Opus Builders Fields Rebuild Calls, Price Misconceptions

Gary Mkrtichyan said his construction company Opus Builders receives two to three calls per day from prospective wildfire rebuilding clients.

He’s got about a dozen Altadena homeowners he’s working with but thinks that could easily grow to 20 within the next couple of months. That’s in addition to a mixed-use project with apartments above ground-floor commercial near Palisades Village in Pacific Palisades.

As more homeowners make the decision to stay and rebuild, nailing down a consensus on cost is a bit like herding cats. In other words, a painful exercise with seemingly no point.

The construction inflation is real, according to Mkrtichyan who said some of the quotes he hears are coming in wildly beyond reality for his company.

An example? The conversation around pricing that’s $700 and above per square foot to rebuild. Mkrtichyan can’t see it.

“There’s not one client that I’m charging $700 a square foot,” he said. “I built three homes in the Palisades prior to the fires below that number. Now, OK, I understand there’s been some appreciation. There’s a labor shortage, especially with ICE [raids], but I know this is not the reason for these numbers people are talking about.”

The exception would be maybe adding a basement level, he said.

Mkrtichyan said there’s no client for which Opus Builders is currently charging more than $550 to $600 per square foot at the moment. The company bills itself as a one-stop-shop general contractor specializing in upscale custom homes and commercial projects, which could explain what some might call a low quote.

Opus has the capacity to handle architecture, design and construction internally, while working with a roster of subcontractors and acting as a project manager on planning, permitting and sourcing of finishes. All of that being overseen by a single touchpoint can in some ways help keep costs in line.

The builder walks into what’s become a heated discussion among some. It’s one some might say began in February when The Agency’s Ben Belack posted an Instagram video on rebuilding.

Belack broke down the challenges developers face in buying burned Palisades lots based on a construction cost of $600 per square foot. When factoring in the cost of the Measure United to House L.A. tax, in addition to commission, escrow, title and other fees, the end result is a loss.

Measure ULA, which was a 2022 ballot measure marketed as the Mansion Tax, applies a 4 percent levy on deals starting at $5.3 million. It creeps up to 5.5 percent on deals of $10.6 million or more. It’s relevant in the Palisades rebuilding conversation because the community is part of the city of Los Angeles. Eaton Fire properties, if resold, are not subject to the tax because Altadena and Pasadena are not part of the city of Los Angeles.

“The lesson here is that prohibitive measures like the Mansion Tax continue to discourage builders from building in Los Angeles and, before you vilify the homebuilders, we really need them right now to replace all the homes and communities the fire just took from us,” Belack says in his video. “The land is for sale because these specific families are unable to rebuild, so unless we allow builders to make a few bucks, which is usually around 20 percent of their investment, Los Angeles remains in a housing crisis.”

Mounting headaches

Belack’s post, as of Thursday, had garnered nearly 29,000 likes and almost 3,000 comments from people launching discussions on land values, zoning, affordable housing in the state, taxes and the subject of costs to rebuild. Central to Belack’s post wasn’t to set off a squeal over who was charging what, but to point out Measure ULA’s impediment to rebuilding.

Even still, it cracked open a discussion around cost that has been eating away at residents since the Jan. 7 fires.

Results of a survey done between March 6 and April 11 show Palisades residents estimating $800 per square foot for construction, which was culled from 307 respondents. That’s an average based on a range swinging from $400 to over $1,200 a foot.

The Urban Land Institute sponsored the survey that was administered by Real Estate Consulting, with endorsements from the UCLA Ziman Center for Real Estate and USC Lusk Center for Real Estate.

The Eaton fire data in that same survey draws from a smaller pool of 37 respondents that estimated an average of $580 per square foot in construction costs. The mean was based on a range of $400 to $800 per square foot.

For most wildfire victims, budgets are not unlimited. In fact, those on the ground almost universally call out the funding shortfall for rebuilds as a major pain point.

Opus’ Mkrtichyan is no different, pointing out most in Altadena that he’s working with don’t have sufficient funds to cover rebuilding. Some, he said, applied for relief through the U.S. Small Business Administration in a bid to offset some of the difference. THE SBA offers disaster loans up to $500,000 for the repair or replacement of a primary residence and up to $100,000 for personal property loss. Other clients of Opus Builders paid out of pocket to make up the difference, but those are typically residents that were already doing a remodel and had funds available.

“I would say it’s probably 60-40 between people who have just enough to rebuild and then 40 [percent] are probably ones that don’t have enough or had a lapse in coverage and those people are the ones that are either going towards the SBA or they’re stuck, and they have to sell or figure out some sort of funding,” Mkrtichyan said.

Once homeowners push past questions of funding, it’s now navigating permitting.

So far, Opus Builders has six Altadena projects submitted to the county. They’re part of the 1,454 applications received as of Thursday for the unincorporated areas impacted by the Eaton fire, according to Los Angeles County. That’s a jump of over 100 applications since Monday. So far, 172 building permits have been issued.

“I think they’re overwhelmed,” Mkrtichyan said of the system. “It’s too much workload and there is a void between submitting and getting a response.”