Business Update with Mark Lacter

How political leaders in Los Angeles may affect real estate development

Remember during the recession when development activity in L.A. pretty much came to a halt because banks weren't lending any money, and the real estate market had nosedived?  Well, the climate has been changing dramatically.

Mark Austin Thomas: KPCC business analyst Mark Lacter, where do you see those changes?

Mark Lacter: You see it at LA City Hall, Mark, where a bunch of new projects are being considered by a council that - up until now - has been pretty accommodating.  Seems that if you emphasize the number of jobs that your project will create, chances are you'll be treated well.  A recent example involves Westfield, that's the big shopping mall company, which is being allowed to keep up to 42 percent of the tax revenue that would be generated from a hotel and a number of new stores it's planning in the Warner Center area.  That amounts to $60 million in savings over 25 years.  The money would normally go the general fund to pay for city services - police, fire, roads, and the like.  What's striking about this deal is that it received practically zero debate.

Thomas: No one spoke out against it?

Lacter: Oh, there were opponents, but once it was brought before the council on Friday, the public comment period was limited to 10 minutes.  When one of the opponents tried to get more time, Council President Herb Wesson said, "Do not debate me. You're wasting my time."  And this is for a major project - you can imagine the potential for rubber-stamping on smaller developments that are being brought to the council all the time.  (By the way, Wesson is up for reelection today as head of the council, though there's not much doubt about the outcome.)

Thomas: There's another controversial project in West L.A...

Lacter: That's right, the developer Alan Casden had wanted to build hundreds of homes, along with a Target and a supermarket, on a few acres of land right next to the planned Expo Line.  Neighborhood groups have been up in arms about the proposal, which is considered an example of "smart growth" - meaning that there wouldn't be additional traffic problems in the area because people would know to take the rail line instead of taking their cars.  (One of the proponents said that shoppers would use pull carts to carry their items, which might not be all that realistic.)

Thomas: This couldn't have gone over well.

Lacter: To say the least.  Opponents threatened legal action, and last week the Casden people announced that they would drop the Target and the supermarket.  That's a major concession, but even the smaller version means more residents in one of the most congested portions of the city.  And now, there's word of yet another big project being proposed on the site of the Hollywood Palladium - that's in addition to the two towers being planned for the area around the Capitol Records building.  We're talking a lot of growth.

Thomas: Will the change in leadership at City Hall make a difference?

Lacter: The assumption has been that this will be a very pro-development Council - in large measure because of Council President Herb Wesson, who - in the past - has shown the power to railroad things through the chamber.  But, there could be limits to this unquestioning attitude.  Councilman Paul Koretz had been working to downsize the Casden project, and newly-elected Councilman Mike Bonin - who takes over Bill Rosendahl's seat - says that opponents of these big projects need to be heard.  It's not like the old days when neighborhood groups would oppose development just on general principal.

Thomas: Where does the new mayor, Eric Garcetti, fit in?

Lacter: We've seen him seek consensus on big projects.  But keep in mind that even when developers compromise, they often end up with what they were looking for in the first place.  That's because their initial proposals were so over the top that when they do pull back it seems like a compromise, when - in fact - it's the plan they had in mind all along.  Look, sometimes development makes sense, sometimes it doesn't.  We rely on City Hall to figure out which is which.  But if the playing field is not level, you end up giving the developers the benefit of the doubt, and - let's face it - developers aren't necessarily set out to make L.A. a better place.  They're out to make money.  So, as they say, fasten your seat belts.

Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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