Stalled Grand Avenue development may get a second look

Bunker Hill is showing signs of life. A new 12-acre Civic Park is nearly complete, sloping down to the steps of City Hall in a cascade of stairs and lawns. Down the block, the skeleton of the Broad Museum is rising on Grand Avenue, set to take its place alongside the Museum of Contemporary Art, Walt Disney Concert Hall and the Dorothy Chandler Pavilion.

But at the center of it all, the land set aside for what was to have been downtown L.A.'s transforming development remains untouched. Under the original plan — which backers said would help create a “Champs Elysees” for Los Angeles — a dramatic Frank Gehry-designed complex of high-rise towers, shops, upscale condos and a five-star hotel should have been completed by now. Instead, the space is still used as parking lots.

The Grand Avenue project was born a decade ago amid the real estate boom and the belief that downtown could support high-end retailers and multimillion-dollar housing.

But it’s been stalled for years by the recession. And even some of its strongest backers now say it’s time to rethink the project given the economic climate. In particular, some doubt downtown L.A. can support the luxury aspirations of the original plan.

“I’m not so sure there’s many people who believe that it’s a reality today,” said L.A. County Supervisor Gloria Molina.

Related Cos., the mega-developer anchoring the project, said revisions are on the way. Bill Witte, president of Related California, said that the firm was working to adjust its plans to better reflect market conditions, and that its “dimensions, scope and scale” could be adjusted. He did not reveal specific details but suggested the new plans would be aimed at getting the project off the ground.

“We still believe we can create some of the highest values downtown....But do I think we have to be a little bit less ambitious? Yes, I would agree with that,” Witte said. “The city’s and the county’s expectation is that they want something with vision and that is doable. I don’t think anybody is interested in pie-in-the sky talk.”

Though Witte said Related remained committed to the basic outlines of the development, he would not comment on the fate of Gehry’s two translucent, glass-curtained towers that promised to alter the downtown skyline.

Under its amended agreement, Related must begin construction by February 2013 — or obtain yet another extension from the board of city and county officials overseeing the project. Related is expected to bring new plans to the board this year.

During the height of the real estate boom, developers unveiled numerous luxury projects, believing the downtown revitalization was so strong that it could support Beverly Hills-level retailers and residences. Most of those projects died, notably a plan to build a 76-story residential tower known as Park Fifth near Pershing Square. Today, Grand Avenue is the last project considered a serious possibility.

The long-stalled project is likely to take a step forward this summer when the Grand Park opens. Related paid about $50 million toward the construction, which was billed as a key public benefit for a development being built on publicly owned land. Residents of downtown, who have long complained that there is not enough open space, are anticipating the park’s opening.

The development, which had a total price tag of more than $3 billion, also includes a lot across from MOCA, where Related is planning an apartment tower, and the site of the Broad Museum. Related officials say both projects, as well as the park, will help it secure financing for the central complex along Grand Avenue, between 1st and 2nd Streets. Since the start of the recession the firm has struggled to secure the $1.1 billion in loans needed for that portion of the project.

Under current plans, the central lots would include a boutique hotel, hundreds of luxury condos and acres of retail space for upscale restaurants, shops and art galleries.

Pricing levels at the condos were projected as high as $1,200 per square foot, said Cal Hollis, a real estate consultant who was involved in the planning phase. Under that pricing, a 2,000-square-foot condo would run more than $2 million.

An earlier version of this article incorrectly spelled Cal Hollis’ name as Hollies.

When Grand Avenue was announced, officials were confident there was a market for homes in that price range, in part because of Gehry’s bold design.

Currently, the average price of a new downtown condo in $489 per square foot, according to OnTheMarket, which analyzes real estate values in California.

Witte said he still believes there’s great potential for the site and that the emergence of new bars and nightlife in other sections of downtown means there’s less pressure on Related to “do it all” at Grand Avenue.

Real estate experts and urban planners were more blunt, however, saying the Grand Avenue plans are outdated and need to be reworked extensively.

Paul Habibi, a professor at the UCLA Ziman Center for Real Estate, questioned whether the market can support the elaborate Gehry towers, given their high cost.

The demand for luxury condos has collapsed in the years since the project began, Habibi explained, shifting to more modest rental units. There is still a market for hotels downtown, he added, but mainly for those catering to business travelers rather than the swank Mandarin Oriental Hotel envisioned in the original Grand Avenue plan.

Joel Kotkin, an urban studies fellow at Chapman University, said downtown L.A. has yet to prove that it can draw an audience for high-end retail shops that were planned for the 450,000 square feet of retail space at Grand Avenue. Some of downtown’s most vibrant retail scenes, he says, have grown up organically in places like Little Tokyo and the historic core, as independent restaurants and boutiques have opened.

“I always felt [the Grand Avenue project] was about trying to create a sort of high-end Upper East Side Manhattan vibe,” said Kotkin, who was critical of the development when it was first approved in 2007. “And I could never understand where the market was going to come from.”

Kotkin and others argue that downtown’s revival has been driven less by an influx of wealthy people than by young professionals and students drawn to the urban feel of the city center’s various neighborhoods.

“Downtown L.A. has taken on a kind of hipster urban identity....It’s lively at night because it’s filled with young adults who are living in relatively affordable apartments and lofts,” said Peter Zellner, a professor of urban design at the Southern California Institute of Architecture.

The lofty expectations for Grand Avenue were fueled in part by Related’s involvement. The company is known for its outsized “destinations” in New York City, namely the Time Warner Center in Columbus Circle, which houses CNN and a number of high-end residences, eateries and shops. Related also developed The Century, a 42-story luxury condo tower in Century City, where Candy Spelling, the wife of late TV mogul Aaron Spelling, purchased a two-story penthouse in 2010 for $35 million.

Martha Welborne, former chairwoman of a nonprofit committee that first began promoting the Grand Avenue effort in the early 2000s, said Related was chosen in part because it could “create a place where no place exists.”

Welborne, who now works for the Metropolitan Transportation Authority, said she was still confident Related could get the job done.

“Their goal is to build it, not to wait,” she said. “But they really can’t do it until they see that they can make it pencil out.”