South Park's Future Remains Cloudy After Anschutz Pullout
Warehouses near Staples Center would have given way to stadium.
Property owners in and around South Park, thrown for a loop when Anschutz Entertainment Group announced plans for a pro football stadium at the site, were whipsawed again when the proposal was abruptly dropped a month later.
After the latest football follies, landlords and developers are questioning the city's will to encourage development of the roughly square-mile patch near the Staples Center.
"The football stadium has created some confusion about the future of South Park, which, within the new redevelopment zone, was to have maybe 10,000 residential units," said Ed Rosenthal, vice president of investments at Grubb & Ellis Co. "It gives a cloudy policy signal, which is unfortunate since this residential boom in downtown is still in the process of establishing itself."
But if skyrocketing land values are any indication, the market appears to believe that a replay of Anschutz's football stadium proposal lies in the near future. Many think Anschutz owns too much of the 17-acre South Park parcel targeted for the stadium to back out entirely. Even city officials disbelieve Anschutz is sitting out this game.
Complicating matters is the City Council approving the Community Redevelopment Agency's redevelopment zone, calling for $2.4 billion in development subsidies over the next 30 years. The proposed stadium would have fallen in a portion of the 879-acre zone, prompting the L.A. County Board of Supervisors to vote to sue the city to halt implementation of the overlay. Resolving that conflict will keep South Park in limbo, with or without the NFL.
"I'd be surprised if this is a death knell for football for Los Angeles," said L.A. City Councilman Eric Garcetti, chairman of the City Council's Economic Development and Employment Committee. "The Anschutz Group will always be a player in that discussion. They won't lose interest."
AEG's president, Tim Leiweke, cited an attempt by the Coliseum Commission to lure a pro team when he announced the withdrawal June 14, the day after AEG disclosed the proposed stadium's specific location.
Anschutz officials assert the firm has moved on and has no further interest in developing the site as a stadium.
Others aren't so sure.
Much of the speculation surrounds AEG's property holdings in the 17-acre site, bounded by Hope, Olive and 11th streets and Pico Boulevard. Most downtown real estate players said the bulk of the property is owned by various small landowners and family interests, many of whom have been there for decades. Anschutz owns some of the property, but the exact amount is in question.
Jack Illes, managing partner of residential developer Urban Labs Co. in San Diego, said he understood Anschutz was buying up most of the property during the past several months. Illes had planned to build a 600-unit mixed use residential complex last September on 11th Street and Grand Avenue until his broker told him Anschutz was eyeing the property.
"He said, 'He's the big dog in town and will buy all this property,' so we decided to look at other areas," Illes said.
Mark Tarczynski, a vice president of investment properties at CB Richard Ellis who has done deals in the area, said, "There are people out there who think Anschutz will come back around and acquire land. I just don't think that's true."
AEG spokesman Michael Roth did not return calls seeking comment on Anschutz's holdings in the area.
The bulk of the property is zoned for high-density residential, said Charlie Rausch, senior city planner at the city Planning Department. The stadium announcement stung many developers and landlords, who banked on the city encouraging residential development.
Illes said after he was discouraged from buying the 11th and Grand site he considered 11th and Hill streets.
The owner of that property pulled it off the market a week after Anschutz announced plans for the stadium in May, and Illes gave up. "The whole thing is a waste of time," Illes said. "It was entirely a result of the football stadium."
In addition, Illes said, asking prices on land in the area had jumped from $85 a foot to $110 a foot more than he could cover from market rents.
Despite AEG's stated pullout, prices have not backed off.
"If land prices go to the point where the deals don't pencil out, the deals won't be sold," said Robert Hart, senior vice president at Kennedy-Wilson Inc., which is gutting a building at 612 Flower St. for a 322-unit luxury loft apartment building.
"There's a limit to where rents will go down there," he said. "If you're a property owner who wants to make a dollar, you'll sell for the highest and best use. Smart developers will not get caught in that. They'll go around it."
Housing development in that area of South Park is now at a standstill, said Mark Weinstein, president of MJW Investments.
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