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Proposed Luxury Condos Spark Debate about Santa Monica's Character

Santa Monica Real Estate Company, Roque and Mark

 

Rusty's Surf Ranch.com

Harding Larmore Kutcher & Kozal, LLP  law firm
Harding, Larmore Kutcher & Kozal, LLP

By Jason Islas
Staff Writer

Editor's note: a previous version of this article reported that the hotel tax was 12 percent. Santa Monica levies a 14 percent tax on hotels.

July 29, 2013 -- Living in a two-bedroom condo two hundred feet above the vibrant streets of Downtown Santa Monica, complete with all the amenities of a five-star hotel, overlooking the picturesque bay, might sound like a dream to some.

With as many as 165 luxury condos proposed as part of three major hotel projects -- including one designed by Santa Monica resident and world-renowned architect Frank Gehry -- along an idyllic stretch of Ocean Avenue, that dream could soon become a reality, at least for those those who can afford it.

With a looming $13 million budget deficit, Santa Monica is turning to hotels and the 14 percent tax it levies against them. But to build the hotels, developers say that condos are a necessary component. ("City Council Reviews Santa Monica's Half Billion Dollar Budget," May 30)

“You need to put a huge amount of equity into these projects to get them financed,” said Bruce Baltin of PKF Consulting, a firm that specializes in financial analysis. “To put that equity in, you have to be able to pay that back sooner rather than later, at least a good portion of it.”

That's what the condos are for. But with those condos come additional height. The Wyndham project across the street from the Santa Monica Pier would have 25 condos at the top of a 15-story tower, while the Gehry project would place 22 condos at the top of a 22-story tower. The Fairmont Miramar Hotel wants to put as many as 120 condos in a 21-story building.

With some of those condos expected to sell for upwards of $4 million, some people wonder if those condos have a place in Santa Monica.

Former mayor Dennis Zane, who served on the Council in 1984 when it set the City's six-story height limit, was turned off by the idea of including condos in tall buildings along the Palisades bluffs.

“I think it's absurd for the City to consider granting exceptional height increases for condos,” he said. That could “certainly compromise (Santa Monica's) very character.”

“What I most vigorously oppose is selling our skyline and privatizing our views to the one percent,” said former Santa Monica mayor Michael Feinstein.

Santa Monica is currently undergoing a rezoning of its downtown area and considering increasing the long-standing six-story height limit in eight specific locations to accommodate more intense development on those sites.

“I'm against saying we have to change our entire community standards about scale to accommodate the needs of investment capital,” he said.

Like Feinstein, some residents have raised concerns about exactly who would end up buying these condos, worrying that the luxury residences would be perfect for real estate speculators and companies looking to buy property where clients could stay during visits to the west coast.

Zane called the projects “particularly objectionable given the high-end” condos and the heights, adding that they “transgress some pretty fundamental values."

But Santa Monica has plenty of expensive homes, largely concentrated north of Wilshire Boulevard. A quick Google search reveals dozens of houses and a few condos with asking prices over $1 million.

Still, there is a limited supply of luxury condos in Santa Monica and none of them are in five-star hotels.

So, who exactly would buy these condos? With multiple hotels in the region already operating under this model, there are plenty of test cases.

Beverly Hills has the 201-room Montage Hotel with 24 condos and the 125-year-old Hotel del Coranado built 35 condos as part of its 2008 expansion.

In 2010, JW Marriott and Ritz-Carlton opened a 1,001-room, 52-story tower complete with 224 condos on the top 25 floors in downtown Los Angeles.

Since opening, the Ritz has sold about 85 percent of those condos.

Kimberly Lucero, vice president of sales and marketing for the Ritz-Carlton Residences at L.A. Live, said that there is a wide mix of residents living in the new condos.

She said that about a third of the residents live there full time and another third are part-time residents, business people and season-ticket holders who come out to Los Angeles frequently. About another third are investors, she said.

What's the average buyer of a Ritz-Carlton condo, which range in price from $800,000 to $9 million?

“There's no average here,” Lucero said. “We have single people and married couples.”

She said that there are both men and women -- young and old -- buying alone. There are parents who buy condos for their children and people who buy for business.

“It's the brand and the level of services that's going to dictate your buyers,” Lucero said. Santa Monica, because of its reputation, might attract people looking for an “outdoor lifestyle” near the beach.

There are perks to having a diverse and well-to-do population, Lucero said.

“That's the exciting part of when you add a new residential building into a new community because people like to invest in their own back yard,” she said.

Despite reservations by some residents, developers have argued that without the condos -- and the extra height -- there would be no way to go forward with these projects. Why?

Feinstein said that he's not opposed to high-end housing, but that he doesn't think 12- to 22-stories up is the place for them.

“If they choose to have some condos closer to the ground level,” he said, “if they want to try to integrate condos without trying” to build up, he might be more open to the idea.

Tomorrow, The Lookout will take a closer look at why condos are a necessary component of luxury hotel development. Stay tuned.


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