Proposal Would Transform Blighted Block : Sherman Oaks: Empty shops could be bulldozed to make way for a three-story complex that mixes housing and retail. The deal would end years of fighting over the site, but neighbors still have objections.

A long-vacant stretch of shops along Ventura Boulevard in Sherman Oaks could be demolished soon and replaced with a senior housing complex as part of a deal to end nearly six years of bickering among Los Angeles officials, nearby residents and the project’s developer.

Under the deal, the sagging, boarded-up buildings on the south side of Ventura just east of Woodman Avenue would be leveled later this year--ridding the neighborhood of an eyesore that residents complain attracts transients and vermin.

In its place would be built a three-story complex that blends 84 units of senior housing with about 3,000 square feet of street-level retail space. The complex would be the first “mixed-use” project along Ventura Boulevard and one of just a few citywide.

The deal between the city and developer Jacky Gamliel must still be reviewed by the City Council, but Councilman Zev Yaroslavsky, who represents the area, said he expects a quick approval and predicted that construction could begin in the fall.

“What this means is that, finally, the end of the blight at Woodman and Ventura is at hand,” Yaroslavsky said. He added that the dispute over the project “has been an embarrassment to everyone involved. Every time I drive by that block, it’s a symbol of how things should not be done.”

Although glad that the abandoned shops may soon be demolished, Richard Close, president of the Sherman Oaks Homeowners Assn., said the new project still is not appropriate for the neighborhood.

“It’s a mixed blessing,” he said upon hearing the news Monday. “On one hand, we are excited to know the blight that has existed there will soon be gone. On the other, we are disappointed that it exceeds two stories.”

Since 1989, when a much larger office building was proposed for the site, Close’s group has fought to limit the project to two floors. The current project would include two floors of housing above street-level shops.

Once home to an eclectic mix of popular shops--including the popular Scene of the Crime bookstore--the merchants were abruptly evicted late in 1988 to the surprise of neighbors, who wondered what was afoot.

By 1989, they found out. And they were not pleased. Developer Gamliel proposed a three-story, 85,000-square-foot building that included office space and stores, but no housing.

Protests erupted and former L.A. City Councilman Mike Woo, who represented the area at the time, blocked the permits to demolish the stores in an attempt to force a full-scale environmental review of the project. Gamliel sued but was rebuffed in court.

In 1990, Gamliel asked for an exception to the Ventura Boulevard Specific Plan, which was enacted to control growth along the commercial strip between Studio City and Woodland Hills. The project would have been inconsistent with the plan.

His request was rejected and in 1991 Gamliel again sued the city, this time challenging the Specific Plan and asking for $10 million. As part of the new deal, the lawsuit will be dropped.

Ironically, however, the building is still inconsistent with the Specific Plan. “But they like it,” said Gamliel’s attorney, Ben Reznik, of city officials. “That’s life.”

While his suit was pending, Gamliel in 1991 scaled back his plans to a larger version of what he currently proposes. That plan called for 11,000 square feet of retail space and 144 apartments for seniors, but was rescinded a month later.

All the while, the shops stood empty.

The situation heated up again last year when Yaroslavsky asked that the block be demolished. Earlier this year, Yaroslavsky said he told Gamliel “to fish or cut bait,” and negotiations began anew.

As part of the deal, the city will give Gamliel a low-interest loan of $2.4 million to provide housing for low- and moderate-income residents. The remainder of the $8-million project will be financed privately by Gamliel and through a combination of tax credits and bond issues.

News of the deal, struck late Friday, had yet to reach even the property’s owner or Gamliel. Property owner Mel Guthman said: “Call us a week from now. You want to say the deal has been consummated, but we’ve not even had a wedding yet.”

If it is built, the project would be among one of the few mixed-use complexes in Los Angeles. Urban planners herald mixed-use projects, which mingle housing with shops or offices, as a way to reduce traffic and provide affordable housing. They are also viewed as a way to turn around flagging commercial strips such as Ventura Boulevard.

“I think this will be a good demonstration project,” said attorney Reznik. “If people want Ventura Boulevard to not be dying, we need to be a little more creative.”

Yaroslavsky agreed, saying that if this project is successful, other developers may be willing to follow. “It could be a prototype for all over the city,’ he said.

But Close doubted such projects could ever sprout without significant public investment. “Is this a good planning idea on Ventura Boulevard? No,” he said. “The only potential for it is low-income housing. It won’t attract people willing to pay the going rate.”