Many entertainment companies are moving from west of the 405 freeway and to Century City, Miracle Mile, Hollywood, Beverly Hills.  It will not be long before we hear of an entertainment firm moving Downtown.  Examples of such departures include Netflix, Viacom, and MGM.  Firms are looking for lower rents and better access to the studios and other entertainment firms.  On the other hand,  technology firms tend to prefer being west of the 405 freeway and in Santa Monica, Venice, and Playa Vista.  New media firms have demonstrated a preferences for both west and east of the 405 freeway.

We are pleased to announce the complete renovations of another apartment complex located in Northeast Los Angeles. The property includes ten units located at 4234 Lockwood. It is known for its hip atmosphere and as an up-and-coming destination for millennials. This property demonstrates PMI’s Creative Multifamily Strategy and is located just steps from  Sunset Junction’s upscale dining, wine bars, boutiques, farmers markets, specialty food stores and much more!

Creative Multifamily is a new line of small, low-rise apartments that are stylish, contemporary, playful and yet, still affordable.  Unlike many of the mega story amenity rich multifamily homes being built, our Creative Multifamily living spaces on London street offer  modernized bungalows with revamped  interiors and large outdoor patio spaces.  We stripped away the drywall ceilings in some units to expose and elaborate on the beauty of the high truss ceilings above.

Residents at properties like these are typically young creative’s that appreciate being located within walking distance of several diverse cultural amenities.

4234 Lockwood

We are pleased to announce the full lease up of a twenty seven unit apartment complex, located in Northeast Los Angeles. The property is located less than a mile from Sunset and Silver Lake Boulevard. It is known for its hip atmosphere and as an up-and-coming destination for millennials. This property demonstrates PMI’s Creative Multifamily Strategy. Creative Multifamily is a new line of small low rise apartments that are stylish, contemporary, and playful but yet still affordable.  3100 London continues PMI’s experiment that some millennials prefer the low rise individual single level apartments with private outdoor space over the brand new multistory complexes packed with amenities like gyms, spa pool, and roof top fire pits.  At London, each unit appears as a casita with no units above, and each unit has a 150 square feet of private outdoor space off the living room or bedroom to extend the interior’s usable space.

Generous Private Patios

Yet 3100 London offered brand new contemporary interiors

3100 London

Finally, we were able to offer residents generous parking that is so often missing from older complexes.

. Residents here want to walk to amenities and identify with the artistic flavor of the neighborhoods. The property is located just steps from upscale dining, wine bars, boutiques, farmers markets, specialty food stores, and much more!

3100 London

10 minute train ride to Downtown Santa Monica and 11 minutes to Culver City

One of the biggest complaints I get from leasing brokers is that we do not have enough parking for the new densities demanded by media, tech, and entertainment companies. Some tenants need 5, 6, or 7 spaces per 1000 square feet, yet very few buildings are even parked at 5 spaces per 1000 square feet.

We have finally solved the problem at one of our buildings at 10951 Pico Boulevard in West Los Angeles. In addition to our 3 spaces/ 1000 square foot parking onsite, we can provide virtually unlimited parking at the Westside Pavilion. The Westside Pavilion is not even a quarter mile away from the property, less than a two minute walk; plus, it is a delightful walk past many popular bars, coffee shops, and restaurants.

In addition to the abundance of parking, the property is located less than half a mile from the Sepulveda Expo Station — not even an 8 minute walk. The train ride to Culver City is only 11 minutes and Downtown Los Angeles is a quick 37 minutes. THE Expo opens on May 20, 2016, at which point the train will also go to Downtown Santa Monica and take just 10 minutes. The train runs every 12 to 13 minutes.

We currently are leasing a 4,560 square foot creative space for November 2016. The ground floor space has a great creative look and has the parking and transit that your tenants are looking for.

