Opinion: What Gives With City Real Estate Deals?

Two vacant lots at 1201 – 1207 N. Detroit may now fetch $4.9 million, and a 5-story, 40-unit housing project built in their place with no parking required.

EDITOR’S NOTE: The West Hollywood City Council will discuss authorizing a loan to nonprofit developer EAH Housing for the purchase of two lots on Detroit Street for development as affordable housing at its meeting on Monday. To read the staff report on Item 5.A, CLICK HERE.

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West Hollywood’s City Council at its Zoom meeting this coming Monday will consider approving a major expenditure for a worthwhile goal – additional affordable housing that should help with the housing crisis. But the nearly $4.9 million deal comes with a price tag that apparently disregards market rates and with an approach that lacks robust community review and involvement.

The deal involves the city providing a $4.9 million “loan” (which requires repayment if the project is ultimately NOT built) that’s being drawn from a dwindling Affordable Housing Trust Fund. The recipient? Not the usual West Hollywood Community Housing Corporation, but another nonprofit real estate developer called EAH Housing which plans to purchase the two vacant lots at 1201 N. Detroit and 1207 N. Detroit (at Lexington) on the city’s east side.

EAH Housing appeared on the scene last year when it acquired a $6.4 million loan from the city to purchase three privately-owned homes on Martel just south of Plummer Park to develop an affordable housing project.

But is this developer involved in helping craft the city’s new Housing Element plans like others in the community are doing? Have its principals shown up at any neighborhood meetings or relevant commissions? Will EAH Housing do a presentation at City Council this time (it didn’t for last year’s loan)?

In the interests of full disclosure, I was involved with the residents who encouraged the City to lease the long vacant lot at 1201 N. Detroit for a community garden that graced that corner for several years. That community garden and the adjacent parcel at 1207 N. Detroit are on 13,000 square feet of land and were sold to a commercial real estate developer – SHP Capital LLC (Michael Soleimani) — during 2015/2016 for a total of $3.1 million.


Condominium project approved in 2017 for 1201 – 1207 N. Detroit on site of former community garden and a triplex, but no longer in the works (rendering by A-K-A Architects).

The community garden was then eliminated and the triplex at 1207 N. Detroit — which included a vintage craftsman home in good condition when first sold — was demolished. The developer then got city approval in Dec. 2017 to build a new four-story, 10-unit townhome condominium complex. But now EAH Housing plans to build a five-story, 40-unit complex which is ultimately estimated to cost nearly $30 million, or about $750,000 per unit.

WHO’S GIVING AND GETTING?

Here are some questions arising from the incomplete staff report prepared for the Council and the public’s consideration:

  1. Where is the professional real estate appraisal for this deal?
  2. What nearby comparable sales prices were used to determine the current fair market value of the two parcels?
  3. Is EAH Housing negotiating the deal with the current owner or is it the city? What real estate firms are involved and what commissions are being paid?
  4. Has the city done its own independent analysis of what the two parcels are worth?

Adjusting for inflation, the original $3.1 million price for the two Detroit parcels would now be equivalent to nearly $3.4 million. Public records show that the most recent nearby comparable sale occurred when 1246 N. Formosa on a 6,987 sq. ft. lot sold for $1.79 million in January 2020.

Then in March 2020, a historic home at 1243 N. Fuller on a 7,153 sq. ft. lot sold for $1.83 million. The average of the two sales equals $1.8 million, and doubling that amount for two parcels comes to $3.6 million, not $4.9 million like the proposed loan.

We’re talking about a cool, $1.3 million dollar difference here! Over the years, I have felt that the City tends to overpay for property acquisitions and have testified to that effect at Council meetings. Given current economic conditions, the City should consider providing a loan of no more than $4.0 million for the deal involving 1201 N. Detroit and 1207 N. Detroit.

1207 N. Detroit as it appeared when sold to the developer in 2015. Adjacent to it at the corner with Lexington is the now gone Detroit Community Garden which provided much needed green space — and flowers and vegetables – in a very dense neighborhood.

Also, more robust community conversations need to occur and the sooner the better when it comes to city acquisitions. From what I’ve heard: some folks want a dog park, others want a return of the community garden, still others want a homeless shelter and services center, and, of course, more permanent affordable housing, especially for those in the workforce with moderate incomes.

And what about parking? Recently enacted rules state that 100% affordable housing projects like that being proposed by EAH Housing for this site (and the earlier purchased Martel site) require no parking.

And then there’s the equity question of whether other sections of the city are doing their fair share to provide sites for affordable housing. Detroit Street on the east side already boasts 3 such sites, including the new Blue Hibiscus near Santa Monica Boulevard, and two other sites up the street called Detroit/Lexington Housing and Detroit Senior Housing.

All these topics are ripe for community conversations, but, in the beginning, it is about the money. So, let’s be sure that the City provides a loan that is transparent and fiscally prudent.

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