Partners take (high) flyer on office-to-apartment project. (Up Front).

There's more than one way to fill a building -- or so the landlords of a Miracle Mile office tower are hoping.

J.H. Snyder Co. and Goldrich & Kest Industries LLC are renovating the top of the 27-floor office building at 5670 Wilshire Blvd. into luxury apartments in what is believed to be the city's first office-to-penthouse conversion. The four two-bedroom units and one one-bedroom apartment are scheduled for completion by the end of next month.

The partnership has invested about $1 million in the conversion, and will be trying to lease the spaces at rents that match the lofty setting.

At between $3 and $4 a square foot, apartment rents not only exceed the $2 per foot asking rate sought from commercial tenants, they easily top the nearby residential market.

The 1,500- to 1,700-square-foot, two-bedroom units in the building would rent for $5,000 to $6,500 per month. By comparison, two-bedroom apartments at the recently completed Palazzo at Park La Brea complex nearby are asking $2,700 a month, or about $2.25 a foot.

"It's definitely a different product," said Jerry Snyder, principal at J.H Snyder Co. While none of the units have been pre-leased, "we think we'll lease them to some of the executives in the building."

Tenants at the 408,000-square-foot tower include ArtistDirect Inc., Singapore Airlines and the Securities and Exchange Commission.

The move, one of many office-to-residential conversions in the region, reflects two markets going in opposite directions. Just 3.2 percent of the apartment units in Mid-Wilshire were vacant last year, according to Hendricks & Partners, an apartment brokerage firm. Rents in the Mid-Wilshire market have increased by 6.3 and 12.9 percent in each of the last two years.

Meanwhile, the Miracle/Park Mile office market has seen little absorption over the past couple of years -- much like the county as a whole.

More than 60,000 square feet was put back into the submarket that was leased in the first quarter, continuing a trend of negative net absorption. First quarter office vacancy in the submarket was 19.2 percent, up from 14.4 percent for the year-earlier quarter, while asking rents fell to $2.05 a foot from $2.24 a year ago, according to Grubb & Ellis Co. The building itself is 13 percent vacant, up from 5 percent three years ago.

"Snyder's been through this market before," said Chris Runyen, vice president at Grubb & Ellis. "He's getting creative quickly to match the market demand and hedge his bets. It's not a bad move."

While the penthouse conversion appears to be the only one of its type in the market, there have been a number of office-to-residential conversions in recent years, the most notable a series of downtown loft conversions.

About a mile west of 5670 Wilshire, Hustler Magazine publisher Larry Flynt is attempting to sell his Flynt Publications building at Wilshire and La Cienega boulevards to Equity Management Group in a deal contingent on the prospective buyer getting approvals to convert most of the property to residential.

There are also some precedents to using penthouse property. The 10-story Oviatt Building on South Olive Street downtown was built in 1928, its penthouse home to clothier James Oviatt. Architect Charles Luckman built-a Sunset Boulevard office building in West Hollywood with a top-floor penthouse in the 1960s, according to Snyder.

The Wilshire Boulevard building was constructed in 1964 as headquarters for California Federal Savings & Loan, with the 26th floor designed specifically for executive offices, complete with a separate elevator bank accessed from the 25th floor. (The 27th floor houses the building's mechanical systems, though the owners have left open the possibility of adding as many as three more residential units.)

The penthouse space has been empty since Snyder and Goldrich & Kest bought the building in 1989.

Snyder and Goldrich are no strangers to residential developments. Having developed more than 5 million square feet of commercial space, including Water Garden II and Granada Hills Town Center, Snyder built 450 homes off of upper Beverly Glen Boulevard in the 1970s and is developing the $218 million NoHo Commons mixed-use project, which will include 810 multifamily units.

Goldrich & Kest, whose chief executive, Jona Goldrich, parlayed his trash removal business into his first apartment complex almost 50 years ago, has either bought or developed a large portfolio of senior, subsidized and market rate housing.

"It really lends itself to residential because it has so many windows and such shallow cores," said Snyder. The building has 14,500-square-foot floorplates, where most modern office towers have floors in the 20,000- to 25,000-square-foot range.

Whether the views will warrant the high rents remains to be seen. With luxury projects like Palazzo at Park La Brea coming online, the upper threshold of apartment rents in the area is continually being broken, according to Dean Zander, associate partner at Hendricks & Partners.

Still, Richard Ringer, senior associate at Marcus & Millichap, notes that "at $3 to $4 a foot, you better come with the goods."