the last month, Weinstein secured a commitment letter for $93 million in long-term bond financing. Sale of those bonds, backed by Fannie Mae, would be used to pay off the construction loan once the project is 90% leased. The city has approved zoning changes and the layout of the units, which will be built to condominium specifications for possible sale. And Weinstein has hired architects, engineers and landscape designers.
The project wouldn't be the first to convert old downtown buildings to housing and ground-floor retail stores, but it would be the city's largest--604 lofts, 125,000 square feet of retail space and 115,000 square feet of fashion design showrooms.
"Mark is undoubtedly the 500-pound gorilla," said Donald Alec Barany, an architect whose Santa-Monica based firm was selected last month to carry out design work for the bulk of the project. "It will be a community within itself, which will make it unique."
Gilmore took on buildings that had been shuttered for years in a corridor frequented by transients and devoid of retail. But Weinstein already is collecting rents from sewing shops that fill about 85% of his buildings, and he can maintain some of that cash flow while construction--scheduled to begin in October--is phased in.
And his project, the heart of which is bordered by South Los Angeles and Maple streets between 7th and 8th streets, is situated in the middle of an already vibrant district.
Entrepreneurs hawking everything from Italian suits to ladies' wear and handbags pack the district's ground-floor shops. Some restaurants and cafes already have moved in. And the New Mart and recently renamed California Market Center--which houses a new gift and home-accessories mart--are filled with young fashion designers and wholesalers who are potential tenants for Weinstein's units, said Kent Smith, executive director of the Fashion District Business Improvement District.
The business improvement district's security teams already work to keep the streets clean and safe. In contrast, Gilmore said he has had to contend with three improvement districts that straddle his properties, each with different management.
"I think it's a much more viable location than up closer to skid row," said Cushman & Wakefield real estate investment broker Carl Muhlstein. "The streets are wider and cleaner, and they have those nice, big industrial buildings with steel square frames."
If Weinstein's project moves forward as planned, an estimated 1,500 people will become new residents in the area--moving downtown one step closer to the Los Angeles that civic leaders and urbanists dream of, a true 24/7 city.
Seven of the buildings are clustered together between 7th and 8th streets, connected by underground tunnels that will help unify the complex. The alley that runs between the buildings--now filled with litter, cars and loading docks--will become a courtyard with open-air cafes.
Many of the existing fashion retailers that front Los Angeles Street can stay, Weinstein said, although he hopes to attract a dry cleaner, a drugstore and a restaurant.
On a recent tour, Weinstein dashed from building to building, pointing out historical features, detailing plans for a rooftop pool and small gym and poking through the tunnels with glee.
Also part of the project is a building around the corner on 8th Street. Two more buildings are located farther down Los Angeles Street, one for loft housing. Weinstein has pledged to make 20% of the units available to low-and very-low-income residents.
The 10th and southernmost building, at 910 Los Angeles St.--known as the Gerry Building--will be dedicated to fashion showrooms. Construction began there last fall. Its art deco facade has been repainted and the curved windows replaced. Glass partitions inside are creating open, brightly lighted spaces for designers.
Parking will be among the project's biggest hurdles, Gilmore and others said, and Weinstein has plans for just 220 spaces. In addition, building permits are not yet in hand.
But Weinstein is making progress. He has secured the long-term financing, which kicks in to pay off construction costs once the project is complete.
For a project of this size, lining up that lender first will "assuage the concerns of the construction lender," and make one easier to come by, said Jack Tweedy, vice president of real estate loans at Cathay Bank, which has no stake in the project.
Because of the age of the buildings, Weinstein expects to sell historic tax credits to investors that are anticipated to generate as much as $10 million in additional capital.
The balance of the financing, Weinstein said, will come from MJW and possibly a few other private investors.
Weinstein said he expects to secure building permits in July and begin construction on the northernmost buildings in October.
From Law Student to
Real Estate Developer
Weinstein got his first taste of the real estate business two decades ago while he was a student at Loyola Law School. He urged a group of friends to scrape together their resources and they bought a four-unit building for $148,000, selling it three years later to Weinstein's secretary for $240,000.
Next came a 10-unit building. And in 1988, while still practicing law, Weinstein took on an abandoned hotel and former jail in Old Town Pasadena, turning them into live-work lofts.
But when the real estate market tanked in the early 1990s, Weinstein retrenched. He became a receiver, managing about 350 foreclosed properties from 1992 to 1999.
With 70 employees, and offices in Fresno and Reno, Weinstein's company owns and manages $150 million of real estate.
Still, Weinstein is new to a project of this scale. The seed was planted in 1998, when a friend called with a tip. Ten Fashion District buildings were for sale, the oldest built in 1908. The price tag was $18 million. Weinstein secured a 97% loan and scraped together a $600,000 down payment, most of it borrowed.
Then he sat back to watch Gilmore's novel experiment with downtown housing unfold. The wait paid off. As Gilmore leased out spaces, the loft fad took root, and property values rose.
"The only reason this project pencils [out] is because we made a good buy three or four years ago," Weinstein said.
The idea for Santee Court came from two architects and a real estate broker who approached Weinstein last year. Contributing his buildings to the project would make it real, so Weinstein signed on.
Santa Monica architect David Gray and broker Blake Mirkin backed out about nine months ago, in part because the project was too financially daunting, Gray said.
Bradley Gwinn was hired away from Gray's firm by Weinstein and is now vice president of the Santee Court development. Though the project's success is still far from certain, Weinstein's competitors are cheering his efforts.
"Certainly, he could fail as easily as he could succeed, but he's really driven," said Gilmore, who has seen a 58% turnover at his own buildings but said he has had no trouble refilling vacancies. "I think he's got a good shot."