2 Hollywood Projects Want CRA Funds : Redevelopment: Builders of the renewal cornerstones formerly said no public money would be needed. Negotiations are under way.
After vowing to build two mammoth commercial, residential and entertainment complexes without a penny of taxpayer money, developers of the cornerstone projects in the $1-billion Hollywood renewal effort are seeking as much as $140 million in redevelopment subsidies to keep their projects alive, The Times has learned.
The city’s Community Redevelopment Agency has begun closed-door negotiations with the development firms, Melvin Simon & Associates and Hollywood/Highland Partners, according to city officials and sources familiar with the talks.
Officials of the companies say they need the cash infusion for the hotels, offices, apartments, shops and theaters planned for Hollywood Boulevard because they have been squeezed financially by the savings and loan crisis, a looming recession and other factors. The projects will cost an estimated $300 million each.
City Councilman Michael Woo confirmed Wednesday that the developers initially asked for about $70 million each, and that top city officials are negotiating with them to engineer a compromise that will keep the projects alive. Such a compromise would have to be approved by the CRA Board of Commissioners and the City Council.
Withdrawal by either developer, some city officials and Hollywood boosters say, would be a devastating setback to the city’s much-criticized effort to restore Hollywood Boulevard and 1.7 square miles of Hollywood’s blighted urban core to their former glory.
Company officials and CRA Chairman Jim Wood confirmed that negotiations are under way but declined to discuss specifics.
Wood described the two projects as the physical and psychological cornerstones of the redevelopment effort, which is expected to cost $922 million and take 30 years to complete. He said the agency’s response to the developers’ demands will have repercussions on its dealings with all other developers involved in the renewal effort.
“It’s going to be one of the biggest decisions we make,” Wood said. “I think it is going to set the tone for Hollywood for some period of time.”
Of particular concern is the fate of the Melvin Simon project, the much-ballyhooed Hollywood Promenade, which would create more than 1 million square feet of museums, offices, retail shops, movie theaters and a hotel in a glitzy package that would wrap around the landmark Mann’s Chinese Theater and extend from Highland Avenue west to Orange Drive.
The project has been in the works for more than five years, and a groundbreaking ceremony was held more than a year ago, but no construction has begun.
The Hollywood/Highland project, meanwhile, calls for a 1.7-million-square-foot “urban village” with 1,000 apartment units, an office complex and retail stores just east of the Promenade, at the northeast corner of Hollywood and Highland Avenue. A principal investor in the project, Robert M. Bass, is a member of the wealthy Bass family of Texas.
Some officials, such as Woo, say that there would be only temporary setbacks in the event of a developer’s withdrawal, and that the city cannot be pressured by developers into giving away too much taxpayer money just to get them to stay.
Expressing frustration at the negotiations, Woo said, “I am willing to announce the (Promenade) project dead if Simon insists on some level of subsidy more than we can provide. There is a limit to what we can afford.”
Both Wood and Woo said the redevelopment effort should provide subsidies when needed to jump-start important projects. “But it’s not intended to be a giveaway,” said Woo. “It’s not intended to be a gift of public funds.”
“I would really like to see one or more of these projects move ahead,” Woo said. “If they don’t, we will find other ways to use these economic incentives to produce visible results in Hollywood in the short term.”
In an interview, CRA Chairman Wood said the agency is considering using tax dollars to invest in the construction and operation of the underground parking portion of the Promenade project. Wood said such a partnership would allow the city to get involved with a lucrative and manageable part of the project without the liabilities and headaches of running a hotel or leasing office space. He would not comment on discussions with Hollywood/Highland, whose development plans are still in the conceptual stages.
Wood lamented the requests for help, which come at a time when lawsuits against the redevelopment project have stymied the CRA’s ability to generate funding for it. But he said such renegotiations and requests for public assistance often crop up in such renewal efforts.
Since the renewal project was approved by the City Council in 1986, only one major commercial project has made progress: the Hollywood Galaxy retail and entertainment complex, which is expected to be completed by next summer.
Michael Dubin, a vice president of Kornwasser & Friedman, developers of the Galaxy, noted that his company did not receive any financial help from the CRA “at a time when such assistance would have been greatly appreciated.”
“If the (CRA) is willing to offer incentives to large developers,” Dubin said, “they should also offer comparable incentives to small developers.”
Michael Marr, a vice president at Melvin Simon, said the request for help was made out of necessity. He said the developer began having problems with financing the Promenade project in January and at the same time found that there would be major cost overruns.
“What we are asking of the CRA is not different than what we have asked for, and received, from other cities across the country when we have done inner-city projects,” Marr said. “In order to continue, we need assistance from the CRA, and we are optimistic they will provide it.”
Marr and a Hollywood/Highland official dismissed critics’ contentions that they were taking advantage of a redevelopment agency desperate for their business.
Besides the incipient recession, a major concern of developers is that urban blight seems to have cast an increasingly dark shadow on Hollywood since they first proposed their projects.
“We finally all took a good hard look at the economic situation that exists in Hollywood today, and we understand more now that the rents in Hollywood don’t support the type of development you need to make redevelopment successful,” said an official of one of the two development firms, who asked not to be named.
“Hollywood is an unproven market and it’s been in decay for a lot of years,” the official said. “You’re going out on a limb in every aspect.”
Proposed Hollywood Developments The Hollywood Promenade project stretches from Highland west to Orange Drive on the north side of Hollywood Blvd. The proposed Hollywood/Highland project is at the northeast corner of Hollywood Blvd. and Highland Ave.
