L.A. to Subsidize Hotel Project


city officials have announced an agreement for the city to heavily subsidize construction of the long-sought 55-story, 1,200-room Convention Center hotel-condominium complex in downtown Los Angeles across from Staples Center.


Hilton Hotels Corp. will lend its name to the hotel and manage it, said Tim Leiweke of Anschutz Entertainment Group and Lew Wolff of Wolff Urban Partners. The hotel, being developed by Wolff Urban Partners working with Apollo Real Estate, is expected to include a range of luxury suites on the top floors as well as 100 condominiums.


Planned as part of a $1 billion entertainment complex on what is now a parking lot, the project also will involve a limited - but costly - role for the city.


"We have minimized the city responsibility in this," Leiweke said. "We felt it was important to move ahead and not deal with the complications of potential lawsuits with any level of direct public funding."


However, the memorandum of understanding, scheduled to get its first hearing next week, will involve significant costs to the city, which already is losing millions of dollars a year on the Convention Center. Among these:  


  • Reinvest all hotel bed taxes - estimated at $6 million year - back into the project for a 20-year period.
  • Make available a $22 million loan, at a 5 percent interest Irate to be paid back in 30 years.
  • Invest $10 million of public funds for infrastructure improvements. U
  • Waive all fees for building permits for five years.

"This is a small investment, comparatively, to what the city will get in return," said Jack Kyser, chief economist of the Economic Development Corp.


"A convention center hotel is what has been needed to make the Convention Center a success. This is a time to fish or cut bait. Without the hotel, you might as well close down the Convention Center." I


And, Leiweke said, without the hotel, the plans for "Times Square West,” the entertainment-retail complex being planned for around the area, will be abandoned. E


"If there's no hotel there, we might as well keep parking cars there."


 Wolff said the city share was minimized compared with other  projects he has been involved with to develop similar properties.


"We are asking all the partners to make an investment.” Wolff said. "AEG is putting up their land, Hilton is making a lean-to the project, Apollo is putting in $50 million to $60 million. U

"We think what we are asking from the city is reasonable and a lot less than most other communities put up."


Mayor James Hahn had placed a high priority on the agreement, said Deputy Mayor Renata Simril.


"Given the circumstances of how most such hotel deals are being financed across the country, the mayor feels this limited the city's liability.


"We are making a loan and a modest investment for a $1 billion project that will create thousands of jobs. And we believe it will help us with a $20-million-a-yearEproblem in paying off the Convention Center bond and make Los Angeles competitive again in the convention business."


However, Peter Zen, general manager of the Bonaventure Hotel and an outspoken critic of the plans, said he was unconvinced about the proposal.


"I have the same concerns I always have and that is why should these people be able to have a $6-million-a-yearIadvantage. I could use that money for my hotel. The city could use that to hire more police officers."


Jon Coupal of the Howard Jarvis Taxpayers Association questioned why such City Ok's Subsidy for Hotel Project


"It just sounds like a boondoggle with special treatment given to a developer," Coupal said. "This is money that should be used for municipal services. If this project is commercially viable, then private industry should pay all of it."


With the Times Square West project, AEG - which owns and runs Staples Center – is taking a major step as part of its downtown investment.  


The plans call for a 4-million-square-footAentertainment district encompassing a 7,000-seat concert theater, a multiplex theater operation of possibly 16 screens with seating for 4,000 people, a ballroom-meeting facility for 3,000Upeople along with bars,  restaurants and other facilities around a 40,000-square-footIopen- air plaza.


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