ArcLight Garage Posing Threat for Hollywood CRA
By HOWARD FINE
Two years after its opening, much of the ArcLight Hollywood entertainment complex remains empty and has resulted in a $254,000 monthly revenue shortfall for an adjacent publicly owned garage.
The parking structure revenues are needed for payments on the $44 million in bonds issued to build the structure.
The biggest loser so far has been the ArcLight's developer, Robertson Properties Group, which was required to put up a $9.3 million letter of credit for the garage before going ahead with the overall project.
The Community Redevelopment Agency, which owns the parking facility, has already drawn down $2.6 million from the letter to help meet payments on the parking garage bonds.
But if parking trends stay where they are, the letter of credit will be depleted in three years even factoring in a recent increase in rates. That would require the CRA to tap into other Hollywood redevelopment revenues to pay back the bonds, sucking about $2 million a year out of a $13 million revenue stream.
Robertson Properties spent $100 million building the 172,400- square-foot ArcLight complex, which surrounds the Cinerama Dome movie theater at Sunset Boulevard and Ivar Avenue.
Currently, the only tenants on the site are the ArcLight Cinemas/Cinerama Dome and a 24 Hour Fitness health club, which together take up 137,900 square feet.
Robertson Properties has had difficulty filling the remaining space. Last year, according to city officials and area retail brokers, negotiations with a nightclub company for a combination nightclub and restaurant fell through.
John Tronson, principal with real estate brokerage Ramsey Shilling Co., said Robertson Properties is close to signing an agreement with another nightclub to fill the remaining space.
"It's a big space, so the nightclub that would open there would have seating for somewhere between 1,000 and 1,500 patrons," he said. "You can imagine what kind of parking traffic that would generate."
Amy Wood, director of marketing for Pacific Theatres, an affiliate of Robertson Properties, declined to comment on the prospective tenant.
The CRA's bond payment on the garage is $455,000 per month, but to date, the facility has been generating only about $201,000, leaving it $254,000 short. The CRA has made up for the shortfall by drawing down the $9.3 million letter of credit, of which $6.7 million remains. If the parking lot ever begins showing a profit, the surplus will go toward replenishing the letter of credit before any funds get turned over to the CRA. But if the letter of credit were to get used up, the CRA would have to shoulder financial responsibility.
Earlier this month, the CRA instituted a parking increase that it projects will bridge about $50,000 of the $254,000 monthly shortfall.
If and when a nightclub opens, CRA consultant Kaku & Associates has projected it will generate another $187,000 if filled to capacity on most nights. That would leave the parking structure about $20,000 short of its goal, which could potentially be made up if plans succeed to lure a community theater group to one remaining space at the ArcLight complex.
The theater chain was opposed to the hike in rates at the parking garage, which is located on the northeast corner of De Longpre and Ivar avenues. On March 1, the price paid by Pacific Theatres for parking validations will increase to $2.50 for four hours from $2. Health club validations will increase to $1.50 for two hours from $1 for three.
"We feel they are raising the parking rates higher than competitive lots in the area," said Wood. "We believe that in turn will have a negative impact on attendance to the parking structure."
Los Angeles City Councilman Eric Garcetti conceded that terms of the 2000 bond agreement make it harder for the city to lure outside users to the site.
In order to obtain tax-free status for the bond offering, city officials had to guarantee that the garage would be operated for public benefit, with no more than 10 percent of spaces locked into private entities through long-term contracts. Since 10 percent of the spaces have already been set aside for the ArcLight/Cinerama Dome theaters, if any other entities want to lease blocks of spaces, the contracts cannot last longer than 180 days.
"These short term leases have been annoying to some people, even after we give verbal assurances that we can roll the leases over," Garcetti said. "If there is a way to extend these leases while still keeping bondholders happy, I'd like to do that. I'm just not sure we can legally."
Garcetti said that Nielsen Entertainment, when it agreed to move into an office tower two blocks east of the Dome complex, accepted those assurances and is using some of the spaces inside the CRA-owned garage.
The city of L.A. also owns the 3,000-space parking garage at the nearby Hollywood & Highland complex. In the months after it opened, Hollywood & Highland failed to attract the projected numbers of visitors, which resulted in parking revenues falling short of the $5.4 million the city needed to make its bond payments. As a result, the city had to tap a separate parking revenue fund to come up with the money to make the first two annual bond payments. The city also lowered parking rates in an attempt to be more competitive with the Grove and other shopping center parking structures.
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