|Tanya Norris lives in a 1,900-square-foot, two bedroom apartment with an option to buy now that the complex is converting to condos. She and her husband have lived and worked in the building for several years. "I like living here, and I would love to stay," she says. "I just don't know about the purchase. It's not worth a million dollars, that's for sure." (Anne Cusack, Los Angeles Times / August 5, 2013)
Apartment building owners in Los Angeles and throughout California are once again converting to condos, but not at the torrid pace of 2007, when condo conversion peaked before the Great Recession.
The work-live units at Universal Lofts in Studio City, across the 101 Freeway from Universal Studios, were built in 2008 as condominiums. But with the 2007-09 recession underway, developers turned them into apartments. Now the owners are back with plans for condos.
This complex is one of the first to return to the once popular trend, said Shalom Ronin, managing principal at Decal Capital, which arranged the refinancing deal. But this property surely won't be the last, he said.
"If someone can start selling condos in the city successfully, I think others will start to follow suit," Ronin said.
The gated complex lined with brick roadways features 67 units with one-, two- or three-bedroom lofts. The rent starts at $4,000 a month and can go up to $5,500, said Amir Haber, who co-owns and manages the property.
Universal Lofts is a certified live-work property, which means that residents need a business license to live there, Ronin said. The lofts can be used entirely as office space or can double as a residence and a home office.
About 95% of the complex is occupied, and Haber said the vacant lofts are for sale. The asking prices range from $900,000 to $1.3 million.
Residents won't be kicked out of their homes immediately, however. They either can buy the loft they live in or keep renting for a year or two while they decide what to do.
"If they want more time, they can stay," Haber said. "We're in no rush to sell."
Before the last recession, it was common for apartments to convert to condos when the market was hot. But the trend came to a screeching halt when the housing bubble burst.
At the peak in 2007, the city issued 208 permits allowing apartment complexes to be converted. But that number has declined every year since. The city issued a mere 38 permits last year.
Tanya Norris has lived in the Universal Lofts complex for about four years and originally signed a lease-buy contract with the property owners. She and her husband, retired professional boxer Terry Norris, run a gym at the ground level of their home called Fitness Management and the Wellness Loft. Their three-story, two-bedroom loft is above the gym.
When the couple signed their lease in 2009, they were told they would have the option to eventually buy the loft if they wanted, but that option wasn't available until now. But Norris said she's hesitant to buy her loft and work space.
"I like living here, and I would love to stay," she said. "I just don't know about the purchase. It's not worth a million dollars, that's for sure."
Norris said her three-year lease has expired and she and her husband are paying rent on a month-to-month basis until they decide what to do.
Frank Spagnoletti, who owns a music management and production company called Poolside Entertainment, said he loves his company's space and wants to eventually buy the loft.
Spagnoletti mostly works just out of the loft, but there is a fully furnished one-bedroom suite upstairs that he or his other employees use occasionally.
"Sometimes we work on a project for 30 to 40 hours," he said. "It's a place to take a nap or take a shower."
The music company has invested a lot to add amenities to the work environment, Spagnoletti said, which is why he wants to own the space.
The refinance deal is another sign that the housing market in Southern California is improving.
Not everyone sees the rebirth of condo conversions as a good sign.
Any sort of condo conversion is bad for the local economy, said Larry Gross, executive director of the Coalition for Economic Survival, a Los Angeles organization that works to protect affordable housing.
"We're extremely concerned about condo conversions making a comeback, which will threaten tenants throughout the city living in affordable rent-controlled units," Gross said.
The surge of condo conversions before the recession forced a lot of people out of their apartments throughout L.A. because they couldn't afford to buy their homes, he said.
The number of condo conversions, however, probably won't get anywhere near the levels they were before the economic downturn, said Chris Foley, a principal at real estate marketing firm Polaris Pacific in San Francisco.
The only conversions Foley said he expects to see throughout the state are the properties originally intended to be condos but turned into apartments when the housing market tanked and condos weren't selling.
"You're going to see a very constricted condo supply," he said. "That's why you're going to see people who built apartments during the last boom trying to convert if they can."