There is nearly $100 million worth of thin air sitting on top of the Los Angeles Convention Center and downtown boosters want the financially strapped city to cash in on it.
Councilwoman Jan Perry, whose Ninth District includes much of downtown L.A., is putting together a proposal to encourage the city to sell the “air rights” above the Convention Center to nearby housing developers.
The concept involves taking square footage that could have but was not built on a piece of property and transferring it to other parcels with tighter zoning restrictions. In the case of the Convention Center a low slung complex spread out on 20 acres there are 4.3 million square feet of excess development under existing zoning.
The result: Taller condo buildings downtown. A building’s height now is capped by a formula based on the size of its lot. But developers can add stories to their buildings by buying the air rights from nearby parcels.
Already last month, the city transferred some of the rights from the center to a developer of a large mixed-use residential project several blocks away at a rate of nearly $23 a square foot. The transfer was done by the Community Redevelopment Agency of Los Angeles on an individual basis.
Using that price, the remaining 4.3 million square feet of development rights at the Convention Center would be worth $98.9 million. If demand for extra density increases, so too could the value of the air rights.
Perry confirmed her office is working on such a proposal, but she said the motion was too preliminary to discuss specifics of her plan.
“For the last 20 years we’ve been waiting for this day, and we are uniquely positioned right now because of the market,” said Perry of the demand for high-density projects. “It’s time to revisit this policy and look at what needs to be done.”
In addition to Perry’s proposal, there are similar motions from the city’s planning department that are before the Council’s Planning and Land Use Management committee. Those proposals would apply specifically to residential developers, who could access the excess density from any public and private properties that have not maximized their zoning.
Developers would have to pay a public benefit fee an amount still being determined by the CRA for transferring development rights from private properties. The money could be used for affordable housing, social services and other programs.
The goal is to help narrow L.A.’s widening housing shortage, said Jane Blumenfeld, a principal planner in the city’s planning department who authored the motions. Under the proposals, developers of commercial and industrialized projects would still have to go through the full approvals process for those projects.
While some city neighborhoods have thrown up barriers for higher-density development, downtown has the infrastructure to handle the added population and congestion, said Carol Schatz, executive director of the Downtown Center Business Improvement District.
“As a city we need to build up, we need greater density and downtown is the perfect place to do it,” said Schatz, whose group supports the proposals. “Not too many other neighborhoods in the city would say the same thing.”
Expensive option
David Mgrublian, the developer who purchased Convention Center air rights last month for a large mixed-use residential project called Metropolis, said the transfer process is a good tool but he doesn’t think it would be used very often.
“From a planning standpoint, it’s a good idea because adding density to an area makes it more pedestrian friendly,” said Mgrublian, managing director of IDS Real Estate. “But it’s also expensive to use.”
High density projects in downtown translate into taller buildings that become exponentially more costly to build. “The higher the number of floors,” he said, “the more expensive.”
Mark Tarczynski, a first vice president with CB Richard Ellis Group Inc. who specializes in downtown residential properties, disagreed with Mgrublian and said downtown developers are desperate to find ways to add more units to their projects.
“I think it’s a great idea,” he said. “We are scrambling for additional density to create additional urban infill housing and this is one way we can get it.”
Transferring development rights isn’t a new concept. The city first instituted the process in the booming real estate days of the 1980s, and sold rights to developers Robert Maguire and Jim Thomas to build the US Bank Tower, downtown’s tallest skyscraper.
The development rights were transferred from the city’s Central Library, which was extensively renovated and modernized using the proceeds from the transaction.
Still, selling off development rights turned out to be a short-lived experiment for the city. By 1991, L.A.’s real estate market had collapsed and a deep recession was dragging down the economy.
“When I first came to this job this was an issue we dealt with for months,” Schatz said. “Then all of a sudden it wasn’t an issue because the market bottomed out and nobody was interested in it anymore.”
Homeward bound
Until recently, developers had no need to buy extra density because building high-rise projects hadn’t made economic sense downtown. However, with sizzling condo prices, residential developers have streamed into the market and today there are plans in various stages for about 50 residential towers.
Moreover, there is no shortage of uses for the money the city could reap selling the development rights off the Convention Center.
Already, the city is paying $20 million a year out of its general fund to pay off bonds from the construction of the Convention Center, which doesn’t book enough business to be self-sufficient.
Schatz believes the money should be sunk back into building affordable housing. “We need to commit to making sure we have enough housing for all income levels,” she said. “That is of the utmost importance.”
The city planning proposal, which came forward in July, would streamline the process of transferring development rights, which routinely takes a year to complete.
Currently, if a development firm wants to buy rights off a low-rise building, the company needs permission from the Area Planning Commission, the Community Redevelopment Agency of Los Angeles and the City Council.
The proposal would eliminate approvals from the Area Planning Commission and City Council. And the department expanded the area where development rights can be transferred to the entire downtown.
“Right now the process is exceedingly onerous and time-consuming, which is one of the main reasons it hasn’t been used,” said Blumenfeld, the city planner. “Our goal is to make it as simple as possible for developers to build more housing downtown.”
