Elat Properties has purchased the office tower located at 801 S. Grand aka the Sky Lofts in downtown for roughly $46 million. The Santa Monica-based investment firm can now turn the keys to the downtown skyscraper that spans over 215,000 square feet.
Sold by CIM Group, with representation from Newmark Group Inc.’s Kevin Shannon, Ken White, Rob Hannan, Laura Stumm, Michael Moll, and Alex Beaton, according to Shannon, the sale was completed prior to the implementation of the new Mansion Tax, which was a significant factor.
Mansion Tax – Developer Nightmare or City Treasure?
The Mansion Tax, otherwise known as, Measure ULA is a tax on high-value real estate sales in Los Angeles, approved by 58 percent of voters in November. It applies to all real estate sales or transfers in the city valued at more than $5 million and is a flat four percent on properties worth between $5 million and $10 million, and 5.5% above $10 million.
The law mandates that nearly all resulting revenue must be spent on “affordable housing and tenant assistance programs,” but emergency shelters or temporary housing are excluded.
The mansion tax doesn’t only apply to luxury homes, but also to apartment buildings and commercial properties. The tax must be paid at the close of escrow, regardless of whether the seller makes a profit or loss, and every dollar of property value is taxed, not just the value that exceeds the thresholds.
The tower was built in 1986, renovated in 2014, and sits on 1.35 acres with 11 stories of commercial office space, 594 parking stalls, and over 8,000 square feet of retail space.
The property is in close proximity to the 110 freeway, the 7th Street Metro station, Whole Foods Market, L.A. Live, Crypto.com Arena, and various retailers and restaurants. At the time of the sale, the building was 74% leased to a diverse tenant mix with an average lease term of 5.4 years. The sale highlights the advantageous position of contrarian investors in attracting new tenants.