by Joe Shea
American Reporter Correspondent
February 28, 2003
NEW SENIOR HOUSING SITS EMPTY AS OWNERS ARGUE OVER 'AIR RIGHTS'
HOLLYWOOD, Feb. 28, 2003 -- How can it be? In a low-income community where rents are soaring, some seniors are homeless and many are suffering rent increases that strain their fixed-income budgets to the breaking point, 100 brand-new low-income apartments built expressly for them - and 12 years in the making - remain completely vacant months after they were rented and ready.
"It's an extremely unusual development," said a spokesman for the buyer, a church-affiliated foundation based in Long Beach.
The $10-million HollyWest Promenade mixed-use project is located in a renaissance district of Hollywood, the once-seedy and dangerous corner of Hollywood Blvd. and Western Ave. Here, recent immigrants from places like Armenia, Azerbaijan and Russia, along with thousands of legal and illegal Latino residents from Mexico, Central and South America, look on the brand new, bright orange building with a mixture of envy and longing.
The project was controversial from the time it was proposed by developer Ira Smedra in 1990, and quickly won a $5 million subsidy from the Hollywood CRA for its daring mix of housing and retail. Then, under stiff pressure from anti-CRA activists it was more or less abandoned, and then once again proposed, and then re-subsidized by the CRA to the tune of $7 million in funds reaped from the 1 percent property tax increment it earns on all new Hollywood construction.
Over the past 12 years, the surrounding community has witnessed a sea change at Hollywood and Western, where in 1992 a gunbattle erupted between warring gangs, sending bullets whizzing over the traffic below from gangsters on the rooftops of battered brick tenement buildings on both sides of the street. Bodies crumpled in the street as the Mara Salvatrucha and White Fence gangs battled for power over the neighborhood's lucrative drug trade. Killings were as common as dirt during the height of the crack epidemic, and subsided more slowly here than elsewhere in the city.
Board and care homes for the mentally ill, tough bars and liquor stores spotted the neighborhood of mid-sized buildings, an occasional church and single-family homes. In the past decade the northwest corner of Hollywood and Western, where the project now stands, has been a dilapidated series of buildings, a vast, fenced-off empty lot, or a huge hole in the ground. Then the construction started in earnest.
Now the buildings have been rehabbed or torn down, a Thai fast-food joint has replaced the venerable taco stand, the Hollywood Billiards basement operation has gone upscale a few blocks down the street, and brand-new low-income housing has been constructed right next to the new Metro Rail Red Line stop. The St. Andrews Hotel, where a transient shot the night desk clerk to death a few years ago, has been painted a bright white, inviting a young, cool clientele.
Is it possible that someone's saying a place like this is too good for low-income seniors? You have to wonder as you watch.
Margarita Prizdyan, 71, a babushka from Baku, Azerbaijan, short and heavyset and now without teeth, was taking her daily walk on the arm of her 16-year-old friend. Dressed much as she would be back home in a simple wool overcoat, her grey hair hidden beneath a white scarf, she lives around the corner from the project on Russell St. and is one of the low-income seniors who signed up for a chance to rent one of the units two years ago.
"They told her was told her number was too high, like 700-something on the waiting list," her friend said as Margarita leaned back on a stout white cane.
"They said that at the end of December, which would be starting the New Year, they would be ready," the old woman told The American Reporter. She needs the apartment, she said, "because the rents are going up." Asked if she understood why the units are not occupied, she shrugged and said, "I don't know. Maybe they are still working on it." Her young companion noted the obvious, nodding towards a couple of late-model cars parked near the units.
"I always pass by here and I see the cars but I've never seen anyone actually working, or going towards the building," Lyubov Arustamova said.
But John McCoy, deputy director of the Community Redevelopment Agency that is pumping a $7 million subsidy into the project, says that while work is complete and all the final repairs on the "punch list" were completed weeks ago, a complex negotiation of "air rights" and a "reciprocal easement agreement" that will give all owners access to the common areas of the project is underway.
"It's cleanup issues with regard to conveyance of the property. See, usually when you do something like this you have one owner," said McCoy. "Here, you have a thing where HollyWest Associates, the developer, sells the project to RHF, and RHF doesn't want to move anyone in until they complete the purchase and sale transaction. That should be done in the next 30 or 45 days.
"It's a matter of dealing with the banks and investors," he said. "This is an unusual transaction because it's airspace, and there are a whole lot of issues with regard to reciprocal easements for who does what with regard to where water lines run, and plumbing lines, and that sort of stuff. The reciprocal easement agreement is in the final stages of being put together; the financing is basically put together," he said.
Like the project area leader in Hollywood, though, McCoy could not answer some basic questions. How much are the rents? What is the median income that eligibility is determined by? Dolores Hemmer, who is in charge of the Hollywood Area CRA, said she didn't even know the units were unoccupied.
The head of the project at RHF, business development vice president Richard Washington, also knew few of the details. That may be normal, but it doesn't demonstrate a deep concern for the future residents of the project.
"We don't own it yet," Washington said in a telephone interveiw. "Neither does the redevelopment agency. The MacFarlane group owns the entire development, the commercial as well as the residential. There's an agreement between MacFarlane, or HollyWest Promenade Associates, and the redevelopment agency for the purchase of it. And the redevelopment agency in turn will be selling it to us, to an affiliate of Retirement Housing Foundation."
The current owner of the project is Victor B. McFarlane of San Francisco, the head of MacFarlane Partners, the largest minority-owned real estate investment management and advisory firm in the country. McFarlane sold his $2 billion investment advisory business to General Electric's GE Capital Management in 1996 and then was the GE unit's CEO until 1999, when he branched out into urban development projects. MacFarlane heads California Urban Investment Partners, which he formed in 1996. In early February, he purchased 49.3 percent - or 558,000 square feet - of retail and office space and a 504-car parking garage in the new AOL Time Warner Center, opening this Fall at Columbus Circle in New York City.
