Grand Avenue project delayed again

Good evening. Will downtown L.A. ever achieve critical mass as a place to live?  Will most Angelenos ever care? If you are among those who care, you will be interested in this item from Downtown News:

"A groundbreaking ceremony for the $3-billion Grand Avenue project has been pushed back from March until at least the summer, officials with developer Related Cos. confirmed last week. It marks the third time that the public kickoff for the massive Bunker Hill effort has been postponed."

LA Biz Observed reports the delay is "bound to raise questions on whether the much-ballyhooed project being developed by Related Cos. is running into financing problems. It wouldn't be surprising, given the scope of the project and the uncertain state of the commercial lending market."

For the recrod, Related Cos. President Bill Witte told Downtown News "the development is on track to meet its most recently announced timeline, with phase one slated for completion in 2011. He also maintained that the project's financing is in order."

Thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com.
Photo credit: Gehry Partners LLP for Grand Avenue Committee

Comments

[chickenortheegg]

No Grand Avenue Project, no buyers. I just rented a loft downtown and am waiting to buy - but the more I get concerned about big projects pulling out, the less likely I am to stick around. So what comes first? The same hype that built this housing bubble is alive and well, simply human nature. Go forward with the project or suffer a death by 1000 paper cuts.

[Robbie Fields]

Peter,

For the "record", check out the financial tsunami emanating from the City of London that will engulf commercial real estate worldwide.

Mr Witte may be counting his lucky stars that his project isn't further along.

Much has been reported about overbuilding in Miami; but I'd say when the Chicago condo and commercial market crashes, the reverberations will be more far reaching than in Miami.

[MaRk]

I can only hope that Mr. Gehry lives long enough to see the completion of his metropolitan masterpiece and that I live long enough to become a resident!

[MaRk]

I can only hope that Mr. Gehry lives long enough to see the completion of his metropolitan masterpiece and that I live long enough to become a resident!

[Karl]

It's a pity if it goes down because of the current financial situation... in 2011, the market will most likely have improved, and if they build now, they will be able to take advantage of the lower labor costs associated with building during a slump.

[Tombstone Realty]

Well being something like 30 million or so of the costs come from state tax breaks and taxes on other hotel rooms downtown - if that money vanishes due to lower travel rates, and a state budget crisis, that's something they have to make up.

Being that I resent the city financially supporting housing projects that I will never be able to afford, I'm not exactly crying my eyes out over this.

[Gerrrg]

Misc. thoughts:

1. The project is mixed-use, and while the housing component may decrease profit from the project, the commercial end wouldn't be an issue. I've only seen projections of commercial markets increasing, as opposed to housing markets decreasing.

2. Delivery is 2011, so there's a lot of leeway for the housing component to break even with current market pricing.

3. Does the Related own the actual property, or does the ownership have a contingency on approval of financing for the construction? I can see that as a problem for a ground breaking...so then yes, financing might be a problem and perhaps they are considering retooling their project to include more commerical and less housing?

[Theorist]

Hmmm.... how much of the $3 Billion is coming from subsidies? This is one of those fancy public/private projects, isn't it?

Has any of the subsidy money been spent so far? If so, where has it gone? William Witte has a wealth of experience juicing the coffers from his time with HUD and the city of San Francisco. Witte's company, Related of California -- how is it related to the Related Companies of New York. Related Companies is major shareholder in Centerline Holdings, owner of Centerline Capital Group. Are they providing any financing? How does Eli Broad figure into this whole thing? Is Broad putting any money into Grand Avenue himself? Doubtful he'd want to risk his own money... Is he really L.A.'s best friend? Let's clast some more icons.

[lefty]

i think it will happen, i see a lot of nice people walking around downtown after dark these days. many of them have bought there! this is one more clue for you that now is the best time to get into metro L.A., don't wait for the rush!!

[Brady Westwater]

Not one dollar in subsidy is going into building any of the market rate buildings or any of the market rate housing units. It is largely going into the heavily subsidized housing (mandated by the government) though there are some typical transportation and infrastructure improvements in the public right of ways.

There will also be a rebate on the hotel tax for a period of time which, again, is not part of the construction costs and there is some parking tax relief that will be passed through to the consumers with lower public parking rates - but not the tenants. And this was a requirement of the government.

And NONE of these tax rebates are coming from other projects. They are all reductions on future taxes that will be paid only if the project is built. Not one dollar of the tax rebates comes from existing revenue sources.

Lastly, Eli Broad is one of the people who worked to make this project happen and, as one of the members of the Grand Avenue Authority, he does not and can not have any financial interest of any kind in the project. It is strictly a civic improvement project for him.

[Brady Westwater]

Oh, and Related will never 'own' the property. It only has a ground lease and all the property will one day be fully owned by the taxpayers of Los Angeles. And, yes, if they do not meet their deadlines, the lease will be null and void.

[Theorist]

Vell,

I guess Grand Avenue is about as close as we'll get to true public works projects, and it's been suggested widely that public works is what we need to get our economies back down to earth and happy, so heck, why not nurse it along.

Ross, you can justifiably feel like this is your baby; you're probably more invested in it emotionally than Related Co's will ever be. You more than anyone, at this point, are probably rooting for this thing to get finished -- your magnum opus. To me, though, it just seems like another balloon. Lots of money and planning, and hype -- we've got the Kobe's and the Beckham's and whoopdeedoo. Now, it seems to still be stillborn at the start of a housing recession.

What is the term of the ground lease? Are there options to renew? Does the city/CRA actually own the dirt currently? Is any money being paid towards rent while the land is tied up before construction? What are the deadlines? Have they missed any already (having been postponed so many times, and budget having inflated from $1.2B to $3B)

Here's a wayback machine link to an L.A. Times article from 2005:
http://tinyurl.com/2ghhp6

Here's link to the project website:
http://grandavenuecommittee.com/

Interestingly, the last update to their website was July, 2007.

Another link, to the Lear Center which caused a stir years back when they solicited design and planning ideas for the development, and called for an open contest (humored, but surprisingly not well-indulged). Updates on the project, and interesting tidbits:
http://tinyurl.com/ow8a7

The last billion dollar question is... who will actually build this thing? There's going to be some big big money made on the construction. Watch the budget jump to $4B+ as well. Gehry has said himself recently that there *are* issues with the financing. NYT reported last month that there shouldn't be as ABU DHABI just danced in with $1.4 Billion for the Related Co's. Hmmm... Where's the construction financing coming from?

Maybe we could actually get this thing built on time and under budget if we all get out there, dig with our hands, and swing hammers as Stalin had asked of his comrades, to build the subway tunnels of Russia. Nah... won't happen unless they disconnect our cable tv and internet.

[Jeremy R]

"Being that I resent the city financially supporting housing projects that I will never be able to afford, I'm not exactly crying my eyes out over this. "

1) This thing has like 35% affordable units that go for people making less than 25k/yr up to 100k/yr. You can afford it if you are lucky to get in the waiting list.

2) They are providing a 50 million dollar park for free essentially. The city isnt paying for it.

3) The retail will generate a lot of taxes over the longer term to offset the hotel bed tax waiver.

4) Who doesnt want a 5star hotel near our underrated music center. It will make it more prominent and make it a more enjoyable area for residents to visit. More high profile cultural ammenities may move to the area as a result.

5) Later phases add more jobs to the civic center which is a great thing.

dont think of this as just housing. The hotel, park, jobs, and retail will be a great catalyst for our civic center.

I am not a booster. What Angeleno wouldnt want this? I go to MOCA, and the opera often, and I would love for their to be more life around the civic center.