AEG and KB Home announced Thursday that they have teamed up to finance and develop the 50-story Los Angeles Convention Center hotel that will be the key component of the new $2.5-billion L.A. Live sports and entertainment district near the Staples Center.
The hotel, budgeted at more than $600 million, will feature at least 250 luxury residential condominiums, 1,100 luxury hotel rooms and over 70,000 square feet of hospitality and banqueting/ballroom space. It will be developed by AEG, a subsidiary of the Anschutz Corp., and KB Urban, a division of KB Home.
The partnership guarantees that the development of the property within L.A. Live will continue on time and with no additional public funding required, said Timothy J. Leiweke, president and chief executive of AEG, in a statement.
"This partnership will ensure that L.A. Live and the hotel not only come to fruition but will make Los Angeles the entertainment capital of the West Coast," said Los Angeles Mayor Antonio Villaraigosa in a statement released after the announcement. "The Convention Center Headquarters Hotel is absolutely necessary if Los Angeles wants to have a convention center that is able to compete with other convention centers in the region."
The partnership replaces an original arrangement with Apollo Real Estate Advisors. Apollo agreed to step down to allow the new partnership to move forward.
In mid-November, negotiations between Apollo and AEG broke down despite a $277-million public financing package. Apollo, which was expected to provide about $70 million for the hotel, pulled out of the talks as hotel construction costs soared to more than $500 million.
In addition to agreeing to forgo as much as $257 million in room-tax revenues from the hotel over 25 years, the city's Community Redevelopment Agency agreed to a $16 million below-market loan, and the city has authorized $4 million in fee waivers.
"The addition of luxury condominiums and a premier hotel to the project is essential to building a vibrant downtown where people will live, work and play in the heart of the city," Bruce Karatz, KB Home chairman and chief executive, said in a statement.
Richard Ackerman, principal of Apollo, congratulated the new development team in a statement. "Our decision not to continue with the creation of this hotel will allow the project's development to go on in the most expeditious manner," he said. "We congratulate AEG for their persistence over these last five plus years and know that their determination will pay off."
For now, Hilton Hotels Corp. will manage the property. In the coming weeks, the partnership will be re-evaluating which hotel operator is most appropriate for the project.
When completed, officials believe that L.A. Live will bring $9 billion into the economy by attracting over 13.5 million visitors per year. It will also create more than 25,000 jobs. The project, which covers six city blocks in the South Park neighborhood, includes restaurants, nightclubs, sports bars, housing, a 7,100-seat theater, and radio and television broadcast facilities. Villaraigosa officially broke ground on LA Live on Sept. 15.
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