Westside Developer Navigates Residential Market; Demands Mitigation of Traffic Gridlock

California Landmark has been doing much if not all of its development on the Westside of L.A., responding to demand and advocating densification. What is the market opportunity on the Westside?

The opportunities on the Westside are quite apparent. The changes that have happened in the Planning Department the last five years to promote housing, to establish RAS zones, and to facilitate residential development on commercial properties have made major strides. Some other things that are happening include the bonus density rule, SB 1818, and other improvements to the development picture will create additional housing.

As they say, "If you build it, they will come." I've been building since 1987; for those who don't remember, in 1989 and 1990 they said the same thing, and people stopped coming. Nonetheless, the demand is exorbitant. There are many more buyers than there are units. There is a greater increase of smaller infill projects (fewer than 30 units) than larger units on the Westside.

It's very difficult to build over 30 units because the assemblage is so complex, but a number of projects are under construction right now, more than I can remember since about 1990. That will partially meet the demand. I think that other areas on the Westside that obviously have brought a lot of people down include Playa Vista and the areas near the Marina, where we are building as well.

Obviously the gridlock on the Westside is as great or greater than any other location in the region. What's the building capacity, or tolerance, on the Westside to accept more units; and, what's the justification for the city to approve greater residential density?

I don't really believe the housing being built on the Westside creates the traffic. In many respects it reduces the traffic. Much of the office space on the Westside is in Santa Monica, and the problems on the Westside pertain to getting to Santa Monica whether it be on the 10 Freeway or Wilshire or Olympic or coming from the South Bay. If you can build more housing within the region, you'd have fewer people traveling to work, and they'd be traveling shorter distances.

Since most of the intersections are rated F now, what's the obligation of developers seeking infill opportunities to contribute to relieving westside congestion?

In some cases, just changing the use of land from commercial to residential creates a positive impact. Take our Wilshire/Barrington project as an example: In four months we're going to start a high-rise project at the intersection of Wilshire and Barrington. There is about 10,000 feet of commercial on that corner right now, which creates traffic in and out all day long. When we finish constructing our high-rise, the actual traffic trips will be fewer. Now, how could that be? The ebb and flow of traffic will be different; for people living right where the commercial will be, the traffic patterns are exactly the opposite from if there was commercial on the site. And beyond changing the use from commercial to predominantly residential, we're widening Barrington and removing street parking to improve the flow and safety of vehicles.

Let's focus in on your project at Barrington and Wilshire. The parcel, we understand, was zoned by right to be as tall as you cared to build, but the entitlement process was anything but permissive. What does "by right" mean in 2006 and in Los Angeles?

That's a great question. A "by right" apartment project on that site could have been built. The only question is whether or not someone could make a CEQA challenge based on the project size, given that there is sometimes site plan review. But the standards to prove that the development does not create significant environmental impacts are not that great. I think that there are many projects that simply are "by right" for that reason. Of course, if you're building a project under 50 units, there is no site plan review. Or, if you're building a project that is under 50,000 square feet of commercial, there is no site plan review. Those projects are truly by right because one can simply go to Building and Safety and seek a building permit with a set of plans. There is an environmental clearance, but there are not public hearings.

How has California Landmark engaged with the surrounding community to gain political support for this project? Are there lessons you can share with other developers?

Let me preface by saying that we spend a great deal of our time seeking out groups to talk to understand their concerns. We work hard to create developments that add to the community character and enhance quality of life, and to get that done, we do a lot of listening to local community leaders.

We bought the Wilshire/Barrington property in August of 2003, but we had gone out into the community even prior to that to try to understand the community's issues, which, as it turned out, focused much more on parking and traffic than on the fact that the building was going to be a high-rise. They did not want our residents parking in a community that is congested on the smaller streets north of Wilshire near multi-family housing. We addressed these issues head-on, and incorporated parking solutions and traffic patterns into the plan. We also needed to do some education about our project and the benefits of converting the corner from commercial to residential.

