Despite a downtown Los Angeles real estate market that continues to sputter, Korean Air remains committed to building its $1 billion mixed-use project on the site of the Wilshire Grand hotel.
Yang Ho Cho, chief executive of the airline and chairman of parent Hanjin Group, said the company wants to begin construction next year and called on City Hall to speed up a permitting process he called slow.
“It’s a good opportunity not only for Korean Air lines, but for all of the city of Los Angeles,” said Cho, who swung through town last week. “City leaders should not slow down tomorrow’s project for today’s problems.”
Announced last April, the project would replace the aging, 896-room hotel with a 560-unit luxury hotel topped by scores of condominiums. A 60-story office tower with ground-level stores would be built next door.
The project is being developed by the Seoul, Korea-based airline and conglomerate in partnership with Thomas Properties Group Inc., a Los Angeles real estate development and investment company that has worked on big projects, including the 25-story Cal EPA tower in Sacramento.
The project is expected to create 8,000 construction jobs and upon completion, employ 4,000 people and generate $10 million in annual sales tax.
Thomas Properties Chief Executive Jim Thomas said that layoffs in the planning department have delayed all approvals. “That has delayed the entitlements, and in fact delayed the project,” he said.
Thomas Properties had initially hoped to secure approvals within 18 months. Now, he said, that may not be possible. Cho, when asked if the project was still on track, replied, “Don’t ask me, ask the mayor.”
Calls to the office of Mayor Antonio Villaraigosa were referred to Austin Beutner, the deputy mayor in charge of economic and business policy. Beutner did not return calls for comment.
However, Kevin Keller, a senior planner with the city, said the project was running on a “very standard time frame” and that the team responsible for the project has not been affected by layoffs or early retirements.
“These are the timelines on these types of projects,” Keller said. “We want to move quickly while maintaining a comprehensive level of review of the environmental impacts.”
Thomas said that though permits are being sought for the entire project, the project may be built in phases because of the weak office market – with the hotel first and the 60-story office tower second.
“You have to realistically plan that maybe you won’t be able to proceed with both towers at the same time,” he said.
There hasn’t been a new office high-rise built in downtown since the early 1990s and the market has been hit hard by the recession. The office vacancy rate was 14 percent in the fourth quarter.
Broker Mark Tarczynski, a senior vice president at CB Richard Ellis Group Inc., said it was smart for the developers to split the project given the state of the market.
“I will tell you this: The only time it’s going to turn around is when employment begins to ratchet up,” he said. “Rents haven’t been holding up. It has to be built in phases.”
However, downtown tourism boosters say the market is more than ready for a new hotel.
Lauren Schlau, a travel and tourism consultant based downtown, said the recent opening of the 1,000-room Convention Center hotel at L.A. Live should spur demand by drawing conventions to the city.
“I think a new hotel at this location is probably very much wanted,” Schlau said.
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- Korean Firm Plans to Redevelop Wilshire Grand
- Page 3: Maguire, Flanigan, Cho & Soon-Shiong
- Yang Ho Cho
- New Tower in Downtown Piles Up Office Space
- Wilshire Grand Demolition to Start Soon
- Wilshire Grand Redevelopment Plan Approved
- Downtown L.A. Project Seeks High Sign from City
- DOWNTOWN L.A.: Airline Scales Back Twin-Tower Plan as Vacancies Remain Sky High