Colliers International has completed the $18.7 million sale of the 68-unit NoHo Lofts in the burgeoning North Hollywood (NoHo) Arts District, where demand for rental units has skyrocketed as part of the city’s decade-long effort to re-develop the area into a premier arts center. Included in the sale was a fully entitled and adjacent land parcel.
Colliers Senior Executive Vice President Kitty Wallace, who is based in the firm’s Brentwood offices, represented both Los Angeles-based parties to the transaction; Vista Investment Group was the buyer and CityView was the seller.
“The NoHo Lofts is the only true adaptive re-use project in North Hollywood with a combination of residential, live/work and office tenants so it appealed to all types of investors – commercial, residential, and those interested in the live/work mixed property type,” said Wallace. “We had additional investors who were interested in the possibility of converting the lofts to condominiums as a potential exit strategy and others who saw the entitled parcel next door as a way to maximize the investment.”
Ultimately, she noted, the selected buyer was able to acquire the project by assuming the property’s existing debt while still placing nearly 40 percent down on the non-rent controlled property, which was another strong selling point. The property sold at a 5 percent capitalization rate.
Wallace noted that the investor cited many key points in its decision to acquire the property: the low 3.7 percent fixed interest rate on the project’s long-term debt, the area’s excellent rental occupancy rate of 96.8 percent, upside rent potential, and significant value-add opportunities to the unit interiors and to the amenity package.
Additionally, Wallace said investors were attracted by the area’s transit-oriented location that includes a Metro Expo subway station, numerous bus routes and nearby freeways that allow residents easy access to thousands of jobs in the region. Those same transit venues also allow easy access to those wishing to visit the area’s evolving mix of shops, restaurants, and theaters, she added.
Located on 1.32 acres at 5355 Cartwright Ave., NoHo Lofts was completely renovated in 2006, but the new owner plans to add further improvements to the property to capitalize on what Wallace terms the “modern loft play.” The investor may also choose to utilize the entitled parcel that was included in the acquisition by adding up to an additional 38 units and 80 parking spaces.
Since North Hollywood abuts other, more recognized entertainment centers – Studio City, Burbank and Universal City – and includes to the upscale Valley Village residential neighborhood, the city made the decision 10 years ago to commit $2 billion in re-development dollars to the long-declining commercial strip that ran along Lankershim Boulevard. That’s when it was officially designated by the Los Angeles City Council as the North Hollywood Arts Center, or “The NoHo Arts District.”
“Although NoHo struggled through the recession like so many other areas, the result of the money that came pouring into the area through municipal coffers and private investment is more apparent now than it has ever been,” said Wallace. “The area is home to a thriving theater district and it houses the largest concentration of music recording venues west of the Mississippi River. Additionally, the vacancy rate among apartment dwellers in the neighborhood is hovering around 3 or 4 percent. This was a smart, timely acquisition.”
According to official marketing materials extolling the area, a central focus of the new NoHo Arts District is the area’s “contemporary theaters, art galleries, cafes, and various shops.” The area features more than 20 professional theaters producing new work and classics, diverse art galleries, public art spaces, and professional dance studios.