In With the Old

Charles J. Fisher on the cover of the LA Business Journal
Charles J. Fisher on the cover of the LA Business Journal
Posted date: 9/8/2008

In With the Old

Architectural restoration in L.A. is booming


Los Angeles Business Journal Staff


Times are slow in the housing market, but it would be hard to tell by following Kevin Kuzma through a typical day.

The historic home restoration consultant is busy from early morning to evening, picking up raw materials, visiting construction sites, doing estimates and meeting with clients.

“It’s gotten busier and busier. I haven’t felt any slow down,” said Kuzma, whose Revival Arts Restoration business is based in his Angelino Heights home.

Ditto that for folks like Ron Radziner, principal at Los Angeles architecture firm Marmol Radziner and Associates, which specializes in restoration and new custom residential homes.

Or Charles Fisher, who has built a busy business helping owners of historic homes qualify for coveted tax breaks that can lower a state property tax bill by up to 80 percent.

Builders may be practically giving away homes in far-flung Los Angeles County subdivisions amid slow sales all around, but there’s one corner of the housing market that so far has been immune from it all.

Historic homes in architectural styles such as Craftsman, Spanish Colonial Revival and Art Deco have all grown in popularity in recent years. What’s more, an increased interest in famed 20th century architects has led to a blossoming of the cottage industry that services and sells historic homes by renowned figures such as Richard Neutra, Frank Lloyd Wright and John Lautner.

Not long ago, many buyers avoided such homes, sometimes because their older layouts don’t accommodate modern amenities such as oversized Sub-Zero refrigerators. But there was even a bigger reason to shun them: Homes with designated historic status were notoriously nightmarish to renovate.

Owners have to navigate a bureaucratic gauntlet to receive approvals even for common repairs, such as window or tile roof replacement.

But the housing boom upended all that by pushing up prices, particularly of luxury homes, which routinely sell above $5 million even in the current slowdown. Historic homes, by contrast, increasingly have seemed like bargains.

Now, if homes receive a cultural monument designation and qualify for state tax breaks, owners with a love of historic architecture are more willing to put up with the hassle.

Architect Doug Hanson, principal at DeStefano + Partners, lives in a 1906 Craftsman home in the historic Western Heights neighborhood of West Adams. The 3,200-square-foot home was attractive because he felt the home’s big porch and windows were “the right size and scale for a family.”

Just as important: He relished the “opportunity to save a house of historical significance.”

The homes

Radziner’s architecture firm has capitalized on that kind of zeal. In fact, the firm has faced such demand that it’s had to turn down work.

“The last three years have been quite consistently busy,” said Radziner. who estimates restoration work now accounts for one-third of his business. “We don’t take on every job that is offered to us.”

Radziner said the projects his company takes on typically have budgets in the range of $1 million to $6 million. Restorations include everything from landscaping to roofing to interior work.

Key to historic home sales is the Mills Act, passed by the state in 1972 to act as an incentive to restore and preserve historic homes. Los Angeles enacted local legislation in 1996 to set up a Mills program.

To be eligible for tax breaks, a home must be designated a Historic-Cultural Monument or be included in a Historic Preservation Overlay Zone. There are 23 preservation zones in the city and 16 more awaiting approval.

Also growing: the number of homes approved to receive Mills Act tax breaks. According to the city’s Office of Historic Resources, there were 45 before this year’s cutoff date, 55 in 2007 and 41 in 2006. From 2003 to 2005, there was an average of 27.

Fisher, the consultant, said that a Mills Act designation can result in annual property tax savings in the $2,000 to $8,000 range, depending on the property’s valuation. (Mills Act properties are assessed at an alternative rate based on the income potential for the property.)

Of course, achieving those savings isn’t necessarily easy or cheap up front. Fisher charges at least $1,500 to complete a Historic-Cultural Monument application and at least $2,500 for a Mills Act application, which does not include a city fee of $443. Still, he’s done about 25 jobs in the four years since he started the business. He had spent the previous two decades as an amateur historian and homes researcher.

“My business is the same level as it was during the housing boom. I haven’t seen a tapering off of business,” said Fisher. “I am working on four or five monument applications right now. I find I don’t have to do a lot of advertising.”

One of Fisher’s clients–Gabriel Eshaghian, principal at commercial real estate developer Somerset Group–has spent about $250,000 to restore the 93-year-old Hollywood Hills home he purchased in 2005.

When Eshaghain purchased the home, an amalgam of Spanish and Craftsman styles, it was in shambles.

“I paid under market for it on a per-square-foot basis and at the end of the day it was a deal,” Eshaghian said.

He decided to renovate following strictly historic standards–a key to receiving the tax benefits–after discovering cancelled checks in the attic that showed it bad been built for silent film director Clarence Badger. Restoration work revealed two vintage Batchelder tile fireplaces under newer paint.

Hot market

To get a feel for just how hot the historical home market is, consider that in July, La Miniatura, a famed Pasadena home designed by Wright, has been put on the market for $7.73 million. The home, Wright’s first textile block house, was last sold in 1996 for just under $1.2 million.

La Miniatura was listed by Crosby Doe, owner of Mossier & Doe real estate brokerage in Beverly Hills. The broker has seen sales of historic homes become a significant part of his business during the housing boom.

“At this point, it has continually grown over the last five years,” said Doe. “I’ve seen the growth for the last 35 years with fits and starts.”

But it’s not just the rare properties by world class architects that have increased in popularity. More upper-middle-class buyers are attracted to historic and architectural homes, which can still be had at a bargain if they need work. However, in good shape, the homes are turning out to be good investments.

Mike Deasy, co-founder of Deasy/Penner & Partners, a local residential brokerage that specializes in historical and architecturally significant homes, conducted a study of South Carthay homes sales over the past year.

The neighborhood, near Beverly Hills and the Fairfax District, includes a strong stock of Spanish Revival architecture homes. A large part of the area is protected by one of the city’s historic overlay zones

In the one-year period that ended Aug. 26, 11 homes sold. According to Deasy, the seven non-historic homes had an average sale price of $506 per square foot, while the four homes deemed to be historic went for $595 per square foot, or 18 percent more.

“Is the architectural home market impervious to what’s happened over the last year?” Deasy asked. “I think this market has affected everyone in terms of the psychology. However, the qualities of design and architectural character will always help give an edge to a house.”