Key Hollywood Renewal Effort Fails : Redevelopment: Firm planning the complex around Chinese Theatre says neither city nor private financing is available. Woo withdraws his support.

Negotiations on city financing for a massive theater, shopping and hotel complex around Hollywood’s historic Chinese Theatre fell through Friday after two years of talks between the developer and the Los Angeles Community Redevelopment Agency.

City Councilman Michael Woo, who represents most of Hollywood, announced that because of the current economic climate he can no longer ask the CRA to invest in the 1-million-square-foot project that was to have been the keystone of the city’s long-delayed redevelopment of Hollywood.

Planned for a sprawling site atop a Metro Rail station at the intersection of Hollywood Boulevard and Highland Avenue, the Hollywood Promenade would have included 400,000 square feet of food outlets and retail space, several movie screens to supplement the Chinese Theatre, a home for the American Cinematheque, 300,000 square feet of office space and a 325-suite hotel.

The developer, Melvin Simon & Associates, asked for city funding after it became clear that private financing would not be available for the $250-million project.

Earlier this year, the City Council balked at taking a $48-million stake in the project, but the developer’s requests for municipal funding only increased as the climate for obtaining commercial real estate loans worsened, Woo said.

“The economy is causing business people all over the city to hunker down, and Hollywood is no exception to that,” the councilman said.

In the wake of the recent state budget crisis, he said, the municipal budget will soon be hit with a new deficit of $70 million to $90 million.

“At a time like this I can’t justify going to my colleagues and asking for such a major investment,” he said.

Neither Woo nor Michael Marr, Simon’s vice president of development, was ready to declare the project dead. But they conceded that the Hollywood Promenade will be comatose for the foreseeable future.

After the riots four months ago, the developer had stated its intention to go ahead with the project.

“That is still our stand,” Marr said. “The problem now is one of an expensive project in very difficult economic times, and the key on this is to arrange financing.

“At present, we do not have the financing arranged, and we need the support of the CRA. And obviously with Councilman Woo’s statement today, we no longer have that support,” he said.

The Simon company is a partner in the recently opened Mall of America in Minnesota, but money for that Gargantuan project was in place years ago, Marr said.

“The number for the public assistance in the Mall of America was in excess of $80 million,” he said. “That project had the cooperation of public entities in the Minneapolis area to go forward, and unfortunately we don’t have that right now.”

Despite Friday’s announcement, Chris Baumgart, chairman of the Hollywood Chamber of Commerce, said that he expects the Simon project or something like it to open someday at the prime intersection.

“This is certainly not the death knell for Hollywood by any stretch of the imagination,” he said. “It was the largest project envisioned, but a lot of little projects, or middle-size projects, can make up for one big one.”

Woo noted that several smaller-scale redevelopment efforts have been started or are to be launched in the coming months, including a security patrol for Hollywood Boulevard, a Sunday morning farmers market on Ivar Avenue, the doubling of the number of trees and the installation of glittery new pavement along the boulevard.

Don Spivack, director of operations for the redevelopment agency, cited programs for rehabilitating old buildings and making loans to attract entertainment industry firms to the Hollywood area.

“You won’t have a large anchor for this sector; rather you’ll see it develop with a series of smaller projects, and hopefully by that time, the economy will have turned around and that project will have moved forward,” he said.

If the Promenade project had been successful, the city’s investment could have been recouped by the increase in property tax generated by the property, Spivack said.

But in the aftermath of the debacle in the savings and loan industry, it has been difficult for developers to finance any large projects, he said.

“It’s well and good for the city to put in several million dollars, but if you’re not able to put in $200 million from the banks, then the project isn’t going to go forward,” he said. “It’s not reasonable for the city to do 100% financing, and that may have been the only option at this point.”

Robert Nudelman, one of several Hollywood activists who have been critical of Woo’s plans for redevelopment, said he welcomed the decision to back away from the large project.

Instead, the city should concentrate on cleaning up Hollywood Boulevard, he said.

“The real problems are crime and how dirty it is out there, and the panhandling,” he said.