KB Home, Anschutz to Take Over Planned Hotel, Condo Project Near Staples Center
KB Home and billionaire Philip Anschutz have agreed to take over development and ownership of a planned $600-million hotel and condominium project across from Staples Center, officials announced Thursday.
The partnership all but ensures completion of what is seen as the linchpin in downtown Los Angeles’ transformation into a viable entertainment and residential district. The project’s proximity to the Los Angeles Convention Center also could spark a rebound in the city’s convention and tourism business, which has suffered because of a dearth of hotel rooms and attractions compared with Las Vegas and Anaheim.
The project, however, attracted controversy because nearly half its cost -- $290 million -- will be financed by city subsidies and loans.
Anschutz’s AEG Group and KB Home’s newly formed KB Urban division replace developers Apollo Real Estate Advisors and Wolff Urban Management Inc., who were bought out of the project.
“Our decision not to continue with the creation of this hotel will allow the project’s development to go on in the most expeditious manner,” said Richard Ackerman, an Apollo principal.
The 50-story structure will include two separate hotels with a combined 1,100 rooms, plus 250 luxury condo residences. It will be part of a $2.5-billion “sports-entertainment” hub, called L.A. Live, already under construction by Anschutz’s AEG Group that also will feature restaurants, nightclubs and movie and performance theaters in addition to Staples Center.
The area also features new or proposed high-rise office and condo towers, as well as retail establishments. Demand for space seems healthy, as rents for downtown housing and commercial space have risen faster than in many other parts of the city in recent months.
“We will have a massive impact on the rest of the downtown hotels as we become one of the great points of destinations for conventions and events,” said Tim Lieweke, president and chief executive of Los Angeles-based AEG.
At 50 stories, the new structure also would become one of the tallest buildings downtown. The tallest, at 73 stories, is the US Bank Tower, formerly called the Library Tower.
Lieweke said Anschutz, a longtime Denver resident who made his fortune in oil and gas, railroads, telecommunications and real estate, put up $100 million in capital to ensure that the hotel project got built.
“We have to get this built so we can get the convention business turned around,” Lieweke said, adding that AEG has no plans for other hotel projects.
Lew Wolff, a nationally recognized expert in urban development and head of Wolff Urban Management, will be an advisor to the hotel project.
The previous developers had been working with Hilton Hotels Corp. to operate the hotel. AEG and KB Home said they were re-evaluating the Hilton deal and were also talking with other hotel operators to carry out their plan to have two hotel brands -- offering mid-priced and luxury accommodations -- within the same building.
Atop the structure will be 250 high-end condos with sweeping city views, to be built by Los Angeles-based KB Home. The nation’s fifth-largest home builder, known for entry-level housing, has been slowly moving into the luxury market by building million-dollar single-family houses and townhomes. The condos will be the company’s first high-end condo project and its first hotel-related venture.
KB Home and AEG “have the attitude of moving forward well and competently,” said Bruce Karatz, chairman and chief executive of KB Home. “We’ve got all the elements to make this an extremely successful development -- for us, for our partners, for the city and for all members of our city,”
To form its partnership with AEG, KB Home withdrew from a previously announced proposal to build a twin-tower, 700-unit condo project two blocks away with rival Lennar Corp., said Jeffrey Gault, president of KB Urban.
Miami-based Lennar declined to comment on Thursday’s announcement. LNR Property Corp., a Lennar spinoff, has agreed to buy the parcel on which the project was to be built in a deal expected to close next month. But it was unclear whether the Lennar condo project would go forward in its originally proposed form.
Building a 1,000-plus-room hotel within walking distance of the convention center has been on the minds of city planners and developers for at least three decades.
It was only after the development of Staples Center in 1999 that plans for a hotel started to crystallize. “This is another symbol of what the downtown renaissance is providing the city -- millions in tax revenues and thousands of jobs,” said Carol Schatz, president of the Central City Assn., a nonprofit business advocacy organization.
The proposed hotel attracted controversy last year when its developers -- faced with rising construction costs -- asked the Los Angeles City Council to approve as much as $290 million in subsidies. That support was opposed by owners and operators of existing downtown hotels including the landmark Westin Bonaventure, the city’s largest hotel with 1,368 rooms, which threatened to put the subsidy issue before city voters through a referendum.
The council in September approved the subsidies, which will come through rebates of hotel taxes collected by the city.
Since then, the city and the Bonaventure have worked out their differences, L.A. Mayor Antonio Villaraigosa said during a news conference Thursday.