Hollywood & Highland to Be Sold
Hollywood & Highland, the Hollywood Boulevard retail, hotel and entertainment complex once valued at almost $650 million, is expected to be sold for less than a third that amount.
The owner, Trizec Properties Inc., a Chicago real estate investment trust, has signed a contract to sell the property to CIM Group Inc. of Los Angeles for about $200 million, according to people who know about the deal. Neither Trizec nor CIM would comment.
The massive Hollywood & Highland complex, built in the spirit of the set of D.W. Griffith’s “Intolerance,” brought the Academy Awards back to Hollywood and helped spur investment in the area. But it seemed to court calamity. After cost overruns and delays drove up the price, it opened to mixed reviews shortly after the September 2001 terrorist attacks.
The free-spending Japanese tourists who had been expected to buy luxury goods in the center’s fanciest stores stopped traveling, and several tenants failed. Locals complained about the high cost of parking, and many chose to patronize the nearby Grove at Farmers Market instead.
“All of the things that could have gone wrong did,” Merrill Lynch Global Securities real estate analyst Steve Sakwa said even before the Grove opened in March 2002.
Trizec soon repositioned Hollywood & Highland as an entertainment destination, pumping enough life into the center to make it attractive to more visitors and investors. Recent boosts include the daily taping of Ryan Seacrest’s news and variety television show for Fox and the expected addition of a small studio where radio station KROQ will do live broadcasts.
“Trizec began to realize that people wanted entertainment, not just duty-free high-end shopping,” said Los Angeles City Councilman Eric Garcetti, whose district includes Hollywood.
The sale would close a painful chapter for Trizec, which lost millions of dollars in 2002 when it wrote down the value of its investment -- to about $200 million from $540 million -- and announced its intention to sell the property.
The city of Los Angeles invested nearly $100 million in the center to pay for its large underground parking garage. The garage, operated by the city, is intended to serve the busy retail district around Hollywood Boulevard and Highland Avenue.
Revenue from the garage has more than doubled since use shot up after rates were dropped in 2002 to $2 for four hours with validation from $10, said Garcetti. The 3,000-space garage has even been filled on some nights when there were events at the Hollywood Bowl a few blocks away.
“Trizec was trying to do many things at once,” Garcetti said of the center’s stumble out of the gate. “CIM really understands its market and how important it is to focus.”
CIM Group owns the 12-story TV Guide Hollywood Center office building across the street from Hollywood & Highland and is headquartered there.
It also owns the nearby Galaxy entertainment complex that includes the Knitting Factory nightclub and the former Woolworth building at 6410 Hollywood Blvd.
Founded by Israeli immigrants Avi Shemesh and Shaul Kuba, CIM Group specializes in large-scale urban projects and owns or is developing more than 4 million square feet of properties. Among its current projects is a $220-million residential and retail complex at 9th and Flower streets in downtown Los Angeles. It will start work soon on a $65-million apartment, condominium and retail project in downtown Anaheim.
The firm also played a role in developing the Third Street Promenade in Santa Monica, Old Pasadena and Brea Town Center. It is largely financed by a pool of money raised by institutional investors including the California Public Employees’ Retirement System and the California State Teachers’ Retirement System for investment in urban developments on the West Coast.
Trizec will continue to focus on its core business of owning and operating office buildings and leave the retail business behind, according to company statements.
As for Hollywood & Highland, “our company has acknowledged a bit of a mispositioning of this facility,” said LeeAnn Stables, Trizec’s marketing officer.
Stables led the effort to attract Angelenos through such steps as setting up shuttle service to the Hollywood Bowl and the Pantages Theater. Silent movies with live music and laser light displays where shown in the center’s courtyard during the summer. Shows with popular appeal such as “The Full Monty” were booked in the Kodak Theatre, the home of the Academy Awards. Entertainment-oriented tenants including bowling alley Lucky Strike Lanes and Twentieth Television, which produces Seacrest’s show, were courted.
“Our goal was to bring entertainment and excitement and try to bring relevance for locals,” Stables said. “Everyone’s expectation was that this was going to be a big mall in Hollywood. People who were looking for that were disappointed.”