In Los Angeles, MacFarlane's partnership with Magic Johnson also owns the Santa Barbara Plaza in South Central Los Angeles. Johnson is developing the nearby Hollywood Marketplace with a $3.3 million CRA subsidy, for which it CRA got an option to build some 50 low- or moderate-income units; the CRA also paid $10,425,000 for a 1,725-car parking garage near that site, and $2,792,900 for a 920-car garage at the Marketplace. The CRA's dealings with MacFarlane, Johnson and Washington addresses its mission of bringing minority participation into its projects; all three men are African-Americans.
MacFarlane took the project over from Smedra's Hollywest Associates in 2001 and formed his management entity, Hollywest Promenade, LLC, on Jan. 15, 1999, as Smedra's Arba Group started running into more delays, bad press and new problems in financing the site. The Arba Group transferred their rights to MacFarlane in 2001. On Jan. 15, 2002, the city council increased by $2,243,500 the price the CRA would pay California Investment Partners - owned by MacFarlane and the California Public Employees Retirement System, or CALPERS - for the site.
The history suggests the seniors may be in for a long wait unless their council representatives can break the deadlock.
"I can't predict" how long it will take to move seniors into the housing, said Richard Washington. "I'm not making a prediction. I'm hoping that by April 1st we'll have purchased this from the redevelopment agency and people will be able to move in. That's what I'm hoping, but I'm not in control of all the parts. Neither is my organization. We're not in control of all the parts.
"The delay is in the negotiations on a reciprocal easement agreement between the parties - how we will govern the shared areas," Washington said. "But it's almost resolved. It all depends on when we conclude the negotiations and also when the agency signs the notice of completion. That starts the clock.
"There have been various issues. I'm not going to go into them, but they've been somewhat substantive in terms of how we relate to one another, how we effect repairs, those kind of things. The housing is an air rights parcel but there are reciprocal easements to allow each party to gain access to various parts of the development," Washington said. The easements don't cover the entire block-through property.
"Actually, it's a little more limited than that. The areas that are shared are probably affecting perhaps two of their tenants, Ralphs and Ross," he said. "Our space - the space that we intend to buy, the residential - is above Ross, which in turn is above Ralphs. And then we have sewer lines, water lines, we own the ramp - there is an access ramp for parking on Serrano. That space is deep in the residential portion, and we obviously have to grant access to the commercial portion for them to be able to use and cross over to use it.
"Unfortunately, it's become very complicated," Washington said. "I think we're in the last throes of resolving those issues."
While McCoy believed some of the housing would serve some very low-income people, defined as earning 30 percent of the median annual income, and the rest would go to people who earn just 50 percent of median, Washington believes it is all for slightly better-off seniors, who make either 50 or 60 percent of the median.
A spokesperson for Councilman Tom LaBonge, who is looking into the problem, said the median is $34,859 for a family, and slightly less for a household; for individuals, the average income is $23,690. A senior living alone, for instance, would need an income of just $7,107 to qualify at the 30 percent rate - close to the basic Social Security check - but $14,214 at the 60 percent level.
"So many of the units are 60 percent, and so many may be at 50 percent," Washington said.
It's an important difference, and perhaps the reason neither Washington nor McCoy nor Hemmer could spell out the income levels and rents for us is that they are not as focused on the needs of elderly and infirm seniors like Margarita Prizdyan, who is probably 80 if she is a day, as on the rarefied complexities of air space.
Meanwhile, in the surrounding blocks some rents have soared as high as $1,000 for a large single, unfurnished apartment, and there is a flood of young people moving in to celebrate what has become the undisputed destination of choice for night life in this 468-square-mile city.
New theaters, malls, shops, nightclubs and restaurants are opening almost daily despite a national economy that is mired in recession and awaiting an expensive war.
At HollyWest itself, a dozen tenants ranging from the Ralphs supermarket chain to Starbuck's, Blockbuster and Jamba Juice have already moved in, and employees in those stores wonder aloud when the negotiations will end so they'll have new customers from the apartments, some of which are built right on top of the Ralphs store and look out into the walled-in parking area for the stores 25 feet below.
But housing for poorer seniors like Margarita, who need to be earn somewhere between $7,100 to $17,2500 to qualify to pay substantially below-market rents, is not going to open up anytime soon. The best estimate, from McCoy, was that the units could be ready in 30 to 45 days. Others hinted it might be substantially longer than that.
"This is an unusual project, being in an air rights situation. They didn't complete construction. There are a lot of things going on here. This is unusual. It's an unusual development," said Washington.
RHF, by the way, is an affiliate of the United Church of Christ, which has built some 14,000 units of low-income housing for seniors across the country, including the 1,067-unit Angelus Plaza on Hill Street in downtown Los Angeles.
"They are the largest owner and manager of low-income elderly housing in the United States," McCoy noted.
Washington declines to say that the McFarlane Group, the CRA's partner in the HollyWest units, is uncooperative. "I won't characterize that," he said. "We're talking about a very complex situation here."
The answer may lie, by some accounts, in corporate and city bureaucracies that put costs and budgets ahead of the desperate personal needs of seniors.
No one is talking very much, but it appears that the developers, the MacFarlane group, which apparently got the property and built the project with just $2 million of their own money, may have a public agency over the barrel. One gets the impression they are trying to force the non-profit RHF to accept terms that were not in the original contract.
The McFarlane Group did not return a message left on their answering machine during business hours Thursday afternoon.
Meanwhile, as they have in so many other bureaucratic tangles in other places and other lives, the old and forgotten wait for the phone to ring.