Stalled Hollywood condo project gets new life
A stalled condominium development in Hollywood that became a symbol of the real estate market’s collapse is back under construction after work on it was idled by bankruptcy for more than a year.
New owners recently secured a $32-million loan to fund completion of the former Madrone at Hollywood Boulevard and La Brea Avenue and are turning it into an upscale apartment complex called the Avenue.
“Our plan is to run it as a rental building for the foreseeable future,” said Robert Goodman, president of Resmark Equity Partners.
The Los Angeles residential investment advisor bought the 180-unit project a year ago in a trustee sale. The original developer, veteran Irvine builder John Laing Homes, had filed for Chapter 11 bankruptcy protection in February 2009 and stopped work on the Madrone. The company liquidated its assets the following June.
The padlocked project turned into an eyesore as the seven-story complex — clad in only sheetrock and surrounded by scaffolding — weathered in the elements. It was one of several large residential developments that languished in 2009 as the housing market collapsed.
Resmark intends to finish the Avenue by June, Goodman said. He predicts that the new building will be able to compete in the area’s crowded apartment market.
“We think that the rental market in Hollywood is pretty good right now, and we think there is a likelihood it will be better and stronger next year,” he said. Most of the competition for the Avenue’s one-, two- and three-bedroom units will be in much older buildings.
“I am pretty confident that we will attract 180 tenants in there without too much difficulty,” Goodman said. Rents have not been set.
Since financial markets locked up in 2008, real estate development loans have been hard to come by. The three-year, $32-million deal for Resmark was one of the first large construction loans arranged by Los Angeles investment bank George Smith Partners since the financial crisis began, said Steve Bram, managing director of George Smith.
“Banks are still being conservative as they clean up the troubled loans they still have on their books,” Bram said. Lenders often insist that borrowers have a net worth at least as large as the loan amount and liquidity of 10% of the loan amount.
“Most borrowers are unable or unwilling to provide those kinds of guarantees,” Bram said.
Yet healthy banks have a lot of capacity to make loans and an appetite to do so if borrowers can meet their terms, Bram said. He declined to identify the lender for the Avenue, but said large banks including Chase, Bank of America, US Bank and CIBC are actively looking to make loans.
The revival of the Madrone complex as the Avenue is welcome news to its architect, Jonathan Watts.
“It’s gratifying and somewhat of a relief,” Watts said. His firm, Cuningham Group, also designed another Hollywood development that stalled but is now back on track. The Redbury hotel at Hollywood and Vine Street, where work was stopped when the previous owner lost title to the property, will open at the end of the month.
The firm is working on changes to the Avenue for the new owners as they convert the complex from condos to apartments. It will remain mostly the same: a triangular arrangement of five-, six- and seven-story buildings with 13,500 square feet of shops on the ground floor and a three-level underground garage for 465 cars.
The design has horizontal accents of Art Deco and takes a cue from theatrical masks with its ornamental skin, Watts said. Its interior courtyard will be visible through large gaps in the buildings.
“We wanted to connect the core to the streets like old Spanish-style development,” Watts said.