Not everyone is happy about the gentrification of Echo Park, but it is happening.  PMI and its affiliates and competitors have transformed tired and obsolete housing into new efficient and contemporary housing.   Yes, we use horizontal wood fencing with stainless steel letters (see story below). Restaurants and retailers have in tandem opened new stores to accommodate the new residents.  Media and entertainment firms push into nearby Hollywood to provide employment and opportunity for the new residents. However, with lower crime, neighborhood beautification, and more employment opportunities–others will also benefit.   You can read the Curb LA story below about

Source: Crucial Chunk of Echo Park Getting a Gentrification Makeover – Curbed LA

New Rose Cafe at 220 Rose in Venice

It never hurts having a hot restaurant/ bar open across the street from your creative offices. The Rose Cafe at 220 Rose Avenue in Venice, opened (or reopened) late last year and is generating lots of crowds as you can see from the picture.

I have been an owner and investor in office buildings for 35 years. I can tell you from experience that it is very difficult to generate consistent cash flow from office investments. Office buildings require large and consistent capital outlays for commissions, tenant improvements, and capital improvements. This fact is as true for creative office buildings as it is for traditional office buildings.  Office buildings have complicated HVAC systems, elevators, and roofs that require frequent reinvestment.  Competition and changing tastes causes frequent updating of common areas and even tenant suites.  Commissions need to be paid on every lease transaction. Tenant improvement monies need to be spent on almost every transaction, and they continue to grow. Tastes and space technology are in a process of constant change and require more capital investment.

Cap X will eat up over 300 basis points of your return over time. Most people I know who own office buildings make most of their return on the sale. Institutional owners have an advantage in the ownership of office buildings. First, institutional owners have more access to cash than private owners. Office building capital outlays require a constant source of cash–especially if you want to make cash distributions. Second, institutional owners look at the quarterly total return (including unrealized appreciation) and not just their quarterly cash return. In other words, institutional owners try to estimate their increase or decrease in asset value on a quarterly basis and publish a total return for the quarter. The investment managers will publish these returns for their institutional investors.  These institutional investors focus more on this quarterly total return estimate than the cash distributions, whereas cash flow investors focus heavily on the cash return.

Sometimes as a cash flow owner, we must choose to cash flow add versus value add. In other words, we may choose one tenant that will maximize our cash flow over the next five years versus one that will increase net value of the property on an appraisal basis.

You may ask about the fairness of these valuations. Barron’s recently did an expose on Brookfield, one of the largest office building owners in the World. The article was entitled “How Fair Are Brookfiled’s Values”, April 4 2016:   http://www.propertyprospects.com.au/investment-properties-for-sale/how-fair-are-brookfields-fair-value-estimates/

In a business that has many surprise cash requirements, the ability of institutional investors to offset cash returns with appraisal returns provides a big advantage at satisfying investor expectations during the operational phase of the investment.

We are pleased to announce the full lease-up of 1325 Sutherland St in Echo Park, located one block north of the very popular Sunset Junction. The property is located steps away from Echo Park’s most popular and hippest restaurants, bars, and nightclubs, including Sunset Beer (named the 2^nd best bar in Echo Park), Ostrich Farm, and The Echo! Walking distance also to Lassen’s Natural Food Store, Short Stop Bar, and El Compadre restaurant!

1325 Sutherland demonstrates PMI’s Creative Multifamily strategy. Creative Multifamily is a new line of small low rise apartments that are stylish, contemporary, and playful but yet still affordable. Residents here want to walk to amenities and identify with the artistic flavor of the neighborhoods. The property is located just steps from upscale dining, wine bars, boutiques, farmers markets, specialty food stores, and much more!

In early 2016–the S&P fell almost 10% while NASDAQ fell over 20%. Due to he disappointing IPO performance of some technology companies–venture capital companies declared a cutback  of venture funding and a revaluation of technology startups.  Boards began to encourage management to refocus on profitability over growth to minimize future capital requirements.  Future capital may need to be raised at lower valuation and therefore dilute stockholder values.  In turn,  this new paradigm caused some startups to cut back space requirements and put space onto the sublease market.

Recently, the S&P recouped much of the losses, and NASDAQ has reduced it loss to 6.5% from its end of the year close.  As shown by the chart,  San Francisco office rents tend to lag NASDAQ performance by six to twelve months.  If NASDAQ can hold or gain ground–tenant pull back will be relatively modest.    Other technology companies will have the capital to buy up weaker companies and continue to invest even if at more reasonable valuations.