December 4, 2009 - From the November, 2009 issue

L.A. Live More Than Survives Recession; AEG Seeks to Expand Across Olympic Boulevard

The series of openings at L.A. Live over the last few years have brought fundamental change to Downtown L.A. and have been nothing short of historic in terms of the size of the investment made by AEG. With the final impacts-for better or worse-on the surrounding neighborhood yet to be determined and AEG looking at further expansion, TPR interviewed AEG's V.P. of Real Estate Ted Tanner, a veteran of Los Angeles development, who detailed the deliverables already online at L.A. Live as well as the plans for more to come.


Ted Tanner

TPR last interviewed you in July 2007, before even the Nokia Theater had opened. What has been accomplished since at L.A. Live?

In November of 2007 we opened Nokia Theater to six sold out concerts with the Dixie Chicks and the Eagles. That launched an important new 7,100-capacity, mid-sized venue for L.A. and our campus that would compliment Staples Center. We have attracted major award shows such as the American Music Awards, the ESPY's, the Emmy's, the American Idol Finale, and the Grammy Nomination Concert. While it was built primarily for live music performances, it is a highly flexible venue that can accommodate award shows, boxing, comedy, family shows, corporate meetings and product launches. Phase 1 also included Nokia Plaza, a one-acre square with two levels of parking underneath.

Phase 2 incorporated the two buildings that define the balance of the Plaza. To the east is the five-story ESPN building with about 130,000 square feet. It's the West Coast Broadcast Center for ESPN, currently hosting the 10:00 p.m. Live Sports Center telecast, with more live television programming soon to come. There is an ESPN Zone sports bar, restaurant and live radio studio on the ground floor and mezzanine levels totaling 33,000 feet. This project solidified our relationship with ESPN; we host the annual X Games and the ESPY's award show at L.A. Live and we continue to look for further strategic programming opportunities.

The north boundary of Nokia Plaza is formed by a five story, 430,000-square-foot building, housing four major uses. Restaurants occupy the ground level, and we achieve a good mix of food offerings for Downtown workers/residents and visitors to our campus. They all include large outdoor dining spaces, which we felt was important to activate the campus, enhance the pedestrian realm and enrich the experience for those dining or strolling by.

On the westerly upper floors are four levels of offices, about 165,000 square feet for four major tenants. It is the world headquarters for Herbalife and AEG. ESPN Radio is located here plus additional office space for their television production facility. HRO, a law firm that we do business with is also located there. Office uses work well because it puts a large daytime population on the property that provides a great customer base for the restaurant tenants. On the east end of the building are three diverse clubs. First is the spectacularly lively and fun 25,000-square-foot Lucky Strike Bowling Club. Second is AEG's flagship Club Nokia which is our three level, 2,350-capacity venue that completes our triad of AEG-owned and operated facilities. This club has also been fit-out as a digital broadcast studio so we can produce live studio broadcasts utilizing AEG's adjacent 9,000-square-foot state of the art production studio. Third, is the 14,000-square-foot Conga Room, a beautifully designed 1,000-capacity club that specializes in both live and recorded Latin and alternative music.

Last but not least is our 32,000-square-foot Grammy Museum, a unique interactive facility resulting from our commitment to the CRA/LA to allocate the art fees collected from each L.A. Live project to build a permanent cultural institution with a wide range of educational programs-a true jewel. It is highly interactive aimed at all ages and deals with all genres of music, the art and science of writing, recording, creating music, and many diverse career opportunities in the industry. Phase 2 was completed in December of last year and this summer.

One of the core reasons for civic investment and support for the project is the Convention Center hotel capacity. Can you talk about the balance of the entertainment neighborhood?

Phase 3 provides the last two pieces. The first consists of the two hotels (the Ritz-Carlton and the J.W. Marriott), totaling 1,001 guest rooms and a conference center, which includes three levels of ballrooms and banquet, meeting, and support spaces. This serves as essential meeting space for the hotel and accommodates special needs that the Convention Center might have for additional space. We have built 224 Ritz residences that sit on top of these hotels between the 27th and 52nd floors, which enjoy spectacular panoramic views, luxury amenities, and VIP access to all events at L.A. Live. We have sold 60 percent of the units, and will have complete models in the building next January.

To the west of the hotel is the Regal Cinema, Stadium 14 that opened last month. There are 14 screens with 3,850 seats, including a large premier house with over 800 seats. We have seen a tremendous response from the local community, and we have already hosted two premieres-This Is It and 2012. The Cinemas are an important piece in making Downtown a sustainable, viable urban community, like the Ralph's Market.

Talk a little bit about building and then opening the development in the midst of one for the deepest real estate recessions in the last 50 years.

