Craig Trager saw opportunity when he opened Daddy’s bar on Hollywood’s then-gritty Vine Street seven years ago.
“I go into areas before their prime,” said Trager, owner of the Vintage Bar Group, which is also a partner in The Well in Hollywood and NoBar in North Hollywood. “Hollywood has the demographic. Being 21 to 30ish, they are not intimidated.”
Today, Daddy’s is a prime pick-up spot. Crowds spill onto the sidewalk on Saturday nights, waiting to get in.
And that’s created a problem as developers, seeing that Hollywood is on the upswing, want in on the action. A $326 million mixed-use project approved by the Los Angeles City Council is slated to be built along the east side of Vine and Hollywood Boulevard wiping out many small businesses on the block, including Daddy’s.
The project, which will include a W hotel, 350 apartments, 145 condominiums and nearly 60,000 square feet of retail, is scheduled to break ground next year. And if Trager and other business owners don’t reach buyout agreements, the Los Angeles Community Redevelopment Agency could evict them through eminent domain.
“It is a big injustice,” said Aaron Epstein, who owns Artisan’s Patio Center on Hollywood Boulevard. “The people on Vine Street have worked very hard over the years. When they are just about to see prosperity with these other projects going up, they are being forced out.”
Eminent domain, the government’s power to seize property for the public good, allows redevelopment agencies to condemn buildings in blighted areas.
It has been used twice before in Hollywood: With a dilapidated property on Hollywood Boulevard and Western Avenue that was turned into affordable housing, and with the Egyptian Theater, also on Hollywood Boulevard. Those projects, however, didn’t displace many working businesses.
From 1998 to 2003, the CRA’s power of eminent domain in Hollywood lapsed, but it was renewed by the City Council in time for the W project. Meanwhile, a U.S. Supreme Court ruling this summer makes it harder to challenge condemnations to make way for private developments, such as hotels.
For this project, the CRA’s board would have to approve the use of eminent domain, although Helmi Hisserich, the CRA’s Hollywood administrator, hopes it isn’t needed. “We strongly encourage negotiations,” she said.
About 75 percent of the 4.6 acres where the W project is planned is owned by the Metropolitan Transportation Authority, with the rest belonging to four property owners. At least 10 tenants would have to be bought out or relocated.
The new development would be a welcome addition in the view of many civic leaders, who have tried to revitalize this long-suffering part of Hollywood.
They applaud the CRA for working with W project developers Foster City-based Legacy Partners, Norwalk, Conn.-based HEI Hospitality LLC and Dallas, Tex.-based Gatehouse Capital and assert that eminent domain, although a last resort, can help reshape a community for the better.
“Eminent domain is one of the tools that is necessary for a redevelopment agency to function,” said Leron Gubler, executive director of the Hollywood Chamber of Commerce. “It is very difficult to achieve anything if you don’t have some clout to get people talking.”
Developers have until next March to make a deposit of $9.6 million to the city to gain access to $4.8 million of CRA funds for acquisitions. “It is still pretty early at this point,” said Dale Goldsmith, an attorney for Gatehouse Capital and Legacy Partners. “We are hopeful that we can come up with a price that will be fair to the owners and that they will accept.”
Trager, along with his landlord Herb Clark and Robert Blue, owner of Bernard Luggage Co. and the building at 1642 N. Vine Street, say they have had little communication with the developers. “We are in no-man’s land right now,” said Blue.
Blue is one of three parties who sued to challenge the CRA’s right to use eminent domain in Hollywood. The CRA won in trial court, but an appeal decision is pending.
Trager, who estimated that Daddy’s is worth at least $700,000 to $900,000, said he is not optimistic the developers will offer what he thinks the bar is worth. To avoid a similar situation in two bars he plans to open downtown, he is trying to write a strict eminent domain clause into his new leases.
“Any time you are going into an underdeveloped area, the biggest fear that I have is you run the risk that some big deep pocket is going to come around and buy up the block,” he said.
