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Downtown’s Billion Dollar Baby
  
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City Gets Ready for the 1,001 Room Ritz-Carlton/Marriott
by Anna Scott
DOWNTOWN LOS ANGELES - For the past two and a half years, Downtown has eagerly watched the progress of the Convention Center hotel. The development that began with a massive groundbreaking ceremony on June 1, 2007 — complete with a chandelier suspended from a crane, hanging over city and business officials as they stuck golden shovels into the ground — culminates on Feb. 15 with the opening of the 54-story tower.
Although developer the Anschutz Entertainment Group spent $1 billion on the project, it is only now that the really hard work begins.
The Ritz-Carlton/J.W. Marriott hotel and condominium tower represents the final piece of the 27-acre L.A. Live entertainment district, which began its rollout in fall 2007. The project includes 1,001 hotel rooms and 224 condominiums.
Experts and AEG officials agree that, at least in the short term, the battered economy will mean the project generates lower revenues than were originally anticipated. But AEG brass expect that the location and the favorable financing that was secured before the hotel and housing markets tanked will help the mega-development.
“We financed this project before the recession hit, so we were very fortunate that we locked in long-term financing,” said AEG President Tim Leiweke. That means the developer has several years to pay back the syndicate of lenders that financed the tower’s construction; that is in contrast to several other large-scale projects in Downtown and elsewhere that have been turned over to lenders in recent months as developers were unable to make payments.
Leiweke also noted that two years ago AEG and investment partner MacFarlane Partners provided enough upfront capital to finish the project.
“We understand that other projects have fallen by the wayside or gone into bankruptcy, but none of that is going to happen here,” he said. “We were a little bit lucky and aggressive when we got our financing. Our timing was good.”
Rooms to Let
The opening of the Ritz-Marriott will be celebrated Feb. 16 with a ribbon-cutting ceremony, although the first Marriott guests will begin checking in a day earlier, on Feb. 15.
The Ritz-Carlton rooms open March 15.
The project at 900 W. Olympic Blvd., designed by the architecture firm Gensler, has an L shape. The first 22 floors hold 878 J.W. Marriott rooms, and the 123 Ritz-Carlton rooms are on floors 23-26. The top 27 floors of the building hold the 224 condominiums.
The two hotels together require a staff of 700, said General Manager Javier Cano. Each brand comes with its own amenities. Highlights include the Marriott’s Mediterranean-style restaurant, L.A. Kitchen, a wine bar and pool. The Ritz-Carlton also has a pool along with a spa and an upcoming 24th-floor restaurant, expected to open in March. Cano would not reveal the restaurant operator, but said it is associated with a celebrity chef.
The hotels have separate entrances and lobbies. Rates range from approximately $200-$800 per night for the Marriott rooms and $350-$1,000 for Ritz-Carlton rooms. That is in contrast to the current average of $135 for Downtown’s larger hotels, said Bruce Baltin of PKF Consulting, which tracks the hotel industry and worked on the L.A. Live tower.
Cano said he expects the hotels’ location amid the restaurants, concert venues and movie theaters of L.A. Live and its place a short walk from the Convention Center to fetch the higher rates.
“The L.A. Live campus and the proximity to the Convention Center will allow us to price ourselves closer to what other hotels of our type do in other major cities,” he said.
Convention Ties
Although the economy was booming when AEG launched the project, things have changed markedly in the tourism and convention business. The local hotels that have historically served Convention Center crowds, such as the Millennium Biltmore, the Wilshire Grand and the Omni, currently average about 61% occupancy, said Baltin. That is down from about 70% in 2008.
Baltin does not expect a quick turnaround.
“I think, frankly, it will be a challenging year for the hotel and the market from a hotel standpoint,” said Baltin. Of the Ritz/Marriott, he said, “It’s not going to do as well in the first year or two as all of us projected.”
Leiweke agrees. Over the next year, he said, he hopes to have 65%-70% occupancy. Before the downturn, he said, AEG expected to see occupancy surpass 70% during the first year.
“It’s not the greatest time in the world to be opening up a hotel,” acknowledged Leiweke. “The recession is lingering, especially in this industry, and we know we’ve got some hard work ahead to be in the 60s.”
Still, he said, he expects large events at the Convention Center to provide regular business, continuing a trend that began long before the hotel’s opening.
Within the 18 months of the hotel breaking ground, the city booked 53 conventions for 2010 through 2012 and saw an 800% increase in room nights over 2005, said Mark Liberman, president of L.A. Inc., the city’s convention and visitors’ bureau.
Those bookings have mostly held steady, Liberman said last week. Some new events have also been scheduled, such as a convention for the Society for Science and the Public in 2011, 2014 and 2017, with a total of 13,000 room nights over all three years; and the health and fitness association IDEA, which signed a four-year agreement starting this year. That will produce 23,200 room nights over the term of the deal.
The NHL draft this year and the NBA All-Star game in 2011 are also coming to Staples Center and are expected to generate thousands of room nights.
The Marriott rooms are completely booked for its first three days in business, said Cano, due to the concert industry conference Pollstar Live, which will take place entirely inside the hotel and the Marriott’s adjacent four-story conference center.
