"The Milano"

1248 N. Laurel Ave, 90046
Late 2008 Construction

16 Units

The Conceptual design for "The Milano" was to give their clients the ultimate in luxury & metropolitan living spaces, designed w/ very large floor plans inspired by the best of Italian architecture. Features include large master suites, state-of-the-art kitchens, dark bamboo floors, huge balconies, frameless glass rain shower w/ separate tub & much more. Located in the heart of West Hollywood walking distance to Sunset & Santa Monica. Seller financing available.

Several readers have mentioned this building, so thought I'd do a little more homework. I was able to do a drive-by this weekend, albeit at dusk, so I didn't get the best view of the exterior. There seems to be a lot going on with this building, so buckle up for a fairly lengthy post. And, as always, I look forward to comments from readers with more knowledge, or to correct me where I'm off-base.

My initial observation is ... the architecture isn't terrible. I don't know about "inspired by the best of Italy", but it looks decent enough, as a lot of these builders are going for some sort of faux-[fill in the European country] look.

The problem is, it dwarfs the neighboring buildings, most of which are typical 2-story apartment/condo buildings. When you check out the pictures on the building's website, it's obvious that they were trying to build as high as permitted to get some units with downtown or hill views. I wonder if a special variance was needed here. All that I found was a Feb 2005 WeHo Planning Commission report approving the demolition of the exisiting 10-unit building at the address and the construction of this building.

This building would be right at home in Santa Monica, another area where I have some familiarity, as a lot of new townhome and condo projects are 3-4 stories. But here, it's a bit of a sore thumb. I don't know what the prior building looked like, so I can't comment as to whether the space was just extended vertically, or if they used more land on the ground level as well.

Frequent readers will have noticed my preference for bullet points or numbers when discussing properties with a lot going on, and here is no different. Let's examine, shall we?

1) What's REALLY been sold?
There are 16 units in the building. The price sheet (linked as a PDF) that's put out by the realtors representing the Milano indicates that 7 units have been sold, and 2 are in escrow. Anecdotally, my drive-by showed evidence of activity in at least two units (no, I wasn't spying!), so someone's living there. The units were sold too recently to show up in any public records as of yet, so I'll keep my eyes open for that, which should be telling. I still believe that in the current market, builders are playing games by either putting units in "shadow" inventory by saying they're sold, only to re-list them later, or claiming they're "sold" to the builder himself, and are being rented out for cash flow.

2) What's the PRICING like?
The units that show as still available range in price from $769k (2BR/2BA, 1700 sq ft) to $1.079mm (3BR/2BA, 1740 sq ft). They go out of their way to mention the # of patios for each unit. Interestingly, both the lowest and highest-priced units have only 1 "patio" (note to realtors, "patios" are on the ground floor, regardless of their size ...). There are some remaining units with 2 or 3 "patios" - ahem - balconies.

It's a little difficult to get a sense for the overall pricing, given that only the units showing as still available have prices. In general, the price per square foot seems to range from $450 to $620.

3) What's the LAYOUT on these units?
If any readers have seen the interior, I'd be interested in your comments. The layouts or appointments must be different, or a significant premium is being put on the location (for units on the same floor) in the building. For example, Unit #103, a 3+2, 1740 sq ft unit with 3 patios, is listed at $869k, while Unit #102, a 2+2 with 1620 sq ft unit with 2 patios, is listed $100k higher, at $969k.

The pictures available of course show professional staging, and look very slick. I wonder if, like many of these new buildings, the finishes are high-end Home Depot or Ikea, based on form, not substance. Not that there's anything wrong with that - although at close to a million bucks, I'd like a little higher quality.

4) What kind of PAIN can the builder take?
It looks like the prior building was bought for $640k. Maybe someone with more knowledge can clue us in as to demolition and building costs, but I'll take a guess:

$640k land
$100k demolition/permitting
building = approx 30,000 sq ft * $250/ft = $7.5mm

So an all-in cost of just over $8mm. Factor in carrying costs, and you could argue that the builder breaks even by selling 10-12 units at original listing prices. So even if the sales figures are right, the builder's not out of the woods yet, although might be close.

Could this lead to aggressive discounting on remaning units? Recall my post on 718 N Croft, also a new construction building that was seeing price reductions on remaining units. The builder needs to be careful, given that at least a few of the other units have sold, theoretically at higher prices than current market will bear. It's buyer beware, of course, but you could be facing some PO'ed tenants (not that they can really do anything about it).

5) So, are they WORTH it?
I'll let you be the judge. Remember that here at WeHo-Ho, we like to look at:

a) what a comparable unit would rent for, and
b) who "should" be able to afford these places.

At an average list price of approx $900k, and with some reasonable assumptions, including tax deductions, you're looking at an all-in monthly nut of approx $4,500. In a "real" lending environment, I think that would require approx $200k annual income.

So, ask yourself: would similar places rent for more or less than $4,500 (and don't forget the opportunity cost of putting almost $200k down), and should these be affordable to households making less than $200k/year?


UPDATE 3/3/09:

Thanks to "Bubblewatcher" and an Anon reader for their comments about the probable original purchase price for the entire property, and the recording of other sales.

In looking more closely at Propertyshark, here's some updated data:

April '08
Transaction for $1.7mm (assume purchase of the lot + existing structure)

June '08
Unit #301 sold for $867,000
Unit #302 sold for $1,150,000
Unit #202 sold for $940,000

November '08
Unit #201 sold for $640,000

So that accounts for 4 of the units, and I guess it's possible that a couple others have closed and not yet been recorded ...