It seems every doctor – whether cardiologist, cosmetic surgeon or fertility specialist – wants a Beverly Hills address. Maybe as a marketing tool, maybe to cater to the rich and famous or maybe just to bask in the status the city confers.

“They all want the cachet,” said L.A. cosmetic surgeon Richard Ellenbogen.

But it could get tougher – much tougher – for doctors to get that cachet. Fearing their city could have many more doctors’ offices than reasonable amid a rash of proposals for medical office towers, Beverly Hills city officials are considering limits on the amount of medical space that can be created.

Evidence of a crackdown came just last week when the city denied a developer’s request to convert a building under construction at Wilshire and Robertson boulevards into medical office use. The building is still under construction, for now, at least, even though its eventual use is unclear.

The means by which Beverly Hills would limit medical office space is still under consideration. City Council members last year directed city planners to propose strategies to deal with the medical office glut. Options now include an annual cap on new space, a cap on total square footage or conditional use permits that would require each medical office proposal to get individual city approval.

A proposal will likely be released in the next several weeks.

“We do have concerns about setting the right threshold number,” said Anita Zusman-Eddy, vice president of economic development and government affairs for the Beverly Hills Chamber of Commerce.

The chamber will take a position when proposals become more clear, Zusman-Eddy said.

Doctors already in the city generally favor a cap; they said it would help keep out what they refer to as the “riff-raff.”

“How many fertility clinics and plastic surgeons does a community the size of Beverly Hills really need?” said David Alessi, owner of Alpha Surgical Group in Beverly Hills, a plastic surgery center. “So many practitioners are coming to the area that it’s getting harder and harder to know who’s a good physician and who’s not.”

Ellenbogen also objects to the wannabees from less desirable locales.

“A lower class of doctor is coming in to take advantage of the publicity that the Beverly Hills name can generate,” he said.

But if a stringent cap is ultimately approved, it could do far more than dissuade doctors from Koreatown or the San Fernando Valley from hanging their shingles near Rodeo Drive.

It could also raise rents for all doctors’ offices in Beverly Hills. That’s because the supply of medical office space would be constrained at the same time demand is being fueled by the ongoing expansion of Cedars-Sinai, the mammoth hospital complex just east of the city limits. As Cedars-Sinai has grown, doctors affiliated with the medical center have flocked to set up offices nearby.

“Physicians are already getting driven away little by little: The rents are too high and the economy’s bad,” said Payman Simoni, owner of Simoni Plastic Surgery in Beverly Hills. “And that’s before we start talking about caps on medical office space.”

Also, Beverly Hills’ office market has tanked along with the rest of the region’s. Vacancy rates were 14.4 percent in fourth quarter 2009, up from 10 percent the prior year. As a result, developers want to convert office space to medical use, and a cap might mean they won’t be able to.

Cedars-Sinai adjacent

City officials said they are growing concerned about medical office space crowding out other uses. They noted that more than 20 percent of all office space in the city – an estimated 1.2 million square feet – is devoted to doctors’ offices and pharmacies. That’s four times as much as in the city of Los Angeles, where 5.1 percent of all office space is medical, according to Grubb & Ellis Co. research.

While City Hall doesn’t want Beverly Hills to be known as a “doctor depot,” the stakes are higher than just perception. Medical office buildings with ground-floor pharmacies generally bring in less tax revenue for the city than buildings with lawyers or other professionals. That’s because those buildings also have retail space that generate a good deal of tax income for the city. While doctors pay the same business tax as lawyers and accountants on the upper floors, pharmacies on the ground floor don’t generate the same sales tax as other retail stores because insurance covers many prescriptions.

Then there are parking and traffic problems generated by constant streams of patients, prompting complaints from nearby residents. Some doctors don’t validate, and as a result their patients try to avoid their parking structures and opt for street parking.

“We’re seeing more requests now for preferential parking districts from residential neighbors of medical office buildings,” said Jonathan Lait, assistant director of community development for the city.

The debate over the proliferation of medical office buildings in Beverly Hills has simmered for years, but has come to the fore as several major medical office projects were proposed as part of a regional boom.

Most recently, developers of a four-story office tower under construction at Wilshire and Robertson sought city approval to allow medical office space in the tower because they lost their financing in 2009 due to the collapse of the office market. Last week, the City Council on a 3-2 vote rejected the request from the Kobor Family Trust.

An attorney for Kobor said the bank they had been working with would consider making a new loan if the project could be converted to medical office use.

“The general office market now is a disaster, so that’s why the bank refused to approve a construction loan,” said Benjamin Reznik, a partner with the Century City law firm of Jeffer Mangels Butler & Marmaro LLP who represents the Kobor Family Trust. “Converting the project to medical office would make it more likely to get financing from the bank.”

Reznik said his client is considering filing a lawsuit to overturn the City Council’s decision. Otherwise, there’s little hope for finding alternative financing to complete construction as an office tower in the current market. The construction is currently being self-financed by the trust, at least for now. Beyond that, the fate of construction is unclear.

Winners and losers

City planners last year proposed a moratorium on all new medical office space or conversions to medical offices because they were getting swamped with requests for new projects and conversions. The City Council rejected the moratorium, but asked planning staff to find options to limit the amount of new or converted medical office space.

Councilman John Mirisch’s viewpoint represents the council’s desire to set limits.

“Our cachet in Beverly Hills is glamour,” he said at last week’s hearing on the Kobor project. “It’s ‘come to Beverly Hills and see a star,’ not ‘come to Beverly Hills and see a sick person.’”

If city planners recommend that the council adopt caps, the next step will be determining what the limit would be. Setting it too high would allow most projects through; setting it too low could choke off almost all projects and cause medical office lease rates to soar.

Setting a cap would create winners and losers. The biggest winners would be owners of existing medical office buildings with no plans to expand, such as New York-based LeFrak Organization, which owns a medical building on Spalding Drive near Century City.

“If there’s a cap in place, one would not expect as much competition among building owners renting space,” Principal Jamie LeFrak said. As a result, lease rates would rise, to the advantage of the landlords. But those who weren’t already in the game would be at a disadvantage.

“If you were hoping to build a medical building or convert to medical from office, it would be very challenging,” he said.