January 13, 2009 - Grand Avenue Project - Related Cos, Los Angeles CA

Grand Avenue project developer might miss deadline to start work

Related Cos. agreed to pay the Los Angeles Grand Avenue Authority penalties totaling $250,000 a month until ground is broken if construction did not begin by Feb. 15.

Grand Avenue project developer might miss deadline to start work

The first phase of the project near Walt Disney Concert Hall includes residential towers and shops. The Grand, a residential building, is being financed by Related Cos.

The Grand

The developer behind the massive Grand Avenue project has met all of the required milestones on the downtown development but probably won't meet next month's deadline for beginning construction.

Last year, Related Cos. agreed to pay financial penalties to the Los Angeles Grand Avenue Authority if ground wasn't broken by Feb. 15. Penalties would total $250,000 a month until the project breaks ground.

If construction on Grand Avenue has not begun by February 2011, the authority has the right to renegotiate the deal.

With the current state of the credit market, it is likely that Related will pay some penalties to the authority starting next month.

Related officials Monday told the joint city-county authority overseeing the project that they have met all the deadlines required by the panel but that the $3-billion project will not move forward until the developer can obtain funding for the project.

Among other things, the developer produced 80% of the project's construction documents before its Dec. 15, 2008, deadline.

Related also paid most of the costs for the project's design needs and has been providing monthly updates on its project, said Nelson Rising, chairman of a committee overseeing the negotiations on behalf of the city and county.

"We are near the finish line," said Related California chief Bill Witte, who added that the project will be in position to move forward once the credit market allows Related to obtain financing.

In the meantime, Witte and others said they were moving forward with the design of a 16-acre civic park that is part of the project. They have completed schematic designs and are waiting for cost estimates.

A report on that and a plan for a business model to run the park are expected to be presented at the authority's February meeting.

Original Story - LA Times

Update February 12, 2009

Grand Avenue developer might avoid penalties

Moving to save what has been billed as a centerpiece of downtown L.A.’s revitalization, local officials are considering a proposal that would defer a $250,000 monthly penalty that the Grand Avenue project developer is supposed to start paying Sunday.

The hefty penalty was negotiated last year after numerous delays in construction of the $3-billion, Frank Gehry-designed complex.

At the time, the developer promised to begin construction by Feb. 15 or pay the fines. But Los Angeles County Supervisor Gloria Molina said Thursday that Related Cos. had asked to waive those fines and that the city-county board that oversees the Grand Avenue project is considering the proposal.

Like many developers, Related has struggled to gather the construction financing needed to break ground amid the nation’s financial meltdown.

"It’s a matter of how they’re going to pay for it," Molina said. "The reality is, there [are] no banks to pay for it."

Several sources familiar with the negotiations confirmed the details of the developer’s request and said that the deferment of the $250,000 payments was most likely.

They also said it was likely that the civic agencies would ask for a smaller payment, closer to $100,000, perhaps to be made annually, to defray some of the costs of ongoing work on the project by the civic committee that is overseeing the project.

Paul Novak, a planning deputy for county Supervisor Mike Antonovich, who has been a vocal critic of the Grand Avenue project, charged that the renegotiation of the penalty was being done with little or no public comment.

The members of the authority apparently discussed the deal in a closed session Monday, but did not report any information about their discussion to members of the public. The concern, Novak said, is that this is "very much a backroom deal. We would just like the developer to live up to the original deal. Every time something happens, they want to come in and change the deal, and it’s not in the public limelight."

Update Story - LA Times