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Old August 16th, 2005, 08:07 AM   #1
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Fashion District development

The Big Makeover

Fashion District Shakes Off Its Dusty Image, With New Projects Worth More Than $500 Million

by Kathryn Maese

The 90-block Fashion District is in the midst of a half-billion dollar development frenzy that is transforming the gritty garment manufacturing hub into a thriving community filled with a mix of housing, designer showrooms and retail projects.
Sina and Wizeman Kangavari (center) of KI Group partnered with Farhad and Farid Novian (left and right) on the 15,000-square-foot 1000 Maple project, a mall that opened this year. They are some of the new players betting big on the future of the Fashion District. Their next deal is a 100,000-square-foot retail center. Photo by Gary Leonard.

After years of struggling to replace its outdated image with a new name and marketing campaign, the 90-block Fashion District's strategy is paying big dividends. According to a study released last week by the Fashion District Business Improvement District (BID), 32 new projects have cropped up in the sprawling area in the past three years, with 13 this year alone. In total, more than $510 million has been invested in the neighborhood since 2000.

"There is a new generation of property owners replacing many of the people who have held property in the district for a long time," said Kent Smith, executive director of the BID. "These new owners and businesses coming in tend to be younger and very entrepreneurial, and they are going to help further the [growth] of the district."

Perhaps the most significant trend is the boom in ground floor business, up 26% over the last three years to 2,420 shops, according to the study. The increase is partly due to the fact that a number of parking lots were sold and converted into retail. Smith noted that some larger building floorplates that housed one or two businesses have been subdivided into five or six smaller operations.

Among the new retail destinations is 1000 Maple Center on the southeast corner of Olympic Boulevard and Maple Avenue, a joint venture between the KI Group and Bridge Capital. The 15,000-square-foot mall, built on a former parking lot earlier this year, is fully leased to women's apparel and accessory stores. Likewise, a plaza geared toward men's apparel on the southeast corner of Eighth and Los Angeles streets has broken ground, while another on the northwest corner of Pico Boulevard and Maple will soon add more public shopping on the thriving streets around Santee Alley.

"It's a great indication of the growth and vitality of the district," Smith said. "If you break it down, 500 businesses at roughly 1,000 square feet each would be as large as a regional mall."

The biggest ventures, however, will come in the near future: KI Group has announced plans for three mega retail centers, including the 100,000-square-foot Pico Regency Plaza on Olympic Boulevard between Maple and Wall; the 300,000-square-foot Stanford Regency Plaza at Stanford and Pico; and the 100,000-square-foot Maple Union at Maple and Olympic (also with Bridge Capital).

"It's a proven fact that there is over $8.5 billion of transactions annually that run through the Downtown area," said Sina Kangavari, a principal in the KI Group. "That's what's driving a lot of investors from different cities. The appeal in the Fashion District is certainly the foot traffic, and the bargain shopping drives the market."

Diversifying the Trade

The study details a shift in the area's tenant makeup. Since 2001 there has been only a modest 6.2% growth in wholesale-only stores catering to designers and industry buyers; as recently as the last decade, that sector dominated the district. In the same period, new stores that serve both the industry and the public have increased by 32.3%.

Smith said he expects the trend to continue, largely because of the swelling ranks of residents and visitors looking for more street activity. Thousands of local, out-of-state and international buyers who come to the portion of Downtown Los Angeles during the district's five market weeks are also spurring the need for more places to eat and visit.

Indeed, the number of restaurants and snack shops has doubled from 47 to 94 businesses since 2001, according to the study. Typical of the new wave is the spacious, sit-down eatery O'Mamamia Italian Restaurant at the corner of Pico Boulevard and San Pedro Street. Like other newcomers, the restaurant melds into the hustle and bustle of garment stacks, mannequins and showrooms from its location on the second floor of a modern fashion center.

Closer to the major apparel mart hub, the Tiara Café is expected to open later this year on the ground floor of the New Mart. Owner Fred Eric of Los Feliz's trendy Fred 62 is behind the venture, which will include a gourmet eatery and market.

Eric Kessler, a broker with GVA DAUM who specializes in Fashion District properties, said he has recently shown buildings to several restaurateurs looking for space. Last month he sold the building housing one of the district's most popular restaurants, Angelique Café at 832-840 S. Spring St. (it will remain a restaurant for at least the next two years). The two-story property, which includes several additional stores and a two-story loft, was purchased by local industrial and commercial property owner DNR Brothers for $1.24 million. While it was in escrow, more than a dozen bidders made offers on the property where Spring and Main streets converge.

