Rosenfeld puts his chips on waterfront revival
With the purchase of the storied Chapala One luxury condominiums in downtown Santa Barbara, Los Angeles developer Michael Rosenfeld has placed a bet of an estimated $30 million on the future of the city’s waterfront neighborhood.
Rosenfeld’s Los Angeles-based Woodridge Capital Partners purchased the mixed-use condo project at the corner of Chapala and Gutierrez streets in mid-November for $22.8 million, property records show. The purchase comes almost two years after his firm purchased La Entrada, the long-dormant hotel and retail project on lower State Street at the gateway to Stearns Wharf.
“Timing is everything,” Rosenfeld told the Business Times in a recent interview. “We have come into the market at a time when we’ve been able to acquire these properties and when we believe there is opportunity for growth.”
Rosenfeld has plans to put Chapala One’s 46 high-end condos, which range from one- to three-bedroom units, back on the market within the next year, he said. The project also includes 8,900 square feet of commercial space.
Chapala One has a long and troubled history, and the condos remain vacant and unsold four years after construction was completed. The project was finished in mid-2008, after developer Don Hughes spent six years winding through the planning process. Along the way, Chapala One garnered criticism from neighbors and low-growth advocates, who said the size of the project ruined Santa Barbara’s small-town feel, and ignited a heated debate over building-height limits in the city.
The project was also the fly in the ointment for Melchiori Construction, at one time the largest general contractor in the Tri-Counties. Melchiori and Hughes went head-to-head in court over unpaid construction bills for the project, a battle the contractor ultimately won in a $5.8 million court victory. But Melchiori’s numerous subcontractors have since gone after the construction company in court over its alleged failure to pay bills, and the firm filed for Chapter 7 bankruptcy liquidation in October, amid a flurry of creditor lawsuits.
Austin Herlihy and Steve Brown, brokers with Radius Commercial Real Estate & Investments in Santa Barbara, worked with Rosenfeld on the deal. Herlihy said the Los Angeles developer is known as someone who doesn’t waste time. The day after he purchased Chapala One, Rosenfeld had scaffolding put up and sent construction crews out to begin fixing defects, Herlihy said.
“Everything will be addressed,” he said. “Michael only does things first-class. There’s a lot of due diligence that was done in purchasing this outfit. He will make sure that everything, any construction problems, are taken care of before he starts selling.” Housing Demand Rosenfeld declined to say what the listing price for the Chapala One condos would be when they go back on the market. The previous owners had planned to sell the units for $1.2 million to $3.5 million.
Other downtown luxury condo projects also hint at the listing price for such homes. The high-end Alma del Pueblo condominiums under construction next to the public food market at Victoria and Chapala streets will be priced at between $840,000 and $2.6 million, developer Urban Developments said recently. Those units include smaller studios and one-bedrooms.
Mark Schniepp, chief economist at the Santa Barbara-based California Economic Forecast, said that with a tight supply of housing on the South Coast and a likely bargain price for the project, Chapala One is likely to make money for Rosenfeld.
“It’s probably a decent play,” Schniepp said. “It does seem to be symbolic of what’s going on with the housing inventory. There’s hardly any inventory in many of these markets.”
The median home price sale price in Santa Barbara is $689,000 as of mid-November, according to real estate website Zillow. Deeper Pockets While Rosenfeld has spent upwards of an estimated $30 million on the two Santa Barbara properties, he generally operates on a much larger scale.
His projects include the Fairmont San Francisco Hotel, The Fairmont Orchid in Hawaii and the Carlyle on Wilshire in Los Angeles.
Perhaps his most ambitious endeavor to date is the 1960s-era Century Plaza Hotel on Avenue of the Stars in Century City. Rosenfeld’s firm bought the 762-room hotel for $366.5 million in 2008, initially planning to demolish it in favor of a $2 billion, two-tower condo project. But after community push-back, his team instead opted for a multimillion-dollar restoration of the landmark.
Both of Rosenfeld’s new Santa Barbara holdings were former projects of Bill Levy, once a major Santa Barbara developer who filed for bankruptcy protection in 2006 after failing to get La Entrada off the ground.
Chapala One is estimated to have cost $40 million to build, according to media reports at the time, meaning that Rosenfeld likely paid half of the construction price for the project.
In the wake of the 2008 financial crisis, many smaller developers have faltered or left the market, leaving larger players with deeper pockets to buy up the remains at often rock-bottom prices.
“The trend of having out-of-town, deeper pockets – we’re seeing that all over the place,” Schniepp, the economist, said. “The recession really cleaned a lot of little guys, the regional developers, and restructured the whole field. So we need these much deeper pockets to revitalize these projects.”
Herlihy, the commercial real estate broker, said he brought Chapala One to Rosenfeld’s attention after the developer purchased La Entrada, just a few blocks away, in January 2011.
“Michael Rosenfeld has been incredibly successful in many projects,” Herlihy said. “He’s really going to breath new life in to that entire waterfront area.”
La Entrada, which includes the jazz-era Hotel Californian, has changed hands three times over the last decade, with lender Mountain Funding taking possession in 2007, after Levy filed for bankruptcy a year earlier. Levy’s original vision for the project was a 62-unit timeshare condo building, centered around the old Hotel Californian, with an addition on a parcel across the street.
When Mountain Funding took over, it went on to submit its own plans, doing away with the timeshare concept. The project is approved for a 123-room hotel and 20,000 square feet of retail space.
Rosenfeld started demolition of the existing structure this year. The purchase price for the hotel was not disclosed, but the property was listed with Radius for $8 million.
“Everyone’s kind of waiting for Michael,” Herlihy said. “I think everyone knows that once Entrada’s built and once Chapala One is alive and vibrant – when these two eyesores are no longer there – that’s really going to be an asset to the community.”
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