Massive Retail Project Pulls Hollywood From Doldrums
By DAVID GREENBERG
City officials and others still believe that the project ultimately will do what the redevelopers had intended boost activity in the area and bring in more business.
"It is a major catalyst," said John McCoy, deputy administrator for operations at the Community Redevelopment Agency, which helped spearhead the project. "We have already seen additional investment along Hollywood Boulevard in new restaurants and retail facilities."
Just this weekend, the center received an incalculable PR boost by hosting the Academy Awards at the 3,500-seat Kodak Theatre.
But the complex's Nov. 9 opening couldn't have come at a worse time, smack in the middle of the post-Sept. 11 travel and tourism decline that has yet to fully recover. Retail sales have been especially bad because Hollywood & Highland is largely targeted for the tourist crowd especially foreign tourists.
"It's unfortunate that we have a project that is geared to maximizing tourist revenue that came on line at a time when tourism is particularly low," said McCoy. "We hope we will see significant increases in tourism over the next year."
Outside the 645,000-square-foot development, there are some signs of rebirth.
Next door, Grauman's Chinese Theatre completed $7 million in renovations to its 1,186-seat facility, while up the street the Hollywood Roosevelt Hotel's $10 million renovation of its 335-room property is scheduled for completion on July 1. The hotel, which saw occupancy rates drop to as low as 25 percent last fall, has benefited from the overflow at the newly overhauled Renaissance Hollywood Hotel, which is part of Hollywood & Highland.
Real estate brokers said retail space that remained vacant at $1.50 per square foot before the project broke ground is now renting for as much as $5. While office rates have fallen to $1.85-$2.20 per square foot, from the $2-$2.30 pre-Sept. 11 rates, brokers believe that the numbers would have been even lower without the new complex.
Little about the project has been easy. Originally pegged as a $385 million retail center, various additions and delays pushed up the final price tag to over $600 million.
"The fundamentals of development in Hollywood had always been strong but there hadn't been a track record of success," said David Malmuth, the TrizecHahn official who spearheaded Hollywood & Highland and who is now a managing director of Santa Monica-based Saybrook Capital. "Sometimes it was bad timing, sometimes a bad project."
Even with Hollywood & Highland up and running, the area's long-term prospects remain in doubt. Toronto-based TrizecHahn has plans to sell off the development by 2004 and recently announced it was taking a $217-million write-down.
"It's not ready to sell yet," said Rick Matthews, a senior vice president of communications at TrizecHahn. "We would hope to make some of that ($217 million) back. We're not going to run a fire sale."
But Malmuth said that by planning to sell out, the developer is creating uncertainty among partners, tenants and sponsors. "It has made it difficult for the project to realize its full value," he said.
Greatest Impact on Community
Project: TrizecHahn Corp.'s $615 million Hollywood & Highland project
Players: City Community Redevelopment Agency; Assemblywoman and former City Councilwoman Jackie Goldberg, who organized the public and private entities involved in the project; David Malmuth, former TrizecHahn senior vice president of development.
The Deal: The Hollywood & Highland development was conceived as the linchpin in the long-awaited renaissance of Hollywood. In the four months since its opening, the project has brought renewed activity to the area and more business for neighboring shopkeepers.
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