DOWNTOWN LOS ANGELES — [This story was updated after the original publication with comments from SBE] A key development partner in the $850 million vision to re-imagine a portion of Grand Avenue on Bunker Hill is no longer involved in the project, Los Angeles Downtown News has learned.
Bill Witte, president of Related California, which has spent more than a decade working with the city and county to develop a Frank Gehry-designed mega-project, told Downtown News that Related has broken off its partnership with SBE Entertainment, the company headed by nightlife mogul Sam Nazarian.
SBE was identified in November 2013 as the partner Related needed to build two towers and a large retail and entertainment complex in a single phase. SBE was slated to operate an approximately 300-room SLS Hotel as part of the project. The other building would be a residential tower. The complex would rise on the site known as Parcel Q, which is currently a parking structure across the street from the Walt Disney Concert Hall and the under-construction museum The Broad.
“We made the decision not to move forward with SBE in early January and shared that with City and County representatives at that time,” Witte said in an email (his full statement is below).
[Update] The decision is not sitting well with Nazarian and SBE.
"They have no right to back out of the deal, and we are considering all legal options," said Nazarian's attorney, Daniel Petrocelli.
Witte did not elaborate on the reason for the split with SBE. It follows some well-publicized troubles that Nazarian and SBE encountered in December. During his attempts to get a gaming license for an SLS Hotel in Las Vegas, an investigation revealed that Nazarian had used cocaine and had paid as much as $3 million to a convicted felon in a possible case of extortion. Nazarian got the license, but stepped back from running the hotel, letting a partner take over.
[Update] SBE representatives said the company continues to be focused on the success of the SLS Las Vegas, and that it has eight hotels in various stages of development.
A spokesman for Related said the company intends to have a new hotel partner within several months. Witte said he believes Downtown Los Angeles has a “significant void” of what he termed “luxury lifestyle” hotels.
“We are actively engaged in discussions with a number of these hotel brands and operators and have gained significant traction with a number of them,” Witte said.
Fourteenth District City Councilman José Huizar, a member of the JPA, indicated that he did not think the shake-up will be a long-term problem for the project.
“I’m confident that Related wants to put together a world-class team and will bring on a new hotel partner that will make the Grand Avenue Project a unique attraction for visitors and a great addition to Downtown Los Angeles,” he said.
A Related representative last month said the company hopes to break ground on the development dubbed The Grand in 2016. The representative also said that a pre-leasing effort has begun in the attempt to find tenants for the project’s retail, food and entertainment space.
This marks the latest twist in a long, winding process for The Grand. Related was selected in 2004 to develop a collection of parcels on Bunker Hill owned by the city and the county. A city-county Joint Powers Authority oversaw the proceedings, and in 2008 approved designs for what was then a $3 billion project designed by Gehry.
When the recession took hold and lending markets froze, those plans were thwarted. Related later opted to take a piecemeal approach to development, working on one plot at a time, but without Gehry. It relinquished one parcel, which became the site of The Broad, and built an apartment tower, the $120 million The Emerson, which opened last fall.
In November 2013, Related revealed that Gehry was back on the project and that a partnership had been achieved with SBE. The project also had a new, updated design.
Below is the full statement that Bill Witte, president of Related California, provided to Downtown News:
“The Downtown LA hotel market is dynamic and ever changing, as evidenced by [the March 5] announcement that JW Marriott is adding 755 rooms. This demonstrates why we are being extraordinarily thoughtful in how we approach our hotel site. We feel that the market currently has a significant void — brands that have 4+ star ratings with an emphasis on ‘luxury lifestyle.’ We are actively engaged in discussions with a number of these hotel brands and operators and have gained significant traction with a number of them. We made the decision not to move forward with SBE in early January and shared that with City and County representatives at that time. We are energized by the completion of The Emerson, how Grand Park continues to become the heart of Downtown’s civic core and that The Broad will open in September. Good things are happening along Grand Avenue.”
Copyright 2015 Los Angeles Downtown News