December 10, 2000 - From the December, 2000 issue

Plans For Staples Phase 2 Progress: 'Destination L.A.' Is Vision

With the timeless problems of gridlock, homelessness, and environmental hazards plaguing the Los Angeles metropolis, it takes a confident and visionary leader to look past the tarnish and say, "A great urban center the likes of which L.A. has not seen for more than a quarter century may only be 10 years away." TPR was pleased to speak with such a visionary, L.A. Arena Land Company President Timothy J. Leiwicke, about STAPLES Phase 2 and its ability to harness the core's constituent elements--the Figueroa Corridor, the Convention Center and the Downtown BID--to create the overarching image of Downtown as a destination.


Tim Leiwicke

The original vision for the area surrounding STAPLES Center included an urban entertainment district. The firm RTKL recently described the proposed plan as "an integrated collection of individual venues forming a district that offers one-of-a-kind experiences indigenous to L.A." Tim, as the project stands now, describe for our readers the aggregate of these proposed venues. What do you envision the ultimate development to look like?

First and foremost, I want to emphasize that this "district" is really an extension of the Downtown Central Business District. We're not trying to compete; we're merely adding to the fabric of the existing core.

Basically, Phase 2 will create a collection of amenities and assets for the Convention Center, STAPLES Center and the Central Business District in the way of entertainment, music, food, drink and shopping, and will ultimately make Downtown more of a destination point. The plan as it's envisioned today includes a 1200-room, 45-story hotel; L.A. Live, a 7,000 to 7,500-seat theatre; parking to replace spaces lost and all code stipulations, which will include a 2,200-stall parking structure; 425,000 square feet of retail; 165,000 square feet of office space; and a 135,000-square foot sports medicine center. Additionally, we're setting aside a site for a potential expansion to the Convention Center.

Tim, the Queensway Bay development in Long Beach showed how brutal the battle can be between a new development and an existing downtown. Is a similar battle brewing in L.A. between the existing Downtown district and your plans in terms of the future of the old core?

Remarkably, we've forged a very good partnership with the Central Business District and the Central City Association, who have both endorsed our concept for Phase 2. They're excited about the project, and share in our belief that it will forge a more cohesive district by extending the Central Business District to the Convention Center and STAPLES Center.

In addition, CCA and the Downtown BID understand that L.A. needs a headquarter hotel, and that every hotel, every restaurant, every bar and every retail outlet in Downtown L.A. will suffer without it. They understand that what we're trying to create will ultimately translate into higher occupancy rates for the existing hotels in Downtown and a higher percentage of business and total revenues for the retail community.

Tim, we interviewed Michael Collins, the Executive Vice President of the Los Angeles Convention and Visitors Bureau, in the August issue of TPR. When asked a similar question, he said, "The massive unknown for STAPLES Center's Phase 2 is the hotel company. Watching the master plan unfold, the hotel company will probably be more than a management company; it may end up being a builder or even a co-owner." Can you comment on Collins' quote and if there's been interest on the hotel side to participate in the project?

Michael understands that market better than we do, and I would never disagree with him. However, we have three hotel companies who have shown continued interest in this project. Each has been an active participant in understanding the concept, not only in terms of the design and amenity structures surrounding the hotel, but also in terms of the financing component. Ultimately, we'd like to choose a hotel owner-operator in conjunction with the City of L.A., as they'll be involved in the project as well.

While we haven't yet chosen a particular firm, I think companies inside and outside the hotel industry will be interested in this project. And at the end of the day, I'd be willing to bet we have a hotel company as the direct owner-operator-that is, if I were a betting man.

As with the development of STAPLES Center, when dealing with such a large undertaking, the first question most Angelenos pose is, "How much public subsidy will be involved?" Tim, the question to you is: How much is contemplated?

Ultimately, we won't be the ones to determine that; the City has created a committee to determine the financial structure and the subsequent subsidy.

No one questions the need for a major Downtown Convention Center hotel to be subsidized. That's a given, readily acknowledged by the hotel industry, the CCA and the City. Now, that doesn't mean everybody agrees with it, and I doubt we'll receive a unanimous approval from the City Council. But if there's one thing we've learned about the City of L.A., it's that not many things get a unanimous vote from the Council.

Most of the City Council members are good business people who understand what's in the best interest of Los Angeles. However, there are some members who either 1) care more about their political careers than they do about the City, 2) don't understand business very well, or 3) simply aren't willing to take a leadership role in generating an economic benefit for the betterment of L.A. As a result, I don't expect the Council to take a positive position on this particular project. We're realistic that there's going to be opposition. But we're also realistic in saying it's for the wrong reasons.

Fair enough, Tim. But I think one of the questions your answer begs is the development of STAPLES Center. A year after its development, can you give an assessment of its impact? Is the deal that was ultimately struck by that political involvement workable?

First of all, the main objections to STAPLES Center were initially parking and traffic concerns. And I'd say STAPLES Center has proven unequivocally that this location is perhaps the perfect location in terms of ingress and egress.

Second, from a financial standpoint, we were able to construct an arena privately. That's obviously a win-win for the City; they face no risk. We created naming rights, founding partners, and suite revenue streams that ultimately made the development work. And we're estimating about 240 events in the building next year, obviously another plus for the City. But I think what makes the City happiest is that this economic development engine has helped polish the tarnish off L.A.'s image.

However, the City did risk money on the property surrounding STAPLES Center. But as it turns out, we'll wind up investing far more in that land than the City will through the CRA. The deal was structured so that sales and parking taxes will go back to the City to cover their investment. And with the tax revenue that we expect this project to generate, the City will not only make its money back, but will actually make a substantial return on investment.

