One of the earlier success stories over this timeframe happens to have closed at a record sales price for the entire South Bay, including all of the Palos Verdes peninsula.  The investors purchased the oversized lot in May of 2008 for $7.6 million and listed the home for sale shortly after the start of construction.  They were then able to sell it three years after they first secured the property at the record-breaking price of $12.6 million.  The home shows well and it is spacious as they were able to squeeze 8,000 sq. ft. of living space on the lot.

View from 2826 The Strand

The home at 2408 The Strand closed escrow last April 2011 for $8 million, less than half of the original asking price.  As was the case for 2826 when it hit the market back in 2005, this home was built in the 1920s on an oversized lot.  Construction has begun and, given that the owner is a Limited Liability Company, it’s probably safe to say that this will be a spec build as well.  Look for a listing price of over $11 million late next year.

2408 The Strand in July 2012

The third spec home is located at 2666 The Strand and fits the same pattern as the other two.  It is an oversized lot and the home on it was built in the 1920s.  This home sold for $6 million in July 2011, a relative bargain compared to the other two.  Construction is underway here as well.  I imagine this one will list for over $10 million in a year or so.  I’m told the home will have about 7,000 sq. ft. of living space.

2666 The Strand in July 2012

Our pattern continues with the fourth property, though this one may not be a spec home.  The home at 2444 The Strand closed escrow this past January for $5.85 million, well below the original asking price of $8 million.  We’ll see soon enough if it is flattened as the others have been.

2444 The Strand in July 2012

The last two homes that have sold in the past 18 months are unlikely candidates for a “flip”.  The 2,700 sq. ft. home at 1534 The Strand sold for $3.58 million last year and was built back in 1964.  Lastly, the home at 2909 The Strand almost eclipsed the record price, but fell short by a mere $85,000, selling for the unusual sum of $12,513,962.  The new owners appear to be making cosmetic changes only at this time as shown below.

2909 The Strand in July 2012

So we’ve seen six closed escrows on the beach here in the past 18 months.  Sales prices ranged from about $3.6 million just north of the pier to $12.6 million at 28th Street.  Five of the homes were in a four street stretch between 24th Street and 30th Street.  Half of them were bought or built on spec at what may be impressive returns based on current construction rates and carrying costs.

I’ll take a look at Manhattan Beach next, but I suspect we’ll see less speculation on the beach there…

The earlier changes included the opening of 200 Pier Avenue and the so-called Marlin Equity building.   We saw the addition of such restaurants as Counter, Abigaile, The Rockefeller, Palmilla Cocina and American Junkies to name just a few.  We even mentioned the possibility that Mama D’s and The Shore were poised for change.

Spin forward five months and we can see several more changes that have been made or are getting close to kicking off.

Studio opened in July

Mama D’s was sold to the folks at Boardwalk Fresh Burgers and Fries.  In five short weeks, they gutted the space and re-emerged with their new concept.  The Shore pulled out of an escrow and opted to undertake a complete remodel instead.  They, too, were able to transform the space in about five week’s time. Frosted Cupcakery revamped the old Coffee Bean space and Spiaggia 14 has finally pulled the trigger on remodeling the old Amigos Tacos space.  Stoik’s came out of nowhere and opened up on Pier Plaza.  Budokan has opened up in the old Banzai Beach space, but now it appears that the building may be for sale.

The new building at 205 Pier Avenue is very close to completion.  New tenants could be moving in over the next few months.

We’ve seen Fernando’s move out as well as Bottle Rockit, Geeko’s and a tanning salon on Hermosa Avenue.

All told, this is another 10 or so changes downtown, but more will follow.  Club 705 and an organic cafe may be next on this ever expanding list…

I am often asked to name the most expensive place to live in the South Bay.

Interestingly, the answer to this question has been shifting with time. Ten years ago, the answer was, by a long shot, the sub-area of Rolling Hills. The median price there was a full $600,000 higher than the next closest area, a significant gap at the time. This past year, the Hill section of Manhattan Beach managed to pull ever so slightly ahead of Rolling Hills to claim the crown with a median price just under $2.5 million.

However, looking at this with respect to area masks the much higher cost of buying on The Strand. In the last couple of years, the cost of entry to buy on The Strand exceeded $4.7 million. It is worth noting that through this past year, the price of a Strand home has not varied all that much with respect to location when all things are considered. This may be about to change in a big way.

For the past 10 or so years, the 200 block has been undergoing a remarkable, game-changing transformation. In 1998, 10 beach bungalows occupied 216 and 220 The Strand. They were on the market being sold as two separable lots at the time. A very well-known local professional athlete purchased both lots for under $4 million and ended up selling them less than three years later for $9.8 million. The buyer managed to pick up the adjacent lot soon thereafter for a tad more than $3 million in the summer of 2001. At the time, the remaining three lots were all independently owned by the same parties and had been for at least 10 years.

