New York Lender Teams Up With Harridge Development Group for Seventh Time
Harridge Development will be converting an office building and vacant land along Wilshire Boulevard in Los Angeles into new housing. (CoStar)
By Mark Heschmeyer
October 5, 2023 | 2:16 P.M.
Madison Realty Capital, a real estate private equity firm, has upped its loan commitment on a Los Angeles property converted once from a retail store to offices and being converted again into residential rentals.
Madison Realty upsized its initial bridge loan of $34 million to a total commitment of $115 million for a construction loan to a joint venture between Harridge Development Group, Silverpeak Real Estate Partners and Urban Green Investments.
The loan modification will be used for the conversion of an office at 3240 Wilshire Blvd. and an adjacent ground-up mid-rise multifamily development at 684 New Hampshire Ave.
Previously home to luxury department store I. Magnin & Co. the Wilshire property will be converted into 107 one-bedroom loft apartments with 29,632 square feet of retail space.
The neighboring mid-rise multifamily development will consist of 170 apartment units ranging from studios to two-bedrooms and include 943 square feet of retail space and 256 below-ground parking spaces.
The multifamily development comes as 330 million square feet of excess U.S. office space could become available by the end of the decade as working from home remains popular, according to Cushman & Wakefield. That has prompted office owners to convert properties into residential space as the nation grapples with a housing shortage that is estimated to be as large as 6 million units.
The Path for Converting Office to Residential Is Narrow
The opportunity to repurpose existing office buildings into multifamily apartments is enormous, but, in reality, only a narrow set of existing office buildings are viable candidates for such conversions, according to recent CoStar analysis.
For Harridge, though, this is not its first major conversion. The firm also plans to build 636 units and roughly 58,000 square feet of commercial space at Baldwin Hills Crenshaw Plaza, an aging mall southwest of downtown Los Angeles. The project is the largest proposed multifamily development within a mile and comes at a time of soaring demand for housing in Los Angeles, among the nation's most expensive cities to rent an apartment, according to CoStar data.
In addition, the new loan transaction for the Wilshire property marks Madison Realty and Harridge’s seventh project together in greater Los Angeles.
“Los Angeles’ Koreatown neighborhood is extremely well-located and vibrant, sitting at the intersection of the city’s entertainment, nightlife and residential neighborhoods,” Josh Zegen, managing principal and co-founder of Madison Realty, said in a statement. “The area has continued to grow rapidly as the LA Metro Purple Line Extension has expanded.”
Harridge and its partners have secured all approvals to redevelop the Wilshire site for residential and retail use and has invested significant equity in the project.