Big Developer Looking for Another Handout from LA Taxpayers


THE CITY-Last October, CityWatch reported on the Los Angeles City Planning Department’s belated review of the bulldozing of Hollywood’s Old Spaghetti Factory Building, demolished in 2012 by real estate behemoth CIM Group without proper permits and clearances.  

In February, the Central Area Planning Commission determined that CIM had indeed illegally demolished the Old Spaghetti Factory Building as part of its Sunset/Gordon project, and the Planning Department is only now requiring that CIM take the skyscraper development back through the approval process.  Yet, despite this decision, not only is the city allowing CIM to continue with its construction at the site, but the Department of Recreation and Parks  is also poised to give CIM another $1.25 million in taxpayer funds to purchase an easement to land on the site that the city already owns.   

This is all sadly consistent with the Sunset/Gordon project’s lengthy history of City Hall ineptitude and corruption.  In 2007, developer Gerding Edland entered into an agreement with the former Community Redevelopment Agency and then-Councilman Eric Garcetti to construct a 23-story skyscraper at the site of the popular Old Spaghetti Factory restaurant.  

The project sought extraordinary taxpayer subsidies, on the theory that government assistance was necessary to bridge the “funding gap” between the estimated cost of a redevelopment project and a “fair” developer profit.  Based upon this principle, the CRA determined that Sunset/Gordon could only be built if the taxpayers of Los Angeles contributed $17.24 million in public funds, in order to assure that the developer would make his profit goal of $28.39 million.  

As part of the project’s “public benefits” package, the façade of the Old Spaghetti Factory building was required to be retained and restored to its original beautiful appearance as the former Peerless Auto Showroom building.  Gerding Edland also agreed to include a 1/2-acre public park on top of the project’s parking garage, in exchange for the CRA buying the land with $3.668 million in taxpayer funds.  The developer was also allowed to count this taxpayer-financed park as its required amount of open space for the skyscraper project 

The Sunset/Gordon development subsequently received the most entitlements in the history of the City of Los Angeles, allowing a skyscraper with twice the allowed residential density and half the required parking, a 260-foot tall building where the zoning allowed only a height of 45 feet. 

When community members sued the City over this project in 2008, the CRA and Councilman Garcetti voted to advance the developer the full $3.668 million earmarked for the public park, in order to pay Gerding Edland’s litigation expense.  Gerding Edland subsequently defaulted on that advance, using the public’s money to buy property in Venice for another development. When the CRA’s finance officer was asked why the CRA wasn’t trying to recover these funds, the officer responded: “The Government is in the business of giving out money, not getting it back.” 

CIM subsequently purchased the site and its generous entitlement package in 2011 for $21 million, entering into a new Owner Participation Agreement with the CRA.  This agreement specify acknowledges that the City has already paid in full for the public park, stating: “Agency has advanced the full amount of the Park Funds … (and) Buyer shall have the obligation to develop the Park…” 

The CRA provided CIM with several lucrative incentives to enter into the Owner Participation Agreement, including giving CIM an additional $6 million in public funds to include 40,000 sq. ft. of office space in the development, and quietly approving a refund to CIM on its $628,000 required art fee.  The CRA determined that CIM’s “recreation” of the Old Spaghetti Factory façade that it had illegally destroyed qualified as an “art” project, which CIM coincidently estimated would cost exactly $628,000. 

CIM also acquired the right to cover the Sunset/Gordon skyscraper with massive (and extremely profitable) supergraphic advertising. 

When the CRA originally approved the Sunset/Gordon project in 2007, developer Gerding Edland stated that the skyscraper would cost $200 million.  CIM Group now acknowledges that the cost of the project is $102 million, or a savings to CIM of $98 million, achieved by changing the development from luxury 2-bedroom condominiums to bare, unfinished loft-style apartments, and dramatically reducing parking from its already unprecedented low level.  

CIM, described by the LA Weekly in a 2010 investigative piece as “Hollywood’s Richest Slumlord,” is one of the largest commercial property owners in Southern California, with $14.7 billion in assets.  Its recent purchases include Hollywood/Highland; the 52-story Bunker Hill skyscraper known as 2 California Plaza; and two Beverly Hills office buildings it acquired in 2011 from the former William Morris Agency for $47.8 million.   Last February, CIM paid $2.57 billion to purchase a seven-building portfolio of Class A office structures. 

Yet CIM is now crying poverty and demanding another $1.25 million from the people of Los Angeles.  CIM’s request that that the City use public funds to pay for a public  “easement” to a city park that the public already owns, and for which CIM is required by its agreement with the CRA to include in the Sunset/Gordon project, is typical of this company’s notorious ability to milk city officials for every dime it can get.  

CIM is requesting that the money for the easement come from what are known as Quimby Funds, which are monies paid by developers to the Department of Recreation and Parks.  These funds are then used to acquire parkland and for park maintenance. Money that will flow to CIM is therefore money that would otherwise build parks throughout Los Angeles.  

Yet despite the unsavory aspects of this entire deal, and the never-ending budget crisis at City Hall, the Department of Recreation and Parks is poised to provide CIM with the $1.25 million that the real estate giant has no legal right to receive.  Astonishingly, while CIM has continually wheedled Rec and Parks for the money over the past 18 months, no one at the CRA or City Council bothered to inform the Board of Recreation and Parks Commissioners that the City already owns the land designated for Sunset Gordon Park.  

Instead, it was only because of a strongly worded objection letter sent just last week by the Hollywood Studio District Neighborhood Council that Commission members were tipped off to the fact that the city already owns Sunset Gordon Park.  The Office of the City Attorney then intervened, requesting that the Commissioners delay a vote on the matter until the Board’s next meeting.    

Where is the new councilmember representing Hollywood, Mitch O’Farrell, regarding all of this?  As learned from documents gleaned through a Public Records Act request, O’Farrell’s staff facilitated the approvals through the Board of Recreation and Parks Commissioners.  When the City Attorney’s office refused to be involved in such shenanigans, O’Farrell’s staff -- as shown by internal emails -- acceded to CIM’s demands and pushed the process forward.  

NEED TO KNOW: The Board of Recreation and Parks Commissioners is now scheduled to vote on CIM’s funding request at its meeting of Wednesday, May 21. For additional information, contact the Commission office at: 213 202-2640.


(This story was first published on HNN-TV.  Ziggy Kruse is an activist and reporter for and an occasional contributor to CityWatch.  She can be reached at [email protected].  Ms. Kruse views are her own and do not reflect opinions of either the staff or management of CityWatch.)







Vol 12 Issue 39

Pub: May 13, 2014