“We’re optimistic because of the number of big events we’ve been able to win,” said Leiweke. “I think by next year we will be where we thought we’d be year one.”
Home Sweet Home
The developer has also had to adjust expectations for the condominiums.
Residents are expected to begin move-ins this summer. So far, said Leiweke, half of the condominiums are under contract, though he expects some of those buyers to drop out. Previous published reports have stated that 60% of the condos were under contract.
Potential buyers, Leiweke said, include families with children at the nearby University of Southern California, local professionals shopping for a second home and a strong contingent of national and international buyers in search of secondary residences.
AEG aims to sell all of the condos — the approximately 900 to 4,000-square-foot residences range from $900,000 to $10 million — by the end of 2011, he said, a year behind previous projections.
Despite the decline from original expectations, AEG’s prominent role in financing the development means the company does not have to worry about something that impacts most condominium projects: It does not have to meet occupancy requirements imposed by its lenders. Typically, banks require a building to sell 50% of its units before people can move in.
When it comes to selling, AEG hopes that the well-known five-star brand — the condos are officially called the Ritz-Carlton Residences — will have an attraction. Residents will also have access to Ritz-Carlton hotel amenities such as housekeeping and room service.
“You’re always going to get some cachet when you have brand names like Phil Anschutz and Ritz-Carlton, and the location is probably the best in L.A.,” said lending expert Bob Safai of the commercial brokerage Madison Partners. “It’s right next to Staples. How much someone would pay to be there is based on location, project type and amenities, and it doesn’t really get any better.”
Contact Anna Scott at anna@downtownnews.com.
BY THE NUMBERS
Some of the Figures Involved With the Newest Addition to the Downtown Skyline
27,000: Amount, in tons, of steel used during construction
3,600: Number of construction workers that helped build the tower
3: Number of floors erected per week during peak of construction
54: number of floors in the building
35: number of elevators in the project
12: number of escalators in the project
8,000: Number of applications received for hotel jobs
700: Number of available jobs at the hotel
9: Size of hotel management staff
878: Number of rooms in J.W. Marriott
123: Number of rooms in Ritz-Carlton
224: Number of Ritz-Carlton condos
1,800: Number of nightstands in rooms
1 billion: Price, in dollars, of entire project
80 million: Price, in dollars, of the Gallery Collection, the name of the project’s hotel ballrooms and meeting spaces
4,000: Size, in square feet, of Marriott gym
2,000: Size, in square feet, of Ritz-Carlton gym
page 1, 02/08/2010
©Los Angeles Downtown News. Reprinting items retrieved from the archives are for personal use only. They may not be reproduced or retransmitted without permission of the Los Angeles Downtown News. If you would like to re-distribute anything from the Los Angeles Downtown News Archives, please call our permissions department at (213) 481-1448.
Although developer the Anschutz Entertainment Group spent $1 billion on the project, it is only now that the really hard work begins.
The Ritz-Carlton/J.W. Marriott hotel and condominium tower represents the final piece of the 27-acre L.A. Live entertainment district, which began its rollout in fall 2007. The project includes 1,001 hotel rooms and 224 condominiums.
Experts and AEG officials agree that, at least in the short term, the battered economy will mean the project generates lower revenues than were originally anticipated. But AEG brass expect that the location and the favorable financing that was secured before the hotel and housing markets tanked will help the mega-development.
“We financed this project before the recession hit, so we were very fortunate that we locked in long-term financing,” said AEG President Tim Leiweke. That means the developer has several years to pay back the syndicate of lenders that financed the tower’s construction; that is in contrast to several other large-scale projects in Downtown and elsewhere that have been turned over to lenders in recent months as developers were unable to make payments.
Leiweke also noted that two years ago AEG and investment partner MacFarlane Partners provided enough upfront capital to finish the project.
“We understand that other projects have fallen by the wayside or gone into bankruptcy, but none of that is going to happen here,” he said. “We were a little bit lucky and aggressive when we got our financing. Our timing was good.”
The opening of the Ritz-Marriott will be celebrated Feb. 16 with a ribbon-cutting ceremony, although the first Marriott guests will begin checking in a day earlier, on Feb. 15.
The Ritz-Carlton rooms open March 15.
The project at 900 W. Olympic Blvd., designed by the architecture firm Gensler, has an L shape. The first 22 floors hold 878 J.W. Marriott rooms, and the 123 Ritz-Carlton rooms are on floors 23-26. The top 27 floors of the building hold the 224 condominiums.
The two hotels together require a staff of 700, said General Manager Javier Cano. Each brand comes with its own amenities. Highlights include the Marriott’s Mediterranean-style restaurant, L.A. Kitchen, a wine bar and pool. The Ritz-Carlton also has a pool along with a spa and an upcoming 24th-floor restaurant, expected to open in March. Cano would not reveal the restaurant operator, but said it is associated with a celebrity chef.
