LOS ANGELES | METRO Project Rundown 2.0 (non-downtown)

[craigs]

The eventual mega-development could be amazing.

Rams owner Stan Kroenke escalates property buying spree in Woodland Hills

Roger Vincent
Los Angeles Times
January 4, 2023

Rams owner Stan Kroenke has escalated his property buying spree in Woodland Hills with the $325-million purchase of an outdoor shopping center.

The Village deal, which closed last week, further signals the billionaire businessman’s intention to build a second sports-centric development like the one around SoFi Stadium in Inglewood.

His company, the Kroenke Organization, now controls about 100 acres in Warner Center that are expected by real estate industry observers to become part of a sprawling mixed-use complex that may include stores, restaurants, hotels and residences, along with a training facility for the NFL football team. It could become one of the largest new real estate developments in the region.

The popular Village, completed in 2015, is next to the largely inactive Woodland Hills Promenade mall and an unoccupied high-rise office building, both of which Kroenke acquired last year.

Representatives of the Kroenke Organization declined to elaborate on their plans for Warner Center but said in a statement that “we will continue to operate The Village as an open-air lifestyle and retail destination.”

The seller of the Village was Unibail-Rodamco-Westfield, a Paris-based mall operator that said in April that it would unload all its U.S. properties and bet its future on Europe, where it is the largest owner of shopping centers.

The company still owns Westfield Topanga, another mall near Kroenke’s recent acquisitions. Other prominent neighbors are the Warner Center Towers office complex and a hotel, Warner Center Marriott Woodland Hills.

Los Angeles city officials are encouraging dense mixed-use development in the neighborhood that could include new housing, offices, shops, restaurants, hotel rooms and entertainment venues.

Assembling a 100-acre parcel that would be at the center of a more urban-feeling downtown for Woodland Hills is “pretty spectacular,” said retail property broker Bryan Ley of JLL, who was not involved in the sales.

“There are not many land sites sold around Los Angeles County that are 100 acres with this kind of density and location,” he said.

In Inglewood, Kroenke controls nearly 300 acres surrounding SoFi Stadium, in what was formerly the Hollywood Park horse racing venue. When the complex is completed, it will be 3½
times the size of Disneyland and contain a performance venue, hotel, stores, restaurants, offices, homes and a lake with waterfalls.

Kroenke is a longtime real estate developer whose company owns and operates retail centers in 39 states totaling 40 million square feet, according to the Unibail statement.

[LAsam]

^If I'm doing my math correctly, that's a $17.9 million windfall to LA city with the new transfer tax. Or rather, it would have been if the sale hadn't closed the last week of 2022... I wonder if that perhaps provided some motivation to the seller! $17.9 million swing in profit!

[colemonkee]

^ That amount alone would likely fund the architecture and engineering firm fees for the design phase of the entire project.

[ChelseaFC]

Interesting that Kroenke doesn't seem to be interested in the main Topanga mall, so Westfield will have to find another buyer in their bid to offload their US properties.

[hughfb3]

Intuit Dome in Inglewood

[colemonkee]

Wow! I had no idea that was so far along.

[ChelseaFC]

Originally Posted by colemonkee

Wow! I had no idea that was so far along.

Now people will just have to figure out how to get there.

[CaliNative]

It gets very hot in Woodland Hills in summer NFL training season. Often over 100 degrees F. The coastal breezes rarely get over the hills in the far West Valley, and the cool air making it over Cahuenga Pass usually doesn't get beyond Sherman Oaks. The players will be guzzling chilled gatorade. Still, I am happy for the development.

[ChelseaFC]

Originally Posted by CaliNative

It gets very hot in Woodland Hills in summer NFL training season. Often over 100 degrees F. The coastal breezes rarely get over the hills in the far West Valley, and the cool air making it over Cahuenga Pass usually doesn't get beyond Sherman Oaks. The players will be guzzling chilled gatorade. Still, I am happy for the development.

OTAs in spring will be at the team facility Woodland Hills, but the Rams likely will still have training camp in Irvine like usual.

