la-wanda

Beverly Hills Squeezes Chinese Hotel Builder for Big Bucks Instead of Offering a Handout

Los Angeles Times
11/01/16

Beverly Hills Squeezes Chinese Hotel Builder for Big Bucks Instead of Offering a Handout
By Michael Hiltzik

http://www.latimes.com/business/hiltzik/la-fi-hiltzik-wanda-payout-20161101-story.html

 

The tradition in real estate development in recent years has gone something like this: Developer proposes mega-project, developer claims project will transform city into something great, city gives developer millions in tax abatements and other handouts to make the deal happen.

Beverly Hills may just have turned the payout spigot the other way. In a tentative deal announced late last week, the Chinese firm Wanda Group agreed to increase its fees to the city by more than a half-billion dollars over 30 years to win approval of a luxury condo-hotel project near the corner of Wilshire and Santa Monica boulevards.

Everyone involved in the negotiations expresses satisfaction with the terms. “This is by far the best development agreement ever negotiated for Beverly Hills, and possibly the richest development agreement per square foot negotiated anywhere by a municipality,” said Mayor John Mirisch, who reached the agreement as one of two members of the city’s ad hoc committee examining the project.

His colleague on the committee, Councilwoman Lili Bosse, agrees. And Rohan a’Beckett, Wanda’s manager at the project, calls the deal “an agreement on the numbers that works for both of us.”

But it still has local real estate observers scratching their heads. “This is the first time anything like this has ever been done,” Alan X. Reay, president of the Irvine hotel brokerage Atlas Hospitality, told me. “It’s unprecedented.”

It also involves a project embroiled in controversy. The Wanda development is a neighbor of a hotel and condo proposal at the site of the Beverly Hilton Hotel, which is the focus of a measure on the Nov. 8 city ballot. The measure was placed on the ballot by Beny Alagem, the Hilton’s owner, in order to bypass the city planning process by appealing directly to voters for their approval…

…Whether the stiff terms will harbor unanticipated costs for the Wanda project is difficult to gauge. The transfer fee will raise the price of the development condos above what comparable units might fetch. The higher hotel occupancy fee will also force room rates above older competing hotels that charge guests only the statutory 14%.

“You could argue that it’s a competitive disadvantage,” Reay says, though that might not matter much as long as the economy thrives and demand for Beverly Hills lodgings remains strong. “What if we get into a market where things slow down and people look more closely at rates?” Individual rates may not matter much, he says, but “it will definitely add up if you’re doing a major event, like a wedding.”

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