The hotels have separate entrances and lobbies. Rates range from approximately $200-$800 per night for the Marriott rooms and $350-$1,000 for Ritz-Carlton rooms. That is in contrast to the current average of $135 for Downtown’s larger hotels, said Bruce Baltin of PKF Consulting, which tracks the hotel industry and worked on the L.A. Live tower.
Cano said he expects the hotels’ location amid the restaurants, concert venues and movie theaters of L.A. Live and its place a short walk from the Convention Center to fetch the higher rates.
“The L.A. Live campus and the proximity to the Convention Center will allow us to price ourselves closer to what other hotels of our type do in other major cities,” he said.
Although the economy was booming when AEG launched the project, things have changed markedly in the tourism and convention business. The local hotels that have historically served Convention Center crowds, such as the Millennium Biltmore, the Wilshire Grand and the Omni, currently average about 61% occupancy, said Baltin. That is down from about 70% in 2008.
Baltin does not expect a quick turnaround.
“I think, frankly, it will be a challenging year for the hotel and the market from a hotel standpoint,” said Baltin. Of the Ritz/Marriott, he said, “It’s not going to do as well in the first year or two as all of us projected.”
Leiweke agrees. Over the next year, he said, he hopes to have 65%-70% occupancy. Before the downturn, he said, AEG expected to see occupancy surpass 70% during the first year.
“It’s not the greatest time in the world to be opening up a hotel,” acknowledged Leiweke. “The recession is lingering, especially in this industry, and we know we’ve got some hard work ahead to be in the 60s.”
Still, he said, he expects large events at the Convention Center to provide regular business, continuing a trend that began long before the hotel’s opening.
Within the 18 months of the hotel breaking ground, the city booked 53 conventions for 2010 through 2012 and saw an 800% increase in room nights over 2005, said Mark Liberman, president of L.A. Inc., the city’s convention and visitors’ bureau.
Those bookings have mostly held steady, Liberman said last week. Some new events have also been scheduled, such as a convention for the Society for Science and the Public in 2011, 2014 and 2017, with a total of 13,000 room nights over all three years; and the health and fitness association IDEA, which signed a four-year agreement starting this year. That will produce 23,200 room nights over the term of the deal.
The NHL draft this year and the NBA All-Star game in 2011 are also coming to Staples Center and are expected to generate thousands of room nights.
The Marriott rooms are completely booked for its first three days in business, said Cano, due to the concert industry conference Pollstar Live, which will take place entirely inside the hotel and the Marriott’s adjacent four-story conference center.
“We’re optimistic because of the number of big events we’ve been able to win,” said Leiweke. “I think by next year we will be where we thought we’d be year one.”
The developer has also had to adjust expectations for the condominiums.
Residents are expected to begin move-ins this summer. So far, said Leiweke, half of the condominiums are under contract, though he expects some of those buyers to drop out. Previous published reports have stated that 60% of the condos were under contract.
Potential buyers, Leiweke said, include families with children at the nearby University of Southern California, local professionals shopping for a second home and a strong contingent of national and international buyers in search of secondary residences.
AEG aims to sell all of the condos — the approximately 900 to 4,000-square-foot residences range from $900,000 to $10 million — by the end of 2011, he said, a year behind previous projections.
Despite the decline from original expectations, AEG’s prominent role in financing the development means the company does not have to worry about something that impacts most condominium projects: It does not have to meet occupancy requirements imposed by its lenders. Typically, banks require a building to sell 50% of its units before people can move in.
When it comes to selling, AEG hopes that the well-known five-star brand — the condos are officially called the Ritz-Carlton Residences — will have an attraction. Residents will also have access to Ritz-Carlton hotel amenities such as housekeeping and room service.
“You’re always going to get some cachet when you have brand names like Phil Anschutz and Ritz-Carlton, and the location is probably the best in L.A.,” said lending expert Bob Safai of the commercial brokerage Madison Partners. “It’s right next to Staples. How much someone would pay to be there is based on location, project type and amenities, and it doesn’t really get any better.”
Contact Anna Scott at anna@downtownnews.com.
BY THE NUMBERS
Some of the Figures Involved With the Newest Addition to the Downtown Skyline
27,000: Amount, in tons, of steel used during construction
3,600: Number of construction workers that helped build the tower
3: Number of floors erected per week during peak of construction
54: number of floors in the building
35: number of elevators in the project
12: number of escalators in the project
8,000: Number of applications received for hotel jobs
700: Number of available jobs at the hotel
9: Size of hotel management staff
878: Number of rooms in J.W. Marriott
123: Number of rooms in Ritz-Carlton
224: Number of Ritz-Carlton condos
1,800: Number of nightstands in rooms
1 billion: Price, in dollars, of entire project
80 million: Price, in dollars, of the Gallery Collection, the name of the project’s hotel ballrooms and meeting spaces
4,000: Size, in square feet, of Marriott gym
2,000: Size, in square feet, of Ritz-Carlton gym
page 1, 02/08/2010
©Los Angeles Downtown News. Reprinting items retrieved from the archives are for personal use only. They may not be reproduced or retransmitted without permission of the Los Angeles Downtown News. If you would like to re-distribute anything from the Los Angeles Downtown News Archives, please call our permissions department at (213) 481-1448.
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