Kessler said a number of factors have come together in the last year to create the strong development climate. Among those are sellers willing to part with contiguous properties that can be made into housing. There is also a strong existing retail component and a large population - residents, designers and shoppers - with disposable income.

"The recipe for success in any area is a sense of community, a lot of those multi-story fashion buildings, and you have to have a retail component to sustain population," he said. "A far more superficial reason is that you have a lot of exceptionally good-looking people walking around the Fashion District."

A Slate of Deals

In some cases, the demand for property has driven up land prices to dizzying heights. Buildings that once fetched $50 a square foot are now getting multiple bids for $100 or more a square foot, said local real estate players. One garment building on Eighth and Los Angeles streets sold for a record $110 a square foot earlier this year.

Jamison Properties purchased the 3 million-square-foot California Market Center in April, the biggest acquisition in the district at $135 million. The complex at 110 E. Ninth St. - which takes up the entire block at Los Angeles, Main, Ninth and Olympic - is considered the hub of the West Coast fashion industry.

Last week, the 165-apartment Santee Court (the first of several phases in the project) was sold to Dallas-based L&B Realty Advisors for an estimated $45 million.

"Given Santee's unique location, area retail tenant mix and demand for housing, this asset will give our client the long-term yield stability consistent with their strategy," said David W. Gleeson, the firm's executive vice president, in a written statement.

The Gerry Building, another property in the multi-edifice Santee Court collection owned by developer Mark Weinstein, was sold two weeks ago to LaeRoc Partners for $15 million. The building is 70% occupied with fashion showrooms, with rents at about $2 a square foot.

Kim Benjamin, president of LaeRoc, said the acquisition is the firm's first in the Fashion District. "The growth pattern in the district is fairly obvious, and if you're in the business, this is ground zero," he said. "It's across from the largest fashion product in the U.S. (the California Market Center), and on one of the key corners. It also just happens to be a beautiful building."

Throughout the district, foot traffic is up, Smith said. Weekend pedestrian counts show a 23% increase over 2000, according to the study, with an estimated 20,000 people flocking to Santee Alley's bargain shopping every Saturday.

Smith said recent LAPD crackdowns on illegal vending, drug activity and homeless encampments are helping to create a safer and more walkable business district. For Smith, it's proof that the 1995 creation of the BID and the formal adoption of the moniker Fashion District - for years before it was known as the Garment District - is paying off.

"With all this traffic it's becoming a more exciting retail area," Smith said. "There are a lot of improved storefronts and access to the streets. It's really been an urban-friendly redevelopment of the ground floors, all oriented to the street.

"All the things we say L.A. shouldn't do when it comes to planning, we've learned those lessons," he continued. "We are creating a pedestrian-friendly environment, which in this case is being led by small businesses and entrepreneurs who are turning the city around."

Projects at a Glance
There are well over a dozen projects planned or in the works in the Fashion District this year, from housing to wholesale centers to ground-up retail plazas. Here's a snapshot of a few of the key developments underway in the 90-block community.

Santee Court, Phase II: Demolition of the Textile Center Building, on the northwest corner of Eighth Street and Maple Avenue, began in early January to make way for 64 condos and 5,000 square feet of retail space. Construction is slated to wrap in December. Phase II is part of MJW Investments' $130 million conversion of nine former garment buildings into live/work lofts and retail space.

LA Face: Construction is underway on the LA Fashion Center at 1444 S. San Pedro St. LA Properties Investment and Management Group's 650,000-square-foot structure will bring nearly 200 wholesale condominiums and add to the thriving wholesale area around the San Pedro Wholesale Mart.

1000 Maple Center: KI Group finished construction earlier this year on a new retail center on the southeast corner of Olympic Boulevard and Maple Avenue. The 15,000-square-foot center features apparel and accessories.

Tiara Café: Renovation of the former Sam's Deli space on the ground floor of the New Mart is nearing completion, making way for an eatery by Fred Eric, known for starting Los Feliz's trendy Vida and Fred 62. Tiara Café is set to open in the fall and will feature a gourmet market.

Maple Alley Fashion Center: Renovation of retail space on the northwest corner of 11th Street and Maple Avenue has resulted in formal storefront spaces, some of which open into the adjacent Santee Alley.

Contact Kathryn Maese at [email protected].

page 1, 8/15/2005
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Old August 16th, 2005, 01:56 PM   #2
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awesome. but are these new plazas and centers going to just look like malls, or be open air / pedestrian-friendly areas, like bazaars?
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Old August 16th, 2005, 09:00 PM   #3
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good question. i think the stores will definitley front the streets with street access because the pedestrian counts are so high there, and im homing that the developents are dense and with an eye towards aesthetics.
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