[Lovely1993me]

Slightly Off topic, but we really need a koreatown update. I was in the area looking for apartments, and the amount of new construction is pretty staggering! So many 5-10 story buildings going up, which despite the often destain on this forum about everything not being a tower, is such a great density model that works in cities like Barcelona, Rome, Paris, etc. Great to see Koreatown getting even denser. Anyone down to take some pics??? I spoke with an agent who said they were 60 planned groundbreakings in that area this year! (Don’t know who true that is ) ������������

[ChelseaFC]

Originally Posted by Lovely1993me

Slightly Off topic, but we really need a koreatown update. I was in the area looking for apartments, and the amount of new construction is pretty staggering! So many 5-10 story buildings going up, which despite the often destain on this forum about everything not being a tower, is such a great density model that works in cities like Barcelona, Rome, Paris, etc. Great to see Koreatown getting even denser. Anyone down to take some pics??? I spoke with an agent who said they were 60 planned groundbreakings in that area this year! (Don’t know who true that is ) ������������

Lots of KTown updates here: https://la.urbanize.city/neighborhood/koreatown

[LA21st]

Bed bath and beyond just sold in West LA. Hopefully that means a decent redevelopment coming.

[SoCalKid]

Originally Posted by LAsam

^If I'm doing my math correctly, that's a $17.9 million windfall to LA city with the new transfer tax. Or rather, it would have been if the sale hadn't closed the last week of 2022... I wonder if that perhaps provided some motivation to the seller! $17.9 million swing in profit!

Case in point for how terrible this law is. I work for a big development firm you've all heard off, and I can tell you this law is the single worst thing to happen for LA development in a very very long time. An example:

Developers generally need around a 20% total profit on a project in order to make a deal pencil. So let's say I build a project for $100,000,000, then I need to make a profit of $20,000,000, which requires selling it for $120,000,000. But with this new tax, if I sell it for $120,000,000, then I pay $6,600,000 in additional taxes out of a total profit of $20,000,000. So that's 33% of my profit gone!. That's what was lost in this conversation - it's not a 5.5% tax on profits, but 5.5% on total value which is very different. I can't overstate how severely this impacts the development business.

Here's a different example. Land generally makes up 10%-20% of total project costs. Let's take the previous example of a $100,000,000 project and say land is going to cost 10%, or $10,000,000. As we discussed, in order to make my project pencil, I need a 20% profit, which would have been a $120,000,000 sale before this tax. But now there's $6,600,000 coming out of my profit, and I need to make it up somewhere or I can't get investors. Where can I make it up? I can't cut construction costs, architecture and engineering costs, or financing costs, as these things are largely out of my control. What is the one thing I can adjust? How much I'm willing to pay for land. So in order to make this project work, I now have to buy the land for $3,400,000 instead of $15,000,000 (a $6,600,000 decrease). That's a 66% reduction in land value. But of course the guy who owns a shitty strip mall that I was going to buy for $15,000,000 and turn into new apartments isn't willing to take a 44% haircut. He'd rather just keep running his strip mall. So the deal doesn't happen.

The above example is going to happen all over the city, and as a result, our shitty strip malls are going to stay and our new housing production is going to go way down. The ironic thing is that with this new tax preventing sales from happening, we may actually end up with less tax revenue for the city. This law will make housing affordability way worse by killing most housing development. And since most affordable housing in the city is built as part of TOC projects that will no longer pencil, we're going to get fewer affordable units despite the new revenue source funding affordable development. Far less market rate housing + less affordable units = very unaffordable city. This just sucks.

[Illithid Dude]

Originally Posted by LA21st

Bed bath and beyond just sold in West LA. Hopefully that means a decent redevelopment coming.

I doubt it. It's a huge building less than 20 years old. Maybe an office conversion at most.

[LAisthePlace]

Originally Posted by SoCalKid

Case in point for how terrible this law is. I work for a big development firm you've all heard off, and I can tell you this law is the single worst thing to happen for LA development in a very very long time. An example:

Developers generally need around a 20% total profit on a project in order to make a deal pencil. So let's say I build a project for $100,000,000, then I need to make a profit of $20,000,000, which requires selling it for $120,000,000. But with this new tax, if I sell it for $120,000,000, then I pay $6,600,000 in additional taxes out of a total profit of $20,000,000. So that's 33% of my profit gone!. That's what was lost in this conversation - it's not a 5.5% tax on profits, but 5.5% on total value which is very different. I can't overstate how severely this impacts the development business.

Here's a different example. Land generally makes up 10%-20% of total project costs. Let's take the previous example of a $100,000,000 project and say land is going to cost 10%, or $10,000,000. As we discussed, in order to make my project pencil, I need a 20% profit, which would have been a $120,000,000 sale before this tax. But now there's $6,600,000 coming out of my profit, and I need to make it up somewhere or I can't get investors. Where can I make it up? I can't cut construction costs, architecture and engineering costs, or financing costs, as these things are largely out of my control. What is the one thing I can adjust? How much I'm willing to pay for land. So in order to make this project work, I now have to buy the land for $3,400,000 instead of $15,000,000 (a $6,600,000 decrease). That's a 66% reduction in land value. But of course the guy who owns a shitty strip mall that I was going to buy for $15,000,000 and turn into new apartments isn't willing to take a 44% haircut. He'd rather just keep running his strip mall. So the deal doesn't happen.

