Sunset Millennium Project

Mark, before we delve into the current trials and tribulations of the project, why don't you give our readers some breakdown of the plan for Sunset Millennium? What's the vision?

The vision for Sunset Millennium includes the revitalization and development of three blocks of Sunset Blvd. extending from Sunset Plaza on the west, along the southern side of Sunset Blvd., to the Grafton and Mondrian hotels. Our hope was to tie these three blocks together, rejuvenate the buildings that have fallen on hard times and really invigorate the type of vitality that other portions of Sunset Blvd. have into this portion.

What are the building blocks? And what elements are you moving forward with?

The first block of the project is designed as a mixed-use retail and office development complete with the redesign of a surface parking lot into a 800-space parking structure and the renovation of 8560 Sunset, the old Playboy building. The shopping area is 50-percent tenant committed and the office building, which opened 3 weeks ago, is 60-percent leased.

Now there's a hotel component planned for a later stage in this project. Obviously the events of 9/11 have had a drastic affect on tourism both locally and nationally. Is the financing for the hotel portion in jeopardy? Give our readers some insight.

I read several accounts of how our hotel financing was in jeopardy. Let me clear that up: no financing for the project has gone anywhere. It remains available and the project is fully funded.

The project is a partnership of Apollo Real Estate Advisors and Maefield Development. The first phase is funded by Fremont and funding is available for the remainder of the project. Any other understanding is incorrect.

Fair enough. But is there still a market for hotels now? What's your approach for dealing with the dissipation of a market for hotels and tourism in Southern California?

The development agreement between Maefield and the city of West Hollywood essentially says, "You have the right to build the project, you have the obligation to make payments to the city for that right and in order to keep that right you must make those payments and meet city requirements. That's the overarching parameter of the development agreement and that's something that's in place for another nine years.

Those stipulations are my focus right now. I can't get caught up in making a snapshot decision about the viability of the hotel market when things really haven't sorted themselves out since the "1,000-year event" of Sept. 11. I have a budget to meet and a first phase of a project to complete. I'm within 1-percent of my projected budget and it's my job to make certain that I complete this initial phase on budget and fully leased.

Upon that delivery, I would imagine the marketplace would have given us a clearer sense of what the appropriate course of action will be for both the Sunset Millennium and the City of West Hollywood regarding the balance of the project. At that time maybe it will be better to move forward on the easterly block or perhaps the middle block of the project. But again, only being 2 months removed from a "1,000-year event" I don't know that anyone really knows how things will sort out.

What's been the reaction of your partners to what you call "a 1,000 year event"? Are they a good partner? Do they have the long-term frame of reference that you speak to?

The city has been a great partner and allowed us to move forward on the first block in an expeditious fashion. And because of their help and assistance, I am extremely cognizant of our budget and determined not to exceed it. If this first block is successful, then the balance of the project will undoubtedly move forward smoothly.

What must be realized is that the city has coupled this project and its requisite tax revenue to assurances it has made to provide its social service agenda. As our success continues tax revenue continues to flow and this support help the City to continue to provide its highly focused social agenda.

But the city must have an interest in the bed tax from the hotel.

My guess would be that the primary focus for the City is our obligation to provide them the $100 million in tax revenue that this project will create. That's our obligation and commitment.

At the same time, you make a good point. The city isn't comprised of one or two blocks, but almost 40,000 people residing in an area of over 1.5 square miles, with almost 2,000 hotel rooms in over 20 different hotels. The importance of the vitality of the hotel industry as an engine of economic viability for the city and the appropriateness of the hotel portion of this site is something the city looks at to assure the vitality of all hotels within the city.

You mention the vitality of the West Hollywood. One of the issues that came up during this project's approval process was that the residents outside of West Hollywood felt they had no say in the decision-making process. They had impacts, but lacked the wherewithal to deal with them. Maefield has developed in a lot of places. Was this a particularly onerous approval process? Or do these issues come up wherever you develop?

A democratic society always allows for freedom of expression. People are rightfully concerned with the intentions of others to alter their environment. And they are rightfully concerned about what impacts will be generated. It's the responsibility of a developer to demonstrate that the additions made to an environment benefit the community economically as well as fundamentally.

When you don't meet that set of criteria you end up with "throw away development", development that takes a short-term outlook on the vitality of the community. And in projects that are located in these kinds of intense urban settings, it's extremely important to have a long-term perspective.

The particular impact that you mention did manifest itself in this project. Yet, because the project is focused on the long-term viability of the community, we were able to sit down with the City of West Hollywood and City of L.A. and develop an agreement that mitigates traffic and reduces congestion. If we don't do something to improve the flow of traffic, given the growth of our local population, it will inevitably get worse. Dealing with those types of viability issues will make a project vital to a community.

Give us a sense of the timeline now for the phases as you see them.

There's often a push to examine things when they're a bit in flux and contemplate a redesign or a new vision. But those ideas are better made further into the future. Today we are keeping our heads down and working hard towards our goals. Because we've done that we've seen our rehabilitation of the 8560 Sunset building blossom into highly successful Class A office space. That proves that we made the correct economic decision. A decision that will be complemented with upscale retail and the first parking structure constructed on Sunset Blvd. in the last 25 years.

Those two components will be completed towards the end of next summer. At that point we will look to the economic and political climate and have a more clear idea of how our nation will move forward. My belief is that we will no longer see dangers lurking in our environment, people will regain a sense of confidence and the balance of the project will be moving forward.

Let's end this with an abstraction based on some of your answers. We've heard a lot over the last couple of years about the encouragement of urban investment and Smart Growth. But opposition to your project, Playa Vista and others give many the idea that perhaps if a project is too visible, the benefits may not outweigh the costs. Given your experience, is Smart Growth a term with any meaning anymore? Are there any incentives to make it worth doing?

Real estate is about one thing: location, location, location. Because of that, there will always be a set of vested interests who want to make certain that your project will reflect their vision. The better the location, the greater number of interests. It's that simple.

In this day and age, developers must be a little bit tactician, a little bit politician and a lot savvy businessperson in order to address those needs, survive those demands and create a viable project. We could have built a 10-story retail development, but we listened to the needs of the neighborhood and limited our design to something that provides a mix of uses. We met with all the nearby homeowners and incorporated major benefits for the community-such as the cul de sac on Alta Loma and other significant traffic improvements on Sunset and La Cienega. In many ways, this project shows how effectively smart growth projects can be designed if the community is involved and given influence from day one.