Despite a slowing housing market, a New York developer is gambling that well-heeled buyers will fork out as much as $25 million for lavish Century City condominiums as big as many mansions.
So confident is developer Related in its bet, it is demolishing a relatively new and luxurious hotel to make room for the even more luxurious condos.
Demolition recently began on the former St. Regis Hotel, a Century City landmark next to the Hyatt Regency Century Plaza Hotel.
The 30-story hotel was completed in 1984 and hosted many famous guests, including former President Reagan. Related shuttered the property last year shortly after spending $123 million to buy it.
In its place will be a 41-story tower with units ranging from $2.5 million for space about the equivalent of a two-bedroom home to $25 million for a mansion-size 12,000-square-foot abode.
“What we have tried to do is set a new standard for a building that will incorporate the best aspects of a five-star hotel, estate and condominium” in one site, said Related Vice Chairman David Wine.
Condos for the ultra-wealthy still make sense, said Gunter Prentner, a commercial real estate advisor for CB Richard Ellis.
“They are catering to a very specific type of buyer who can plunk down $2 million or $3 million without blinking an eye, whether it’s for a primary residence or extra home,” Prentner said. “Those buyers are less affected by the ups and downs of the market.”
Related’s strategy demanded razing what is a fairly new building by commercial real estate standards, instead of attempting to renovate it, Wine said. The St. Regis’ 8-foot ceilings were too low for upmarket condos, and raising them would have been problematic and expensive, he said. But the real deal breaker was unmovable exterior metal beams that would have limited window height and detracted from the views.
“Our target market is so sophisticated that they would be turned off by that,” said Wine, whose company has built luxury condos in New York, Chicago and Miami. It also developed the $1.7-billion Time Warner Center in Manhattan and is slated to build the $1.8-billion mixed-use Grand Avenue project in downtown Los Angeles.
Demolition of the St. Regis should be completed by March, followed by excavation for 2 1/2 levels of underground parking. The hotel’s underground meeting rooms and tunnel to the Hyatt Regency Century Plaza will be eliminated.
Related hasn’t released drawings of the 540,000-square-foot condo tower that will replace it, but Wine said it would be oval-shaped to create the best views. The Century, as it will be called, will cost $300 million to build and take two years to complete.
The builders will remove and store 164 mature trees from the site and return them later in landscaping that will include a large outdoor garden for the residents, Wine said. Materials from the St. Regis, such as steel, copper and concrete, will be recycled.
Related apparently has made peace with neighbors who have grown alarmed at the pace of condominium development in the Century City vicinity. Six projects with a combined 1,700 units are in the works.
“We have a huge concern about densification in the area and development without adequate infrastructure to support it,” said Mike Eveloff, president of the Tract 7260 Assn., which represents many nearby homeowners.
Residents are also getting “development fatigue” from all the construction activity in the area, he said. That includes improvements to Santa Monica Boulevard and the construction of an office building across Avenue of the Stars from the St. Regis that will be completed this month.
But the Century condos will replace an existing building and not create a new source of vehicle traffic and congestion, he said. “We think it’s going to help the area.”
The president of the Cheviot Hills Homeowners’ Assn., Kevin Hughes, called the planned development “a net positive” and complained that the boxy St. Regis wasn’t very attractive.
“It didn’t make much of an impression,” he said.
The St. Regis could have remained a viable hotel, said industry consultant Alan Reay of Atlas Hospitality. “It was a perfectly good hotel in a great location,” he said. “Any one of the major flags would have loved to have had their name on it.”
Related could have made money just by keeping the St. Regis a few years while the Westside hospitality market heated up, Reay said. Related paid $414,000 a room in January 2005; the Fairmont Miramar Hotel in Santa Monica sold last month for $700,000 a room.
Wine acknowledged that the Westside hotel market had improved but said that the St. Regis had not lived up to expectations and that its owners sold it because of subpar performance.