Crescent Heights is testing a fresh formula for Los Angeles’ office market, introducing ownership opportunities aimed at doctors and local professionals who want to build equity instead of paying rent.
Backed by more than four decades of experience, from early condo conversions to a national portfolio of award-winning high-rises, the firm is bringing that same ownership ethos to 6200 Wilshire, a newly reimagined Class A medical office tower in Beverly Grove. The project gives specialists a rare chance to buy into their own space in a prime corridor near Cedars-Sinai and some of the city’s leading cultural institutions. The Crescent Heights team says the goal is simple: help practitioners invest in their businesses and take control of their real estate future.
Bring a Euro model to the City of Angels
After his company purchased the building, Elliott Kahn, a partner at Crescent Heights, listened to tenants who were frustrated after years of leasing.
One of the common complaints among tenants was that they often spent hundreds of thousands of dollars of their own money improving spaces they did not own. While this is a widespread phenomenon in America, Crescent Heights decided to look to the European model, where businesses own their office space, for the Wilshire tower.
“The office market in America has done it this way for a long time,” explains Kahn, “so landlords historically had no need to sell office space.”
Selling office space (as opposed to leasing it out) comes with a unique set of challenges. Unlike with residential properties, which are in a constant state of turnover, office properties tend to have longer periods of occupancy, making timing sales more difficult than offering long-term leases.
On the other side of the equation, most professionals choose to lease space not because they prefer it to buying, but because small block office space coming up for sale is relatively rare.
“I think people are not doing it because it hasn’t been offered at this scale,” says Kahn. “But if I’m able to offer smaller suites with views and amenities to medical practices and pair them with local lenders who are willing to give 90 or 100% financing, I think it’s a home run.”
The bottom line
The newly renovated and seismically retrofitted building offers spaces ranging from 700 square feet to entire floors, with pricing from $400 to $700 per square foot depending on location and views.
But while the views of the Peterson Museum and the Hollywood sign are attractive to potential buyers, the financing available for doctors is the real draw.
“The large lenders, such as Bank of America and City National Bank, have a practice solution where doctors can purchase these units with zero down,” says Yair Haimoff of SPECTRUM Commercial Real Estate, the brokerage for 6200 Wilshire. “They’ll do 100% financing, and their interest rate is much lower than that of general users.”
Since 6200 Wilshire is a second-generation medical building, the offices already have build-outs in place. This means that tenant improvements should cost doctors less than if they were leasing.
The building is also equipped with a central vacuum and compressor system that connects to every floor, a major attraction for dental practices, which usually have to install their own within their offices.
“We did the math,” says Kahn. “For every one of them, compared to a typical ten year lease it costs less to own.”
Owners can take advantage of tax benefits that aren’t available when renting. Like bonus depreciation from day one. And, in addition to providing stability while practicing, owning also gives doctors an exit strategy for retirement.
“When they retire, they can still own the asset, lease it out, and that could be their retirement,” says Haimoff.
Ownership also provides protection from skyrocketing rents or unrenewed leases. Kahn notes that when practices move, patients don’t always realize and end up going to another practitioner.
“You’ve leased your office for years. You have spent good money to build out your space and build brand/practice equity within your location. Now a landlord asks for a major increase in rent, and you’re stuck,” says Kahn. “So I think the key here is that you’re in control of your future.”
A true medical community
The project has already drawn interest from doctors in the neighborhood and beyond.
Haimoff recently sold a unit to a plastic surgeon who had been leasing in Beverly Hills and decided it was time to buy.
“We have one doctor who was in Culver City, and he moved his practice to this building because of the centralized location,” says Haimoff. “His patients can come from different places since it’s easily accessible from the freeway and the new metro stop less than a block away.”
Crescent Heights is transforming and modernizing the lobby, giving patients a positive first impression before they even reach their doctor’s office, and will be adding additional amenities, such as a potential conference space and fitness center, based on the needs of owners.
Haimoff and his team have already secured a national imaging center to take over the ground floor, providing an additional amenity for medical professionals.
Kahn adds that working alongside other owners creates a different culture within a building. With minimal turnover, owners can build partnerships and really get to know their neighbors.
“When you’re in a building of owners, everyone is taking care of it,” says Kahn. “Everyone is doing their best not just to maintain the building, but also to make it the best it can be. There’s a pride of ownership.”
To learn more about this unique medical office tower, visit 6200wilshire.com.