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Santa Monica Rent Control Building Sells for More Than $32 Million
By Jorge Casuso
March 30, 2021 -- A 28-unit Santa Monica rent control building -- where some rents exceed $12,000 a month -- sold last month for $32.6 million, according to County records.
The rents, however, are far below those at Champagne Towers, another rent control building down the street.
Rents at the 60-year-old Luxury Living building at 901 Ocean Avenue -- which sold on February 19 -- range from $3,772 per month to $12,386 per month, according to Santa Monica Rent Control records.
The three units with registered rents exceeding $12,000 per month may have been renting short-term or furnished, said Rent Control Board Administrator Tracy Condon.
"That wouldn't be a lawful use now" under an ordinance approved by the City Council last fall that requires leases to be at least one year.
The law is being challenged in federal court by the owners of 32 apartment buildings and projects in Santa Monica ("Apartment Owners Sue City Over Leasing Requirements," December 16, 2020).
After extensive renovations, it was brought back under rent control two years later when, according to County records, it sold for $10.971 million.
An agent for Marcus & Millichap representing the buyer, Coastline Real Estate Investments, told the Los Angeles Business Journal he is unaware of any changes planned for the property.
“Ocean Avenue is the best street in town," said Rabbie Banafsheha. "It’s a legacy type of property.
“The buyer had the wherewithal to buy something that is a generational asset,” he told the journal.
According to CoStar Group Inc., the seller -- American Alliance Property Management -- wanted to leave California due to recent rent control laws, the Journal reported.
The property will likely remain under rent control, said Condon, since the 1985 Ellis Act doesn't allow the the owner to return the units to the market as condominiums.
The building was 96.4 percent leased at the time of the sale, according to CoStar.
Thirteen of the units at Luxury Living have a maximum allowable rent (MAR) of less than $6,000 per month and 13 have an MAR of between $6,000 amd $10,000 per month.
The other three units rent for between $12,076 and $12,386 per month, according to the Rent Board.
Owners of rent control buildings in California can raise rents to market rates under the 1995 Costa Hawkins Rental Act, which went into full effect in 1999.
As a result, the prices of rent control units in Santa Monica have skyrocketed.
The rents at Luxury living are far below those at Champagne Towers, a rent control apartment complex built in 1971 by a development firm controlled by the late bandleader Lawrence Welk.
Rents at the the famed 16-story complex at 1221 Ocean Avenue -- which has been home to celebrities from Britney Spears to Larry David -- go for as much as $41,636 per month.
Two other units at the complex rent for more than $30,000 per month, while 72 units fetch more than $10,000 per month, according to the Rent Control Board.
Condon said she does not believe the tenantts are on short-term leases.
The 50-year-old apartment complex closed for remodeling in 2015, causing a brief pause in the averge cost of an apartment in Santa Monica's red-hot rental market.
Champagne Towers also completed a $90 million retrofit/remodeling in 1999 after being badly damaged in the 1994 Northridge earthquake.
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