Developers Set to Start Staples Center Project

A company controlled by Denver billionaire Philip Anschutz is expected to announce today that it is ready to start work on a $1-billion commercial development around Staples Center in Los Angeles that would include a long-awaited hotel to serve the city’s convention center.

The 4-million-square-foot entertainment, shopping and residential project, which would cover six blocks near Staples Center, has long been approved by the city. Anschutz’s entertainment and development company, AEG, could begin construction by the end of this year.

One thorny issue remains to be resolved: The developers are asking for financial assistance from the city to help make the hotel pencil out. Civic leaders including Mayor James K. Hahn have said they support the project but are reserving judgment on whether to help finance it until they see some numbers.

In the meantime, AEG will begin work on other parts of the project as an act of faith that the city will come through on the hotel, said AEG President Timothy Leiweke.

“Momentum is very fickle, and you have got to show people that this is for real,” Leiweke said Tuesday. The hotel would “allow us to book more conventions and keep more conventions.”

For more than two decades, city business leaders have complained that the lack of a major hotel next door had made the Los Angeles Convention Center undesirable for events that can attract tens of thousands of out-of-town visitors. San Francisco, San Diego and Anaheim all have large hotels next to their convention halls and consistently attract more meeting business than Los Angeles.

The recent wave of residential construction has given downtown a boost, said hotel consultant Bruce Baltin of PKF Consulting, “but it will never be a viable destination without a headquarters hotel” near the Convention Center.

Christy Richards, who plans the annual convention for the National Assn. of Realtors, said a new hotel would put Los Angeles in the running to host an event that attracts 25,000 participants and is held every other year on the West Coast.

“Right now, the lack of a large anchor hotel at the Convention Center is an obstacle for considering Los Angeles for our annual convention,” said Richards, who plans to hold next year’s event in San Francisco.

The Los Angeles Convention Center also needs shops, restaurants and other attractions that visitors can walk to, said Baltin, several of which would be created by AEG. The complex is expected to draw up to 13.5 million visitors annually -- as many as some of the region’s famous theme parks. That would provide a major economic boost to downtown.

“This fills in the dirt between Staples and the central business district,” said Carol Shatz, president of the Downtown Center Business Improvement District. “This moves us fast-forward to achieve our goal of a 24-hour downtown.”

AEG has granted the development rights to the Convention Center hotel to Lew Wolff of Maritz, Wolff & Co. of Los Angeles, one of the world’s largest owners of luxury lodging properties.

As planned, the 1,200-room hotel is expected to include three components in one high-rise of as many as 55 stories:

* 900 guest rooms and the largest meeting space in Los Angeles County under one hotel brand.

* 300 rooms above those, under the flag of another, higher-end hotel chain.

* As many as 100 luxury condominiums at the very top of the building.

It would be the third-largest hotel in the county, after the nearby Westin Bonaventure, which was completed in 1972, and the 20-year-old Los Angeles Airport Hilton, said hotel consultant Alan Reay of Atlas Hospitality.

Financing for the estimated $300-million hotel would be provided by Apollo Advisors, a large private real estate investor based in New York.

The developers have suggested that the hotel be allowed to keep all of its bed tax revenue, estimated to be $5.7 million annually, for up to 20 years, to help it be profitable in a market where the average occupancy is only 57%, far below the national average for big, downtown properties.

In addition, Wolff has talked about having the city waive permit and planning fees that may reach $6 million, and providing a loan of up to $20 million to help pay for a ballroom across the street from the hotel.

Hahn said he generally supported the development and was willing to consider how the city can assist in making it happen, but he has not committed to any specific financial subsidy plan.

“This is something that is going to bring nearly 20,000 jobs that will be created both in construction and permanent jobs,” Hahn said. “It’s going to bring a lot of money into our economy.”

City officials confirmed that the developers had talked about the concept of using hotel bed taxes, permit waivers and redevelopment loan funds to help make the project work, but said the developers had not yet presented a formal proposal.

Wolff said that he had “not perfected” his request for financing support, but that he would not ask for tax-free bond financing. Wolff said a hotel operator, which he has not selected, would be expected to help fund development. He also said AEG was making the land available at a discount and would help provide parking.

The hotel has the potential to succeed by creating its own market, said Richard Ackerman, managing partner of Apollo Advisors.

“We want the best convention center hotel in the country,” Ackerman said. “We love what AEG is doing around Staples. We think it will be enormous for the city.”

City Council President Alex Padilla and Councilman Bernard Parks, chairman of the council’s Budget and Finance Committee, said they were excited about the prospect of a Convention Center hotel but were reserving judgment on whether they can support public assistance, especially given the city’s financial difficulties.

“The goal is important, but I think we have consistently maintained concern about using public funds,” Padilla said. “Although I have serious reservations about using public funds, I am willing to take a look any proposal before making a final judgment.”

Not building the hotel has its own financial effects because the city general fund is being tapped for more than $33 million this year to pay debt on the $525-million Convention Center expansion because there are not enough conventions to pay the debt.

The council can expect to be heavily lobbied by leaders of the city’s tourism and convention industry.

In addition to the hotel, AEG’s project includes the 7,300-seat Nokia Theatre Los Angeles, which developers hope would broadcast major award shows such as the Grammys; a broadcast center for radio and television; a multiscreen theater complex; restaurants, shops; condominiums; and a museum.

Mobile phone maker Nokia purchased the right to put its name on the theater project, which includes a nightclub and a 40,000-square-foot courtyard in the middle of the complex.

A 4,000-seat movie complex would include a 750-seat theater intended for movie premieres. Anschutz’s Regal Entertainment Group is the largest theater chain in the country but must compete with other theater operators for a position in the development, AEG said.

The broadcast media center is expected to serve as the West Coast regional headquarters for a major television network and would include a studio, restaurant and sports bar.

When AEG bought Fox Entertainment Group’s 40% interest in Staples last month for more than $130 million, it was widely interpreted as a move to pave the way for a rival broadcaster to take part in the new development. ESPN, owned by Walt Disney Corp., is Fox’s largest competitor.