Dive Brief:
- Related Companies, developer of the $25 billion Hudson Yards mega-development in Manhattan, announced this week that it has secured a $630 million Deutsche Bank construction loan for The Grand, a $1 billion mixed-use project in downtown Los Angeles. This paves the way for the project to begin site work this month, followed by construction in the coming months, with AECOM as construction manager.
- The project, a public-private partnership with the Los Angeles Grand Avenue Authority that includes Los Angeles city and county, will feature a public plaza, 215,000 square feet of retail, a movie theater and a 10-story, 309-room Equinox Hotel. The Grand will also offer a 39-story residential tower with 436 units, 20% of which will be affordable. Related's partner in the Frank Gehry-designed development is CORE USA, a joint venture of China Harbour Engineering Co. and CCCG Overseas Real Estate.
- The project is a continuation of Related's Grand Avenue redevelopment activity, which includes the 12-acre Grand Park and contemporary art museum dubbed The Broad. The Grand is expected to generate $2.2 million every year in county tax revenue and create 10,000 new jobs.
Dive Insight:
In January 2017, Related announced that CCCG invested $290 million in the project. Just last month, the Los Angeles City Council approved a $200 million bond issue to help finance the 323-unit multifamily rental portion of the project, The Real Deal reported.
Los Angeles, San Francisco and other California communities are trying to come up with ways to increase the amount of affordable housing in an environment of skyrocketing real estate prices and rental rates. Rising rates have also boosted the homeless population, a problem that the city of Los Angeles hopes will be eased through a new accessory dwelling unit program. The city plans on giving homeowners $30,000 of incentives to build these units on their property and then rent them to the homeless, whose rent will be subsidized by the city.
Large developers, however, are still building pricey luxury housing to meet that specific demand, forcing city planners to try to figure out how many inclusionary housing regulations the market will tolerate before developers decide to hold off on construction altogether. For example, Los Angeles city planner Tom Glick, Curbed Los Angeles reported, told the city council at a recent meeting that the Warner Center development in Los Angeles had seen no applications for new residential projects since the city imposed "linkage fees" last year.
