Developers Find Hurdles in Hollywood

LOS ANGELES—Hollywood is certainly undergoing a renaissance, complete with major office development and massive residential development and redevelopment that will change the market dramatically over the next decade. However, some developers are being deterred from the market because of unclear zoning and a lengthy entitlement process that is both time consuming and costly.

In an earlier story, GlobeSt.com reported that Champion Real Estate sold 1.75 acres of land for $39.9 million, a record price. The land was originally slated in for development, but the firm changed their business plan after going through the entitlement process. "After we got our approvals, a court determined that Hollywood's community plan update, upon which the city required that we designed our project, was thrown out, and as a result, all projects had to go back to the prior community plan, which required us to go back and modify our entitlements," Bob Champion, president of Champion Real Estate, tells GlobeSt.com. "This whole thing took about a year and a half longer than expected, so when we did receive entitlements, we realized that with all of the resources that we had spent on this property our business had changed. We decided that rather than using the capital to build this project, we would take our profits and use that to further bolster our value-add business."

Champion says that the biggest issue for developers is public policy and a lack of clarity. He notes that Hollywood is one of the submarkets where the city is trying to build greater density, but he says that poor planning is deterring developers, like him, from investing in the market. "You first have to look at public policy. The city of Los Angeles made a huge commitment to Hollywood in the form of transportation and in the amount of projects that were sponsored by the redevelopment agency. One of the city's policies was that there were certain areas where the city was going to encourage higher density, and Hollywood was one," he says. "We worked very closely with Mayor Garcetti's office when he was the councilman for this district and later with councilman O'Farrell. It was something that we were really excited about but frustrated by the court challenges and the flipping back and forth."

Another issue is the local residents. Compared to Downtown Los Angeles, which is also undergoing a dramatic renaissance, Hollywood already has a residential base. "Unlike Downtown L.A., there is a very big residential base in Hollywood, and that residential base seems to be very vocally opposed to the densification of Hollywood that was contemplated by mass transit," says Champion, explaining that this is fueling some of the new development issues. However, on his project, he didn't experience and community complaints. His issue was with the city-planning map, which was changed during the planning process.

Champion says that, while he and his firm were early believers in the Hollywood renaissance, he has moved on from the market because of these issues. Now, his business plan has shifted to statewide value-add investment.