DTLA—A City Council committee yesterday approved a deal that could lead to the creation of a two-tower project with a total of 1,130 hotel rooms. It would add to a rush of hotel development in the environs of the Convention Center.
The council’s Economic Development Committee voted 3-0 to approve a memorandum of understanding to sell a city-owned, 18,811-square-foot parcel at Pico Boulevard and Figueroa Street, across from the Convention Center, to national developer Lightstone. The city will receive $9.6 million, and Lightstone will also purchase two adjacent privately owned parcels that will allow it to complete the project.
The agreement must be approved by the full council.
The office of 14th District City Councilman José Huizar began trying to find a hotel buyer for the site in 2012, as part of an effort to build more rooms for visitors near the Convention Center. City officials have sought to create 8,000 rooms within walking distance of the facility by 2020, which would allow it to better compete with regional rivals such as Anaheim, San Diego and San Francisco. A report recently released by Huizar’s office found that there are now 4,637 rooms in the area — up from 2,600 four years ago — with another 717 rooms under construction.
“We as a City have long had our sights on bringing a substantial hotel development project to this particular City property. Through years of analysis and hard work, that project is finally here,” Huizar said in a prepared statement after the vote. “The Pico-Figueroa project represents a major increase in our hotel stock, while also creating permanent good-paying jobs and providing much needed services in this dynamic and ever-expanding area of Downtown Los Angeles.”
New York-based Lightstone, which maintains a $2 billion portfolio across the country, submitted plans to the city for the project in August 2016. The development will consist of a 42-story tower facing Figueroa Street: The building will hold two Marriott-brand hotels: a 410-room AC Hotel and a 410-room Moxy Hotel.
A 25-story edifice fronting Pico Boulevard will hold a 310-room Hilton Garden Inn Hotel.
As opposed to some of the upscale hotels in other South Park projects, the Lightstone development will have more moderately priced rooms. A report from the city Chief Legislative Analyst’s office notes that the hotels are required to maintain a three-star rating.
As part of the MOU, the developer will get to keep a portion of the Transient Occupancy Tax, which is levied on hotel guests. The practice has proved controversial in recent years, as hoteliers have claimed their projects will not pencil out financially without the money, while others have charged that the city is giving away cash that could go to the general fund.
According to the CLA report, an independent analysis of the deal by the firm Keyser Marston Associates found that the project has a funding gap of $67.4 million. As part of the MOU, Lightstone will get to keep a portion of the TOT tax, accumulating that $67.4 million over a period of up to 25 years.
During that same period, the city is expected to collect $90.6 million in revenue from the project, according to Huizar’s office.
The city-owned lot currently generates $174,000 annually, according to the CLA report, and would make about $14 million in its first year after the hotel project is completed. The money would come from a combination of TOT tax, property tax, sales tax and other revenue streams.
According to the CLA report, construction could begin as soon as the second quarter of 2018. The project would generate 3,190 construction jobs and 1,320 permanent jobs.
Copyright 2017 Los Angeles Downtown News