Joel Wachs was very aggressive in stating that these arenas have no positive economic impact on cities. And he was totally wrong. The restaurant trade in Downtown L.A. indicates that during STAPLES Center events, trade goes up over 30%. If you talk to anyone Downtown, they'll tell you that when you put 3 million people on the streets you will see a remarkable increase in retail, restaurants, bars and hotels. The reality is that you can use these projects as a stimulus and a focal point for the rejuvenation of an urban core.

Clearly said. And I think your points on economic impact have been proven correctly. But in fairness to that political debate, part of it was over who should bear the risk-the public or the private sector. Did the ultimate deal prove that the private sector ought to bear most of the risk?

It would certainly be an interesting process to sit down and compare the deal that was proposed to the deal that was actually made and decipher how L.A. ultimately benefited. (The challenge is finding the time for it.) But I think that the crux of the deal was that the City wanted a guarantee from the owners that L.A. would never be at risk.

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Now that STAPLES Center has proven its success, the question has become: Was what the City gave up in order to get that guarantee worth it? If they had to do it over again, would they have argued for the owner guarantee? Or would they have realized that it wasn't that big a risk, and they would have been able to generate the necessary revenue without any problems.

In the end, this is a win-win for everybody. We have no problems with Joel or the City. We're doing well; our tenants are doing well; the City is doing well, and the CCA is doing well because of the building.

Tim, let's take this opportunity to have you comment on the link, not just to the Historic Core, but to the Coliseum and USC along the Figueroa Corridor. Could you comment on the significance of that corridor?

I recently met with Steve Sample and was thoroughly enthralled by what they've done at USC-not only on the campus, but in the surrounding community as well. I'm now convinced that area has to become a priority for us and for the City.

We need a bold and clear vision that addresses this question: Can we ultimately create a corridor that combines the Coliseum, the Science Center, the USC campus and the surrounding neighborhood with STAPLES Center and the Central Business District? Can they become a destination so that we can reposition Downtown to attract events that we haven't been able to because of a lack of resources, image and infrastructure?

I see a huge upside. There was a time when we believed that STAPLES Center was the back door; now I'm realizing that STAPLES Center is the heart and soul connecting both of these districts. If we ever figure out how to link the Central City and the Exposition Park area, L.A. will be one of the great urban areas in the United States.

Let's flesh out that last point. You're tying together the threads of STAPLES Center, USC and the Downtown Core and proposing that if we can do that, we will have one of the great urban areas in the U.S. But Tim, while we may become a great urban area, will it really be the likes of Chicago and New York?

Not today, and probably not tomorrow. But eventually, yes.

How long? Maybe it's a 10-year plan. But Southern California needs a great urban core. Los Angeles isn't a city; it's a hosting site for 20 different communities. What we're missing is a place to call the heart and the soul of the City. We don't have a great public gathering place, and until recently, we didn't have world class facilities. But that's all beginning to change.

What we really need to push forward in the next 10 years is increased hotel occupancy, better transportation, and heightened security. Now, even if we do that, are we immediately going to become as dynamic as Manhattan? Probably not-that's an unrealistic expectation at this point. But we can become a top urban center and a destination point for tourists, business travelers, and people wanting to experience our world class facilities.

You've spoken succinctly about the vision it will take for our City to become one of these destinations. But doesn't it take more than just private sector vision? You need a public sector appreciation as well, and willingness on the part of the Mayor, Council and all the Department heads. With the Mayoral election this spring, what issues should the candidates be focusing on in the land-use and development realm? What should our readers be looking for?

The three biggest issues facing this community are LAPD, LAUSD and secession. However, while a Mayor can address those issues and create a blueprint to solve them, business leaders, labor leaders and political leaders need to find a way to partner with the community as a whole.

We also need money. Ultimately, what drives a city and provides the resources necessary to solve all of these problems is a vibrant economy. We need a Mayor that not only understands how to roll up his or her sleeves and tackle those compelling problems, but also knows how to be a leading advocate for the economic boom that we're presently enjoying.

We must continue to bring new businesses here, as well as expand upon the businesses that we already have. We also need to maintain our competitive edge attracting both the tourist dollar and the huge business conferences that bring enormous economic impact for the City. And in terms of the global economy, as the market moves further and further toward globalization, Los Angeles must maintain its position as the 21st Century capital of the Pacific Rim.

In order to do that, we need a Mayor whose top priority is to generate the taxes necessary to provide the City with the resources to solve its various other problems. And the way to do that is to make sure you are the leading ambassador, the leading spokesperson and the leading visionary for creating continued economic growth and investment within our community.

Tim, you've codified L.A.'s current problem with balancing the political and community will with the region's need for economic stimulus. With projects such as the Cornfields and Taylor Yards stirring up similar controversy, what is wrong with the current debate in City Hall?

The business community needs to join the new breed of leaders in L.A. and get involved in community issues, whether it's working with Governor Romer and LAUSD or Chief Parks and the LAPD. We have to be willing to jump in and get a little dirty in order to create a vision for 21st Century L.A.

Taking the Cornfield site for example-the City needs a Mayor with an agenda, a blueprint, and in particular, a commitment to step in front and create the kinds of economic deals that bring new jobs, new taxes and new economic benefits to the core of this City. It's critical that the business community, in particular, has a voice in this next election. We need to elect someone who knows how to put deals together, how to sell businesses on locating here, and how to articulate a vision for creating the new campuses of the 21st Century, i.e. the Cornfield. Perhaps most importantly, we need a consensus builder who can bring together the unions, the business community, the neighborhood representatives, and the 15 Council members to make that vision a reality.

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