City Negotiates Purchase of 113 North Gale Apartments for Redevelopment
Every Beverly Hills City Council evening meeting is preceded by a closed session where confidential issues such as litigation, employment and real property is discussed. This week’s closed session agenda featured a city negotiation over the purchase of land at 113 North Gale. That multifamily property is adjacent to city-owned land that fronts on Wilshire and which the city wants to redevelop most likely as housing above retail. If the city and landlord agree on terms then the 113 N Gale parcel will be part of it. What does that mean for tenants at the Gale property?
Update As of July 2024 the possible city purchase of 113 N Gale has not come back to city council for approval.
Multifamily households for years have tolerated Metro-related construction and the attendant nighttime noise and street closures. In the decade ahead many renting households across a larger swath of the city will suffer a much more significant impact: they will lose their home to demolition so that new housing can rise. And it will rise to much greater heights, and at much higher rents, than does our relatively affordable rental housing today.
To a City Council majority this is not a problem but the desired outcome. All councilmembers embrace it and with the notable exception of Councilmember John Mirisch that future cannot come soon enough. Indeed our Council has declined any measure that would slow it — or that would afford additional protections for tenants who are displaced.
We see this as a mass eviction that has been underway for some time but now we see it play out on a larger scale. The recently-approved 5-story projects at 332 South Doheny, 149-159 South Maple and 227 Tower Drive are the future. The low-rise character of our multifamily neighborhoods will be destroyed parcel-by-parcel.
In fact that process is accelerating now due to: 1) the combined effect of Metro nearing completion and the real estate speculation that drives-up land values; and 2) the unceasing stream of incentives from Sacramento that encourage the production of housing at a scale that has not been previously imagined.
In sum, Metro upped the ante and the legislature suspended the table limits. Property owners hold a winning hand. Tenants will fold every time because we simply can’t afford the action.
113 North Gale
The landlord 1317 BUNDY LLC is negotiating to sell the 9-unit distinctive rent-stabilized apartments at 113 North Gale to City of Beverly Hills and it comes to the table with a strong hand: five of a kind and all of them aces.
- First ace: Multifamily property values more than doubled. Landlord 1317 BUNDY LLC purchased this property in 2013 which was the same year that Metro secured environmental approvals for the Purple Line phase I extension to La Cienega. Purchase price was $368 per square foot. Five years later multifamily was selling for $600 per square foot on average. The landlord got in just as values climbed quickly. (These figures are based on title data. Reference our chart.)
- Second ace: 113 North Gale is located less than two blocks from the La Cienega Metro station which will open next year. With metro nearing completion the multifamily market is pricing-in the benefit of proximity.
- Third ace: 113 North Gale is adjacent to the Wilshire boulevard commercial corridor. In fact when it was purchased it was only one multifamily parcel away from commercial uses. In 2016 the apartment building on the intervening parcel at 111 North Gale was demolished and consolidated with the Wilshire commercial parcels. As a result 113 North Gale is adjacent to commercial uses today. As a parcel zoned commercial it would be worth much more than were it to remain zoned for residential.
- Fourth ace: 113 North Gale today is immediately adjacent to the Metro staging yard at the northwest corner of Wilshire and Gale. City of Beverly Hills owns that parcel and, with a private-sector partner, will likely redevelop it as high-density housing above retail.
- And then the WILDCARD: the city will reap large efficiencies if it can include the 113 North Gale property as part of the future redevelopment. A bigger footprint will mean a more productive and cost-efficient project and that makes this 50 x 100 foot residential parcel worth a small fortune to the city.
Five aces will always take the pot! In fact we would be surprised if the landlord didn’t walk away with four or five times his initial $3 million investment — and that’s after ten years of taking about 70 cents of every rent dollar in profit, according to figures posted on Redfin.
Who Is Cashing-Out?
Larry Harrow, the president of Hollywood Bed & Spring Mfg. company, controls 1317 BUNDY LLC. Indeed he has been the only LLC manager since the company was formed in 2007. Turns out that bedding is his side gig! In addition to 113 North Gale, business licenses show, the Harrow family controls four other Beverly Hills rental properties:
- 416 South Spalding (HARROW, LARRY)
- 461 North Doheny (HARROW, IRVING)
- 463 North Doheny (HARROW, HANNAH)
- 463 South Rexford (11TH STREET INVESTMENTS LLC)
Harrow Sells: What Happens Next?
The process for evicting for redevelopment typically begins with the landlord or the landlord’s agent feeling-out tenants about a buyout. Typically these are low-ball offers and it may come before or after the sale. Regardless, the buyout talks may continue for months — even a year. That’s because development takes time — a lot of time — as a project moves from initial application through the required hearings.
For a tenant the endgame is signaled by an Ellis Act notice. (Read more about Ellis in the RSO guide for developers posted to the website. The Ellis Act provides a minimum of 120 days notice (one year for seniors upon request) before the tenancy is actually terminated. The relocation fee, as required by the city’s rent stabilization ordinance, will be paid once the tenancy is terminated and occupants have vacated.
Buyouts can mean more money and additional conditions that favor a tenant, but only if the landlord is willing to pay for a voluntary vacancy. (Ellis terminations put restrictions on the landlord.) Also the tenant must not be afraid to use that leverage. Read more about buyouts in our explainer: Cash-for-Keys Buyouts: What You Need to Know.
However if the city buys the property then any households that remain at 113 North Gale will have political leverage.
What is political leverage? The ability to embarrass City Council into striking a better deal with tenants that may include more money, more time in the apartment or other protections. If city hall quadruples the landlord’s original $3 million investment, then city hall can afford to show some largesse to tenants too. Every City Council meeting is an opportunity to address our elected officials. (In contrast, a private-sector landlord may work exclusively through an agent and the identity of the landlord may never be known to tenants.)
We haven’t yet spoken with 113 North Gale tenants. Maybe Harrow already served them with Ellis notices. One thing is likely: these tenants will be looking for replacement housing in a tough market.
Occupants at 111 North Gale next door have already suffered that fate. Metro purchased the property and razed it in late 2016. Google Streetview captured one household’s move the year before these apartments fell to the wrecking ball.
The demolition permit is that family’s keepsake.
Extras
- Closed session agenda July 18, 2023
- City of Beverly Hills Gale Yard Long-Term Use Plan