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Arts District 2.0: Lawsuits Fly, Kor Sells, Neighbors to Weigh In

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When downtown furniture store Loft Appeal began leasing a space in a brick warehouse at 521 S. Hewitt Street in the Arts District in 2007, the move was seen as mutually beneficial for both Loft Appeal and its landlord, Kor Group. The developer was selling condos at its Barker Block project across the street and all those new loft dwellers needed furniture. Additionally, the retail (stores Lofty Dog and Cleveland Arts would eventually move to Kor's warehouse building, seen above) helped attract visitors to the former industrial area. Today, the area--now an affluent and established neighborhood--is undergoing another wave of change. Kor is battling Loft Appeal in court in an attempt to evict the store. Additionally, Kor sold the brick warehouse to developer Howard Klein in September, a move which has some neighbors at Barker Block and Molino Lofts wondering if a new residential building will rise on the site.

Warehouse Sells

The sale to Klein, who owns numerous rental buildings in the neighborhood, including the recently opened Factory Place project on Sixth Street, closed in late September, according to Fabian Iobbi, vice-president of development at Kor Group. Currently, the site isn't entitled, and "as of right now there is nothing specific planned for the site,” writes Matt Klein, a property manager at HBK Investments, and the son of Howard Klein, in an email.

That hasn't stopped neighbors from assuming the worst. A widely circulated email sent from an Arts District resident last week erroneously announced that the site had permits for a five-story building. "There is probably a rooftop pool in those plans, making it over 6.5 stories high, which would impact our views," wrote the resident, urging locals to come to a planned November 12th meeting with Klein. (*Update: See below about that referenced Nov 12th date)

Meetings with Barker Block and Molino Lofts residents are scheduled to discuss desired uses for the space, according to Matt. Additionally, his email included an assurance that his father only has the “best interest in mind for the property, and the district.”

With the sale, one longtime tenant is already is out. Lofty Dog, a pet store and dog day care center, opened in September 2007 in the space at 525 Hewitt, and will depart at the end of December. “When a new owner comes in and asks you to move, it means that your use isn’t what they want in the space,” says Lofty Dog principal Cabrini Schnyder.

She says she’s looking to open in another space in the arts district, and adds that she has absolutely no problems with Klein. “He’s been amazing and wonderful to work with."

Loft Appeal Moving On?

Less clear is the fate of Loft Appeal. “I would hope [Howard Klein] wouldn’t chase out retail,” says Rich Reams, owner of Loft Appeal, who says he hasn’t spoken to Klein since the sale of the building. Earlier this month, a judge ruled in favor of Kor’s motion (Kor sued through their LLC on the property, 524 Colyton LLC) against Loft Appeal, which asked for more than $80,000 in back rent, and eviction of the retailer. A final judgment was expected this week. Ream’s lawyer, Fred Szkolnik, says Loft Appeal intends to file an appeal by tomorrow.

A bizarre-sounding arrangement, Loft Appeal has never paid a single month’s rent since moving into the space in 2007, according to Szkolnik. Both Reams and Szkolnik contend that the first year of rent was free. What was supposed to happen after that is unclear, but Reams insists his initials were forged on a 2007 lease, and believes the agreement with Kor dictated that no rent would be paid until improvements were done to the building.

Either way, the relationship between Loft Appeal and Kor is now far different than those early days, when Reams would personally escort buyers from his store to the Barker Block sales office.

In addition to suing Loft Appeal, Kor sued Arte Calidad in September, seeking back rent payment from the non-profit arts foundation, also a former warehouse tenant. An executive at Arte Calidad didn’t respond to emails. Meanwhile, an employee at Cleveland Arts, the third tenant in the warehouse, declined to comment, but a source says the furniture store is staying.

Kor's Shift

Kor’s Iobbi declined to comment on the lawsuits, but he was willing to explain Kor’s strategy in terms of selling some of its Art District properties. In August, Urth Caf&eacute, which was renting space at 451 Hewitt Street, purchased the building from Kor. Additionally, 405 Mateo Street, another Kor property—and a site that’s entitled for over 100 condominiums—is still on the market after being listed for sale last November.

Given market conditions, Kor is no longer interested in developing its former holdings as residential and instead will focus on purchasing distressed properties, projects that are 80 percent-90 percent finished, according to Iobbi. “If it has to be entitled, we’re not interested. Ground-up doesn’t pencil out.”

As for the Hewitt Street space, Iobbi says: “It makes more sense for Howard Klein to come in and do a rehabilitation of the site. To improve it, to subdivide it and lease it as retail, or creative office, or warehousing.”

The new owner may have not decided what to do with the space, but Iobbi is honest in his assessment that the Hewitt Street warehouse, which has served as a transformative building in terms of gentrifying the area, would be a great site for condos. "That is a great residential site, it's fantastic for a real estate development," he says.

*UPDATE: It it wasn't clear, meetings with locals are planned, but not on November 12th. Via an email from Estela Lopez, Executive Director Central City East Association: Our office has been contacted by phone & email by Barker Block residents who have heard the erroneous information regarding a meeting with Howard Klein on Nov. 12. Please help us to set the record straight. The meeting on Nov. 12 is a meeting of the Arts District Business Improvement District, which is public and to which all are welcome. Our agenda does NOT include any discussion of this project, however. The meeting is solely to hear from the business community, police and elected officials regarding community-wide issues in the area.

Thank you.
Estela Lopez, Executive Director
Central City East Association25 S. Crocker Street
· Curbed Inside: Downtown's Barker Block Lofts [Curbed LA]