Relevant Group plans 150-unit affordable complex in Skid Row

Rental will offset loss of SRO units at Morrison Hotel, which developer is converting to market-rate

Relevant Group Managing Partner Richard Heyman and a rendering of the project on 5th Street
Relevant Group Managing Partner Richard Heyman and a rendering of the project on 5th Street

A salacious legal spat with a rival investor hasn’t slowed prolific hotel builder Relevant Group.

The Hollywood firm’s latest project isn’t another boutique hotel though, it’s the near opposite — a 150-unit affordable modular complex in the heart of Downtown Los Angeles’ Skid Row.

Relevant Group is seeking city approval to replace a parking lot and a small commercial building at 407-413 E. 5th Street that for years was owned by a church and operated as a homeless shelter and food pantry. Relevant purchased the property from the church last fall for $4.4 million.

The firm is building the complex to replace affordable single-room occupancy rooms it is converting to market-rate rentals at the Morrison Hotel in South Park, according to a June story in the L.A. Business Journal.

The city of L.A. requires developers to replace any SRO units they demolish with affordable units on-site or nearby. SROs are a key class of affordable housing for L.A.’s unsheltered and low-income residents.

Relevant Group is planning 473 hotel rooms and 100 apartments at the Morrison Hotel and a new construction building next door.

It’s one of two projects Relevant is building outside Hollywood, where its developing four projects — three hotels and an event space — around the intersection of Selma and Wilcox avenues. The city greenlit the latest of those projects in March.

Relevant’s Hollywood pursuits took a dramatic turn last month when the firm filed a federal suit against broker and developer Saeed Nourmand and his eponymous brokerage, alleging they extorted the firm for millions of dollars with costly and frivolous environmental challenges to Relevant Group’s Hollywood hotels.

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The Skid Row project joins a handful of new construction affordable projects in the neighborhood, long the center of L.A.’s homeless community. The project is down the street from two others — a 95-unit project by the Coalition for Responsible Community Development and the Weingart Center’s two-building project on San Pedro Street.

Market-rate development in Skid Row is rare, but more could be built in the coming decades if a planned rezoning of Downtown L.A. is carried out. The rezoning would allow market-rate development near the edges of the roughly 50-block-wide neighborhood.

Relevant Group is developing through an affiliate, RMOD, and hopes to keep down costs using modular construction and an accelerated permitting process required for affordable projects through SB 35, a state law that came into effect in early 2018. A representative for the developer said estimated cost per unit is around $200,000.

City officials are encouraging developers to use the typically more cost-effective method. Modular construction usually involves building individual units off-site and then assembling them at the project site.

A handful of modular projects are in the works around L.A., including Aedis Real Estate’s shipping container-based 98-unit project in Park Mesa Heights.

Relevant Group is seeking significant density bonuses through city programs for the Skid Row project, including the Transit-Oriented Communities program and an affordable housing incentive program specific to Downtown L.A. that boosts buildable floor area and reduces open space for such projects.

The TOC program is applicable for projects located near mass transit citywide. Developers can build more market-rate units and receive and other incentives if they include affordable units in eligible projects under the program, which came into effect in the fall of 2017.

Developers tend to include the minimum required affordable units to receive bonuses or use the program to significantly boost unit counts for 100 percent affordable projects. As of March 2019, developers had built or filed for 3,300 affordable units and 13,100 market-rate units through the program, according to the Department of City Planning.