Celebrities and Taxes Top LA’s Buzzy Stories for 2023

It wasn’t an election year, but politics populated Los Angeles real estate headlines in 2023. The luxury market was roiled by the Measure ULA transfer tax; a new mayoral administration tackled the homelessness issue; and lingering scandals from prior years marched toward resolution.

Meanwhile, the staple of L.A. news — celebrity deals for megamansions — reported a record price this year, despite the overall slump in the market. And a well-publicized Airbnb tenant found a way to live in Brentwood without paying anything.

Here are Los Angeles’ top attention-grabbing real estate stories of 2023.

Squatter in Brentwood

Elizabeth Hirschhorn was nicknamed “the tenant from hell” by the global press. She had booked an Airbnb guesthouse in Los Angeles’ exclusive Brentwood neighborhood in September 2021, but after the 180-day contract ended, she managed to stay in the unit and declined to pay rent.

Her landlord, Dr. Sascha Jovanovic, filed a lawsuit for $58,000 in unpaid rent. But a judge ruled that under L.A.’s rent control law, he couldn’t evict her. Jovanovic’s attorney Sebastian Rucci called her “the tenant from hell.

Hirschhorn’s attorney said she wasn’t required to pay rent because the city had never approved the unit for occupancy and that its shower was built without a permit. Hirschhorn later refused to allow her landlord inside the unit to obtain the permit or make repairs.

In November, Jovanovic was being interviewed for a documentary when he noticed a crew of men approaching the guesthouse. Fearing a home invasion, he called the police. The cops confirmed the men were movers tasked with packing up Hirschhorn’s belongings. Once they finished their jobs, Hirschhorn and the movers were escorted off the Brentwood property.

Her residency without rent lasted 570 days. Previously, she pulled a similar stunt in Oakland.

Jay-Z, Beyonce break record

Los Angeles County’s luxury home market declined 37 percent in a year-over-year comparison to 2022, according to research firm Miller Samuel, which prepares The Elliman Report. But that didn’t sway music power couple Jay-Z and Beyoncé.

They paid $190 million for 27712 Pacific Coast Highway, a 6-acre estate in Malibu’s Paradise Cove. They also chipped in an extra $10 million for furniture and art. Their $200 million purchase set a record for the priciest sale of a home in California history.

The transaction eclipsed the previous record-holder billionaire Marc Andreessen, who paid $177 million for a 7-acre Malibu estate in 2021.

ULA’s market freeze

Pundits groused that the Los Angeles’ real estate business did not pay much attention to Measure ULA during the 2022 election when it gained approval from 56 percent of Los Angeles voters. But as the measure was implemented, it became major issue.

Dealmakers sprinted to close sales before the April 1 deadline for the tax that took 4 percent of all real estate sold in the city of Los Angeles for at least $5 million and 5.5 percent for sales greater than $10 million.

After the deadline, the L.A. luxury market froze. In April, only two homes traded in the city of Los Angeles with prices above the $5 million mark. The tax was blamed. But some said April sales suffered because so many rushed to close deals before the tax deadline.

ULA critics also noted that the city collected far less funds than initially forecast.

TRD broke news in November when L.A. Deputy Mayor Jenna Hornstock told a crowd at an Urban Land Institute event that ULA tax revenue projections were not met because the city’s real estate business threw “a bit of a temper tantrum.” Mayor Karen Bass immediately tried to build bridges with developers when she held a closed-door “fireside chat” with them a day after Hornstock’s comment.

ULA will continue to affect Los Angeles real estate. A judge rejected legal challenges against the tax in October. However, a possible political challenge, the Taxpayer Protection and Government Accountability Act, qualified for the 2024 state ballot.

Hotel rejections

In June, the voters of Beverly Hills narrowly rejected a measure to authorize a six-star Cheval Blanc hotel. It was slated to be built by luxury conglomerate LVMH Louis Vuitton Moët Hennessey, on the site of the former Brooks Brothers store on the corner of Rodeo Drive and South Santa Monica Boulevard.

The final vote tally was 50.6 percent opposed to the project.

In July, LVMH made a statement that it would not seek again to build a hotel in Beverly Hills.

In the city of Los Angeles, the City Council voted to kill developer Gary Safady’s Bulgari Hotel project in Benedict Canyon. The luxury retreat had sparked a development fight for years, with proponents arguing it would represent a low-impact eco-friendly retreat that would benefit the neighborhood and opponents claiming it would amount to an environmental catastrophe.

Industry deaths

Artem Tepler, co-founder of multifamily investor and developer Schon Tepler, died by suicide on Nov. 1.

His company completed 22 ground-up multifamily developments in the Los Angeles market, as well as four custom homes, four mixed-use projects and more than 100 renovations of single-family rentals, duplexes and triplexes, according to its company website. His business partner Paul Schon wrote on a GoFundMe page “we were all touched by him in so many incredible ways.”

Two other giants of Los Angeles’ real estate business passed in 2023. Wayne Ratkovich, founder of The Ratkovich Co. who helmed developments such as The Bloc in downtown L.A. and Google’s Playa Vista campus, died in September at age 82. John Cushman, 82, chairman of Cushman & Wakefield, passed in May.

Century Plaza acquisition

In April, David and Simon Reuben paid $1 billion for the Century Plaza development in Century City. The 19-story luxury building had been in foreclosure.

The British businessmen placed a credit bid that equaled a portion of both the senior and mezzanine debt. It gave the brothers control of the hotel, retail properties and some of the condo units.

Century Plaza cost $2.5 billion to build; the Reubens snapped it up for just 40 percent of the development cost.

Office market craters

The pandemic era’s work-from-home arrangement continued for many in 2023, causing a slow-motion collapse of Downtown L.A. office demand. About a third of DTLA office space was vacant, according to a July TRD story.

Making matters worse, few tenants wanted to sign long-term leases. Many landlords struggled with higher debt payments due to rising interest rates. For buildings with plummeting values, there could be opportunities for buyers to get into the landlord business on the cheap. But as the year ended, distress persisted.

“It’s going to take a while for the market to stabilize,” said Santiago Ferrer, who runs BCG’s real estate division in North America. “If you can hold, [rather than sell], it’s better.”

José Huizar’s plea

José Huizar was a powerful L.A. city councilman who was often mentioned as a possible contender for mayor. His once stellar career as an immigrant kid who made it to the top of Los Angeles politics fell apart when he became embroiled in a corruption case.

In January, Huizar confessed to extorting at least $1.5 million in bribes from developers and evading taxes over the course of seven years, according to a plea agreement filed with the U.S. District Court. Federal prosecutors recommended that Huizar be sentenced to no more than 13 years in prison, though he faces up to 26 years.

Rent freeze ends

L.A. County’s COVID emergency declaration officially ended March 31. But the L.A. City Council continued to extend the pandemic rent freeze until mid-November when it voted 10-2 to thaw the freeze.

The vote would allow an up to a 4 percent rent increase, or up to a 6 percent increase if landlords cover the cost of utilities.

Councilmember Nithya Raman, who had championed previous extensions of the freeze to protect vulnerable renters from homelessness, said that the November vote to end the freeze attempted to protect renters as well as mom-and-pop landlords. Councilmember Bob Blumenfeld characterized the vote as a compromise that no one would like. Rent increases are scheduled to take effect by February 2024.