That process involved our going to two or three significant homeowner associations and neighborhood councils. We sought out individuals in the community who weren't part of those organizations but were still active in the community. One of the complex things about doing a project is that you in fact are not dealing with just one organization. In Brentwood there is no city-certified neighborhood council; as a result, developers are meeting with myriad numbers of factions and people, and we've had lots of conversations. We had hundreds of emails and phone calls relating the project. That's what it takes to built consensus and gain a community's blessing.

When development projects fail to get their entitlements, what happens?

We have not had a project that failed, but typically projects don't simply fail because of a lack of consensus. It's not an all-or-nothing scenario unless the developer is unwilling to compromise, which we do a lot of. If a project fails, it's because a developer says, "we want this and if you can't give it to me, we're out of here."

Our style is to say, "Well we want this, but after hearing what concerns there are, we may be satisfied with something less than what we originally intended." But nevertheless, there is still a project. When a project fails it's most often because the developer really wants one thing and is unwilling to make a compromise, even after the council office steps in to try to broker a compromise.

Let's turn to infrastructure and traffic. How might new development contribute to the funding of needed infrastructure?

I actually have a unique idea. It's more of a political idea than anything else, and it works like this: Imagine what happens in a redevelopment zone. In a redevelopment zone, increments are created that flow back to a city to address the impacts of cleaning up that redevelopment zone. Well, what if, instead of a redevelopment zone, there was a brokered agreement between either the city and county or city, county and state about the impacts that are created by development and how to pay for it?

The problem is that if you have more property tax dollars, right now the city's increment is approximately 10 percent. For every dollar, ten cents go to the city, 35 cents go to the county and 55 cents go to the state. The state then disperses it for all of the state's needs, including schools. Some of the money does flow back to the city's schools, but only ten cents flows directly to the city.

What if the city and county agreed to create an improvement district of some sort for an area impacted and say that the increment created by additional floor area – i.e. greater density – will be used to satisfy street improvements necessary to break the gridlock, whether it be reversible lanes, some kind of street widening, public transit, or whatever people feel is necessary in order to get the traffic to move. There would be a huge amount of money flowing on an annual basis to a fund. Wilshire/Barrington is an example of where we had a six-to-one floor-to-area ratio, but by virtue of our negotiated compromises, we ended up with some low-income housing and an FAR that rose to eight-to-one. The result was that our additional FAR will translate into more sales. More sales transfers into more property tax dollars.

Now, the political question is of course who will administer the fund. Is it the county or city or a joint authority? Regardless, both county and city have an incentive to get traffic flowing. It's a very simple solution, and it provide incentives to create more floor area for developers, which will in turn create improvements directly in the areas that are impacted. This is what I call the "out of thin air solution." It is like a magic trick, creating additional funds to public agencies that otherwise do not exist.

Let's turn to another public good – affordable housing. What sort of incentives will compel a developer to include affordable housing in a project that would otherwise be entirely at market rate?

Our goal, going back three or four years ago, was a model that effectively creates a win-win with respect to adding the low income housing component that is desperately needed on the Westside and at the same time, making it profitable for the developer. The solution, for a condominium developer at least, was not to increase the unit count but to add square footage to the project.

Again, this would be done simply by adding floor area. What we did at Wilshire and Barrington was add floors, not necessarily height. We already had a 300-foot high rise designed but instead of having floors that had 11 feet clear height we made them 10 feet, which is still more than adequate.

We were happy to provide low-income housing whether we ended up selling it or renting it – it doesn't make any difference to us from an economic standpoint because it was profitable for us as long as it gave us additional square footage to build.

Finally, the city of Los Angeles has hired a new planning director, Gail Goldberg. What's the significance of that position for the developments that California Landmark does in the city?

The significance is what sort of push is created among the entire department. To give you an example, I've been doing business in this city for over 20 years, and when I first started, Building and Safety was a disaster. Then Andrew Adelman came on board and turned it into the "Nordstrom's" of public agencies, in terms of customer service and operations.

The Planning Department has many very good people and many people who need to be directed. A good planning director will rally his or her troops in such a way that they will push the city's ideals.