It has been very challenging. We have had to work with many of our tenants to help them through the tough times. This past summer was extremely difficult for many of our restaurant and club tenants who were just coming online. Many of the restaurant operators are newcomers to Los Angeles, plus they had the disruptive construction activity from the hotel and conference center. The economy has affected us as it has everyone.

In spite of the recession, AEG recently went to the L.A. City Planning Commission with another proposal for the expansion of L.A. Live.

That is on our last remaining site of the L.A. Sports and Entertainment District (LASED) called the Olympic North sub-area. This property, subject of this latest planning action, sits literally at the doorstep to L.A. Live. It is approximately 2.2 acres, divided into two segments, one of which is planned for a 600,000-square-foot office, studio, and production facility and the other for a 300,000-square-foot, 275-key hotel, with up to 65 luxury residences. This will be a valuable next phase of development given its prominent location to L.A. Live and great freeway exposure.

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We have sold the balance of our properties east of Figueroa to residential developers. Half of those sites have been developed and the other half is awaiting the return of the capital markets. Nearly 1,200 units have been built on these properties in the emerging South Park neighborhood.

Tim Leiweke spoke last spring at the USC Benjamin Crocker Symposium and mentioned the differences between the L.A. City political process in the current AEG expansion plans and the last L.A. Live approval process. What are the challenges of getting approvals for projects of this nature in the city of L.A. today?

We've had recent challenges with regard to signage and found ourselves having to defend our clearly vested rights to complete our signage installations. This signage program has always been a key part of our LASED Specific Plan ordinance and we had building permits, including all electrical, structural, mechanical, and architectural elements, yet we couldn't get last approvals to install the artwork. That created a dilemma for us, but fortunately we were able to successfully move forward with full support of the Mayor and the City Council.

With regard to the Olympic North expansion mentioned above, our original LASED Specific Plan entitlements permitted a high degree of flexibility. The plan allowed land uses and density to shift by means of an environmental equivalency matrix. We were able to utilize that flexibility to gain additional entitlement for the Olympic North site. This process is proceeding very smoothly.

The Figueroa corridor from USC through L.A. Live and up to Dodger Stadium has been looked at for the last 30-40 years as a promising opportunity. Two of the anchors are L.A. Live and USC. What is happening between those two locations?

We were very active a few years ago to secure State Prop C financing to improve the corridor in terms of traffic flow, congestion management and pedestrian safety. The plan included a user-friendly shuttle, wider sidewalks, jogging paths, additional landscaping and hardscaping, and encouraged land uses that would be more residential oriented. Unfortunately none of the approved money has been released and none of these plans have progressed.

AEG is doing similar projects all over the world. Can you give us some perspective of how L.A. Live fits into our other developments that AEG is involved with?

We have been involved with two other major projects that have become significant urban regeneration catalysts in London and Berlin. Just as Staples Center and L.A. Live have transformed Downtown LA, we believe similar entertainment-based projects in these major markets can have similar impacts. In London, we undertook the first step toward a massive regeneration of the Greenwich peninsula, a heavily contaminated and bombed area during World War II. The government built an enormous Millennium Dome to celebrate the new millennium, but it failed miserably and became a white elephant.

AEG had the courage to make the Dome into the anchor of a 200-acre revitalization project that enjoyed reasonably good transportation infrastructure. We built The O2 Arena inside the dome, where we were to have hosted the Michael Jackson concerts. The O2 has been a phenomenal new live venue for London-the first new venue for London since Royal Albert Hall. We've also completed the initial phase of the entertainment district-about half a million square feet of cinemas, restaurants, clubs, pubs, and exhibition building, and we're moving forward with planning consent on additional phases of development for hotel, office, and added retail/entertainment uses associated with our original vision. A new office building for Transport For London was just completed, and Ravensbourne College school will be completed next year.

In Berlin, we brought a dilapidated 45-acre rail yard in the eastern part of the city that was well located between a number of key transportation nodes, a major roadway, and the Spree River. We cleared the property, installed new streets and utility infrastructure and built a new arena called the O2 World that opened September a year ago. We expect to host about 150 events annually and, similar to Staples Center, the arena has created much investment interest in our property. We have master planned about 5.5 million square feet of mixed use development including entertainment, retail, office, hotels and residential uses.

Given the real estate and credit recession and given that a shoe may drop on commercial real estate in the year or two to come, does L.A. have the capacity to come out of this better than it was when it came in?

I certainly think so but great cities don't happen over night. This is part of changing the perception of Downtown and it will take time for development activity to resume. But I believe a key spark has been ignited-one of building a new, smarter, greener, more diverse and denser city where we have the resources and infrastructure to support such growth. Some of the recent successes, such as Met Lofts, Elleven and Luma, and the new Ralph's Market and Lofts, are transforming Downtown into a vibrant residential community. The continued infilling of Downtown in years to come will make it one of the most competitive and sustainable parts of our region.

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