L.A.'s generosity flows in Mid-City
For nearly a decade, the shopping center known as Midtown Crossing has been a top priority for Los Angeles’ elected officials, from Mayor Antonio Villaraigosa to neighborhood council leaders in and around Mid-City.
The mayor’s business team has spent three years trying to ensure that the corner of Pico and San Vicente boulevards will offer a Lowe’s home improvement store and more than a dozen other chains.
Yet even some residents who look forward to the project’s completion say they are mystified by the degree to which the city has worked with CIM Group, the real estate company building the project.
To complete Midtown Crossing, Villaraigosa’s appointees at the Community Redevelopment Agency recently recommended that the City Council increase the size of the project’s subsidy from $5 million to $14.3 million.
To assist with the project’s bottom line, Councilman Herb Wesson intends to help CIM secure approval of a sign district that would display “supergraphics” -- vinyl advertisements permitted by city law only in special cases.
And two city pension boards -- panels with several Villaraigosa appointees -- have been investing city employee retirement dollars in CIM funds. Looking for a double-digit return on their investment, those boards have voted over the last four years to commit up to $115 million to the Los Angeles-based firm.
Karen Diehl, a spokeswoman for CIM Group, said the company would not disclose whether Midtown Crossing or any of its projects are being financed with public pension dollars.
But one nearby resident voiced surprise to see the city invest in CIM, then provide money to help its real estate projects pencil out.
“They’re investing the money at the front end, closing the [financial] gap on the back end, and when you throw in the sign district, I wonder: Why do they have to do so much?” said James O’Sullivan, a former chairman of the Mid City West Community Council, who plans to shop at Lowe’s once it opens.
CIM has real estate projects across the country and throughout Los Angeles, including a dozen in Hollywood. When CIM went before pension board members last year, the company boasted that its real estate funds produced a return of more than 20%.
The company has completed Midtown Crossing’s first phase, leasing a new stretch of storefronts to Wells Fargo and chains such as Starbucks, Foot Locker and Panda Express.
After efforts to open a Costco and a Home Depot fell through, residents have become impatient to see the project finished, said Philip Friedl, CIM’s vice president of development.
“Everyone wants to see this project built,” he said.
Wesson, whose council district includes Mid-City, said the project is well worth the money. And he voiced confidence that CIM’s efforts would fuel a revitalization along Pico Boulevard, luring customers from South Los Angeles and even the Eastside.
“CIM gets the job done,” the councilman said. “Some developers don’t succeed, but these guys are like the pizza man. They deliver.”
Still, even some of Villaraigosa’s appointees on the redevelopment agency board -- the panel that recommended that the City Council approve a larger subsidy -- have openly voiced doubts.
The panel voted last month to provide an additional $9.3 million after redevelopment officials revealed that Midtown Crossing was $20 million over budget.
Much of the increase has been attributed to soaring construction costs, including an unexpected city requirement that the developer drive pilings to secure the project’s foundation.
As he reviewed the proposal, redevelopment commissioner Alejandro Ortiz criticized the planned billboard supergraphics, describing them as “blight” and “debasing to the community.” Redevelopment commissioner Madeline Janis questioned whether a project that creates “very low-wage jobs” should receive so much money from the city.
“That troubled me, and I felt a pain in my chest trying to decide how to vote,” Janis said in an interview days after the vote.
Redevelopment officials argue that without the subsidy, CIM Group would achieve a financial return of only 7% on its project -- lower than typical developments. Still unclear is how much advertising revenue the company could obtain by winning approval of the special sign district.
Janis said she fears that the redevelopment agency is not doing enough to reach out to other development companies. CIM Group has received financial help with projects in at least three other neighborhoods, including:
Downtown Los Angeles, where the city spent $3.3 million to help construct a Ralph’s supermarket and the 267-unit Market Lofts.
The San Fernando Valley, where the redevelopment agency devoted $4.35 million to the refurbishment of the Reseda Theater, which CIM plans to convert into a supper club.
San Pedro, where the city spent $5.9 million to help build Centre Street Lofts, a complex of 110 homes. Roughly half the money came from the redevelopment agency.
Redevelopment officials argue that CIM has served as a catalyst in each location where it has received financial help, luring other residential and retail developers.
“You’ve got to remember that CIM was coming into San Pedro when there was no significant investment and no significant construction activity occurring,” said Susan Totaro, a project manager for the redevelopment area in downtown San Pedro.
To convince Villaraigosa’s appointees to provide more help to Midtown Crossing, one redevelopment official said the extra money would show residents of South Los Angeles that the agency can deliver on large-scale retail projects.
“I can tell you, being out there day to day, that is priceless,” project manager Michelle Banks-Ordone told the commission.
Although the Pico- San Vicente site is not in South Los Angeles, retailers have shied away from it because they believe it is, said Jackie Dupont-Walker, president of the LaFayette Square Assn. and a major backer of the project.
Too many redevelopment projects in the larger region, including the Marlton Square shopping center, near Crenshaw Boulevard, have languished, she added.
“We need a winner,” she said.