In 2004, the property on 200 The Strand was purchased by a non-occupying owner. By early 2009, the homes on 204 and 208 The Strand were both purchased by a single investor and the triple lot property was converted into a substantial single home. The closing prices for the three individual properties ranged from $5.5 million to $6.7 million, consistent with other Strand sales at the time they occurred. The six lots had a collective total selling price of about $31 million, or $5 million per lot.  By Strand standards, this average is not particularly noteworthy. It is the added value created by combining lots and building prominent homes that make this story far from finished.

Before I carry on about why I think this piece of the Strand will potentially forever raise the bar on home values at the beach, I thought I would put this into a broader context. Every year, Forbes magazine publishes its list of the most expensive homes in America. Last year, two of the top three homes were in the Los Angeles area. The number one most expensive home was selling for $100 million in Beverly Hills and the number three home on the list was listed at $85 million in Bel Air. If you look at the Bel Air price with respect to land area—which turns out to be greater than the Beverly Hills home—the home prices out to about $20 million per half acre of land.

As a side note, a couple of acres in Lancaster, CA will set you back about $15,000. The six homes on the 200 block of the Strand sit on just under a half acre.  Therefore, the $31 million in total acquisition costs for the six lots already significantly exceeds the land value of the top most expensive homes in America.

The home on the triple lot is finished and it looks impressive. The home on the south corner of this block is expected to be completed by Labor Day.  There are rumors swirling around that the now double lot in the middle will begin its transformation as early as next month.

So by the end of 2011, this block will have three homes, instead of the usual six, and the collective value of these homes could potentially exceed $60 million according to the handful of people that I have spoken to about this.  That’s a far cry from the average value of under $2 million per lot placed on these homes back in 1998 and the beginning of a new home pricing paradigm on the Manhattan Beach Strand.

Ribbon Cutting in October 2010

It may be disputed whether it was the redevelopment project that spawned all of the change that we have seen here, but it cannot be denied that we are experiencing a transformation in downtown Hermosa Beach.  By my count, there have been over 30 significant business changes in this area since they took the oversized scissors to the red ribbon.

A good starting point in reviewing this is with new buildings and remodels.  The contemporary 53 unit office condo building located at 200 Pier Avenue surfaced from a trustee sale just weeks prior to the ribbon cutting.  They may not have filled all of the units yet, but the opening of these units as leaseholds rather than purchases has made a huge impact downtown in and of themselves.  Across the street, at 205 Pier Avenue, the development of the old Alta Dena Dairy building was in a holding pattern.  It wasn’t long after the ribbon cutting that the ownership decided to move forward with the project.  It is estimated that it will be open in August of this year.  The third major addition is the Marlin Equity pair of buildings at 338 Pier Avenue with the 25 or so professionals that work there.

200 Pier Avenue When Space First Became Available

The Rockefeller

These three buildings have added new offices and retail space to the landscape downtown.  There have also been a number of building remodels on Pier Avenue, Hermosa Avenue and the Pier Plaza.  The Counter moved into the old El Pollo Loco building and brought a new contemporary style to the space.  The building housing the Post Office was remodeled as were the law offices of Baker Burton & Lundy to the west.  Becker Surf also pumped money into a remodel of their space.  The old Ragin Cajun restaurant has been replaced by the increasingly more popular The Rockefeller artisan gastropub.  Uncorked opened up to the public late last year as did Maison Luxe and Subway.  The long time successful Union Cattle Company decided it was time to make a change and recently reopened as Abigaile.  On Hermosa Avenue we’ve seen the addition of Hermosa Ink, Budokan, Hot’s Kitchen, Unami Burger, Game Changers, The Establishment, Amigos Tacos and Number Nine Noodles.

Pier Plaza has also seen some big changes with the opening of Palmilla Cocina last November and the remodel of Patrick Molloy’s.  Sangria’s has changed hands and will be rebranded as an American Junkies.  The Lighthouse has started the process of getting approvals for a major remodel as well.  Finally, there is a new tattoo parlor in the plaza, Yer Cheat’n Heart, along with an adjacent day spa.

Number Nine Noodles

The Establishment

There’s also plenty in the works in addition to the 205 Pier Avenue and American Junkie’s remodels.  Amigos Tacos will be changing again, this time to a wood-fired pizza place.  The old Coffee Bean may become a Frosted Cupcakery, while the adjacent space may become a branch office for a major national bank.  Rumored to be contemplating change in some form are The Shore and Mama D’s.

That makes over 30 buildings and businesses that have seen a change in the past 18 months.  I would say that this qualifies as the beginning of a transformation of downtown Hermosa Beach.  It will be fun to watch how the next couple of years unfold here, especially with the new smoking ban in place on the strand and Pier Plaza.  Smoking will not be allowed on the patios of the restaurants downtown so when coupled with the business changes, we will no doubt be entering a new era for Hermosa Beach…

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Reach out to us if you are interested in buying or selling real estate or businesses.  We can help you raise the bar for your company and reach new heights.  We help make things happen…

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