The above example is going to happen all over the city, and as a result, our shitty strip malls are going to stay and our new housing production is going to go way down. The ironic thing is that with this new tax preventing sales from happening, we may actually end up with less tax revenue for the city. This law will make housing affordability way worse by killing most housing development. And since most affordable housing in the city is built as part of TOC projects that will no longer pencil, we're going to get fewer affordable units despite the new revenue source funding affordable development. Far less market rate housing + less affordable units = very unaffordable city. This just sucks.

This is exactly what I was worried about. It is truly shocking to me that this was spun as a "mansion" tax, when a substantial amount of the tax burden be put on sales of commercial developments (offices, hotels, etc) and multi-family apartments.

Honestly, if it was just single family homes over $5M (so true mansions) I actually think it could be a fantastic tax to scrape back some of the damage that has been done by Prop 13, but as it is it seems like it is going to cause a truly chilling effect on Los Angeles development.

Doesn't help that on "gimme shelter" our new Mayor spouted out a number of PHIMBY talking points (which just aren't true):
-"Luxury" apartments are mostly vacant
-That even if they are occupied they are "owned" by out of town occupants (when we barely build new condos vs. apartments)
-That she doesn't even know who lives in the new developments that are built
-That she thinks that market rate development cause gentrification

I was cautiously optimistic on her term, but the lack of understanding of the basics of vacancy rate, building housing at all levels, etc was shocking.

[LosAngelesSportsFan]

Originally Posted by SoCalKid

Case in point for how terrible this law is. I work for a big development firm you've all heard off, and I can tell you this law is the single worst thing to happen for LA development in a very very long time. An example:

Developers generally need around a 20% total profit on a project in order to make a deal pencil. So let's say I build a project for $100,000,000, then I need to make a profit of $20,000,000, which requires selling it for $120,000,000. But with this new tax, if I sell it for $120,000,000, then I pay $6,600,000 in additional taxes out of a total profit of $20,000,000. So that's 33% of my profit gone!. That's what was lost in this conversation - it's not a 5.5% tax on profits, but 5.5% on total value which is very different. I can't overstate how severely this impacts the development business.

Here's a different example. Land generally makes up 10%-20% of total project costs. Let's take the previous example of a $100,000,000 project and say land is going to cost 10%, or $10,000,000. As we discussed, in order to make my project pencil, I need a 20% profit, which would have been a $120,000,000 sale before this tax. But now there's $6,600,000 coming out of my profit, and I need to make it up somewhere or I can't get investors. Where can I make it up? I can't cut construction costs, architecture and engineering costs, or financing costs, as these things are largely out of my control. What is the one thing I can adjust? How much I'm willing to pay for land. So in order to make this project work, I now have to buy the land for $3,400,000 instead of $15,000,000 (a $6,600,000 decrease). That's a 66% reduction in land value. But of course the guy who owns a shitty strip mall that I was going to buy for $15,000,000 and turn into new apartments isn't willing to take a 44% haircut. He'd rather just keep running his strip mall. So the deal doesn't happen.

The above example is going to happen all over the city, and as a result, our shitty strip malls are going to stay and our new housing production is going to go way down. The ironic thing is that with this new tax preventing sales from happening, we may actually end up with less tax revenue for the city. This law will make housing affordability way worse by killing most housing development. And since most affordable housing in the city is built as part of TOC projects that will no longer pencil, we're going to get fewer affordable units despite the new revenue source funding affordable development. Far less market rate housing + less affordable units = very unaffordable city. This just sucks.

Exactly right, that's why these advocates need to all vanish. They are retarded people who are destroying our city

[LAisthePlace]

Originally Posted by LosAngelesSportsFan

Exactly right, that's why these advocates need to all vanish. They are retarded people who are destroying our city

In the end I think this is exactly what they want.....The cynically hope that this will not only raise money for subsidized housing (the explicit goal), but stop market rate development and "gentrification buildings"(the cynical and implicit goal), by making it not pencil out.

[citywatch]

• Video Link

[Jun]

3545 Wilshire
https://la.urbanize.city/post/constr...mandie-station

[craigs]

Looking good. Thanks for the photo update, Jun!