DOWNTOWN LOS ANGELES - A proposed $1 billion hotel and office tower project cleared a major hurdle on Thursday as the city Planning Commission approved a slew of entitlements for the Financial District complex.

The decision came more than 18 months after the companies announced plans to raze the 1952 structure and build a luxury hotel and office skyscraper in its place at Figueroa and Seventh streets.

The plan still requires a final OK from the City Council. Thomas Properties Group officials have said they hope to begin demolishing the building in December 2011 and break ground on the 560-room hotel tower in December 2012. They aim to open the new hotel, which would also include 100 condominiums, in 2015.

The office tower would follow at an undetermined time, depending largely on conditions in the currently weak office market. The hotel’s development agreement with the city, which has been agreed to verbally but needs approval from the council, is for 20 years.

The second tower would be Downtown’s first new office skyscraper in more than 20 years. The smaller, 45-story hotel is its own kind of first for the city, said First Deputy Mayor Austin Beutner.

It’s the first time the city will have razed a large building to replace it with a new one, said Beutner, whose office helped negotiate the city’s development agreement with Korean Air and its parent company, Hanjin.

“To do it with labor is a big deal,” Beutner said.

The developers have already reached accord with two key unions: Unite Here Local 11, which represents hotel workers, and the Los Angeles-Orange Counties Building and Construction Trades Council. The hotel agreed to a $10 million deal with hotel workers to pay severance and healthcare benefits once the Wilshire Grand closes. Those 480 workers will have first crack at jobs at the new hotel.

The deal with the construction union calls for the hotel to prioritize hiring of local union men and women.

Look at the Lights

The project has garnered some key backers, as well as a few foes.

Ninth District Councilwoman Jan Perry has championed the project, which is expected to generate some 7,200 construction jobs on the site, plus another 5,000 indirect jobs through the multiplier effect, according to Thomas Properties Group.

“This is major, major, major,” Perry said of the project’s ability to generate jobs in a down economy.

Despite the political support, the hotel’s request to incorporate some elaborate, LED-illuminated signage has proven controversial. The project has been opposed by groups such as the Coalition to Ban Billboard Blight. The sign plan, which involves lighting mostly around the base of the hotel, proved to be the major sticking point at last week’s commission meeting. The commission ultimately the Planning Department’s recommendation to scale back the sign plan proposed by the developer.

Mayor Antonio Villaraigosa’s office supports the project, in part because it is poised to grow the city’s tax base, even though the hotel won’t have to pay the full Transient Occupancy Tax (the 14% fee paid by travelers commonly known as the bed tax) when it opens in 2015.

The developers originally requested a temporary waiver of the bed tax, claiming that the project would not pencil out without it. A similar waiver was granted for the J.W. Marriott/Ritz-Carlton hotel at L.A. Live for 25 years, saving Anschutz Entertainment Group an estimated $246 million.

The development agreement reached by the city does not entirely waive the bed tax for the Korean Air project. Instead, the hotel will have to pay its bed tax at current levels — the hotel is now paying $3.5-$4 million annually — through 2015. Once the hotel opens, it will pay more bed taxes every year in as-yet unspecified increments, delaying the requirement to pay the full 14% tax based on new revenue numbers.

The agreement is a break for the hotel, but also a net gain for the city. The general fund, which relies partially on bed taxes, is protected, Beutner said.

“If you were to score this deal on a golf course, it would be right on the fairway,” he said.

Ayahlushim Getachew, senior vice president at Thomas Properties Group, said that the developer was able to “re-tool” the numbers on the project to make the deal work with only the partial bed tax waiver, instead of the full waiver granted to AEG.

The development agreement also requires the hotel to provide a host of so-called community benefits, including about $8 million in streetscape improvements along Seventh Street; funding for a new Downtown shuttle; an underground access portal that will link the hotel to the Seventh Street Metro Station across the street; and a quarter-acre outdoor plaza with public access.

Jim Thomas, CEO of Thomas Properties Group, said he hopes the project will go before the City Council for final approval by March.

Contact Ryan Vaillancourt at

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