If a handful of downtown condo developers have filed for bankruptcy, the latest news concerning Chapter 11 filings has to do with apartment buildings. The Downtown News reported last week that the owners of the The Flat, that City West rental project at 750 Garland and scene of many a Red Cup party had filed for Chapter 11. Additionally, another downtown rental building, the Title Guarantee Building, a 74-unit rental on West 5th street, is in Chapter 11.
The building's owner filed back in February, but two weeks ago, the builder's lender, Bank of America, filed court papers indicating that it will try and foreclose on the property (a hearing for the foreclosure motion is set for June 23rd). At least one developer we spoke with said the problem with apartment building financing was being exasperated by falling rental prices and the increasing number of units coming online in downtown. "We are all competing against one another,” said the developer, who asked to remain anonymous. "And that drives down prices, and that affects a building’s bottom line, which means we all need to restructure our debt...I think every project that was developed after 2004 is probably reworking their deal either in bankruptcy [proceedings], or outside the bright lights of bankruptcy." As for hard numbers of renters living downtown: According to the Downtown Los Angeles Business Improvement District, the occupancy* rate for downtown apartments is currently 85-86 percent, considered relatively healthy, but 10 percent lower than occupancy rates seen a few years ago (during the real estate boom). Meanwhile, it doesn't seem that the residents of these recently bankrupt buildings are being disrupted as the respective developers re-organize.
· Bankruptcy for City West Complex [Downtown News]