The Color of Money One investor that heard opportunity knocking is Franklin Point Associates, a partnership between New York’s Praedium Group, a real estate investor focusing on underperforming and undervalued assets, and Coastline Capital Partners, a Hermosa Beach, Calif.-based real estate investment company.
Represented by Beebower, the partnership has purchased several properties in Greater Hollywood, including Franklin Point, a 53-unit property located at 1825 N. Cherokee Ave. The seller, Cherokee Partners, sold the building for $8.3 million, almost three times the $3 million price it paid in 2000.
The Apartment
Rent control kept rates low for the previous owner, but the new owners are aiming high. The partnership is investing $14,000 per door on upgrades. Improvements to individual units include new flooring, appliances, and lighting and plumbing fixtures; repainting; resurfacing cabinets and counters; and new air conditioning units. Common areas will be re-landscaped and repainted. New signage and exterior lighting will be installed, and the pool will be re-decked. Additionally, a barbecue pit will be added to the rear courtyard area.
“There’s not a lot of quality apartment housing that’s reasonably affordable in Hollywood,” explains Steven Ludwig, one of Coastline’s principals. “People have had two choices in Hollywood: lower-end Class C product at a decent rate or new inventory that’s affordable to only a few. We’re sliding into the middle of those two extremes.”
The new owners will increase rates approximately 45 percent, or an average of $450 per unit. “Average rents were $1.42 per foot at acquisition,” Ludwig notes. “Market rents will be $2.06 per foot.” The renovated one-bedroom units will run between $1,400 and $1,500 per month; two-bedroom apartments will rent for $1,800 to $2,000.
That’s more in line with Hollywood’s rapidly advancing rates. Average year-end rents were $1,500 per month for a one-bedroom apartment; two-bedroom units went for $1,900. “That’s a 9.4 percent price increase on the year, the highest of any submarket in L.A. County,” notes Delores Conway, director of the Casden Forecast at the University of Southern California’s Lusk Center for Real Estate. The only submarket more expensive is the Westside, which includes marquee neighborhoods like Beverly Hills and Santa Monica.