LA Live's Nokia Theatre Opening in the Fall; Downtown Becomes a Destination

LA Live has been moving along nicely; construction is on schedule, and you recently broke ground on the 54-story, Ritz-Carlton hotel. What is the current status of the project, and when can we expect to see some of the promised elements of the development delivered?

The first component of the project, the 7,100-seat Nokia Theater located directly north of Staples and Chick Hearn Court, will open this October. At that time we will also open Nokia Plaza, a one-acre open space forming the main entry court for Nokia Theater, which, when Chick Hearn Court is closed, is a key element of the pedestrian realm surrounding LA Live.

The second components are the buildings that are being steel-framed and skinned right now, including the ESPN building at 11th and Figueroa. It is a five-story building with about 130,000 square feet of gross building area. ESPN's radio and TV broadcast studios and support space will occupy the top floors, and a two-level ESPN Zone will occupy the lower levels. The Zone is due to open September 2008, and the broadcast studios would come online in the first quarter of 2009.

The other big building that's currently being steel-framed on the south side of Olympic between Figueroa and Georgia streets is our AEG Entertainment Building. It's a 430,000-square-foot, five-level building. The ground floor consists of eight restaurants, six of which have signed leases; two are in final stages. Occupying the upper floors are a number of live entertainment venues: the eighteen-lane Lucky Strikes bowling club, the 60,000-square-foot Club Nokia, a live music venue with capacity for 2,300, and a 13,000-square-foot Conga Room. The Grammy Museum is a 32,000-square-foot facility that will be stacked on three levels above the corner of Olympic and Figueroa. A terrace will occupy the rooftop space above the museum. Approximately 165,000 square feet of office space that will occupy four levels on the western portion of the building and will house Herbalife, AEG HRO, ESPN Radio as its prime tenants.

The core and shell of this structure will be completed next April with all tenants moved in and fully occupied by the fall of 2008. That completes the three-building composition around Nokia Plaza by fall of 2008. On June 1, we broke ground on the 54-story Ritz-Carlton Hotel and Residences, which includes JW Marriott Hotel of 878 rooms, a luxury Ritz-Carlton Hotel of 123 rooms, and 224 luxury condominiums that will be branded as Ritz residences, offering all the amenities and services of the Ritz-Carlton Hotel, such as room and maid services, concierge, valet, and more.

Given the housing data that's been driving prices down nationally, have you been having any trouble marketing the residential units?

We have currently received 160 reservations-more than two thirds of the total number of units in the building. We limited the initial marketing effort to a limited group of friends and family, partners, tenants, suite owners, and premier seat holders at Staples Center, so we really haven't begun our broad-based public marketing campaign.

We expect to open our marketing center in September in the Petroleum Building at the corner of Flower and Olympic. We're buoyed by the success we've had with our reservation program to date, and we expect to have our white report soon, which will allow us to convert those reservations to contracts over the summer. I think the market is recognizing that this is a very unique project. It offers a lot of amenities, not only the extraordinary benefits of being a Ritz-Carlton-branded residence, which has established premium value around the country, but also all the amenities that come from being in the midst of LA Live. The plan is to have the hotels completed December of 2009, and begin closing units and moving people into their residences through the first and second quarters of 2010.

In an interview with TPR in 2000, Tim Leiweke said, "If we ever figure out how to link the central city and Exposition Park area, Downtown L.A. will be one of the great urban areas in the United States." It's been seven years since that interview. Have you figured out this linkage challenge?

We're working on it. Together with a number of stakeholders, we have put together an exciting vision statement for what we're calling a "Figueroa Corridor Improvement Effort," to better connect communities and encourage high density residential infill, but also to provide amenities of a great boulevard such as improved landscaping, wide sidewalks, bikeways, areas for dog-walking, new parks and open space, as well as important land use changes. This private initiative is now being presented to CRA, MTA, City Planning, as well as the Council and Mayor's Office.

The city, the Planning Department, and the CRA have, for years, favored project-by-project planning. Is this changing? Is LA Live integrated with the rest of Downtown? What should the Planning Department do to assure that Downtown will be a livable destination center?

Gail Goldberg has brought in a fresh perspective about the need for innovation and inclusiveness in the planning process, and she has been very straightforward with her views about density and the creation of a livable and sustainable community. I believe she is aware of some of the good work that has been done to create a pedestrian-friendly urban realm in the South Park area. Good examples include the South Group's work with the area surrounding Luma, Elleven, and Evo, coupled with our hardscape and the landscape program, which includes expanding the width of sidewalks by setting back our private development an additional eight feet to create more pedestrian-oriented areas and outdoor seating areas to enliven the street edges.

LA Live faced and surmounted a number of challenges along the way to completion. Who are your partners, owners, and underwriters?

Regarding LA Live-which includes Nokia Theater, the ESPN building, the AEG Entertainment Building, and the parking garages both east and west of Georgia-we've been able to secure long-term financing based on the strength of our own commitments, the commitments of our district sponsors and founding partners like Nokia, Wachovia, Toyota, and others, as well as many tenants we have under binding leases. All of the development currently underway has guaranteed maximum price contracts locking in our costs and avoiding further risk of construction cost inflation, which has been the bane to all developers in Southern California recently. So on the LA Live development side, we've secured our future and have a very solid financing plan in place with Wachovia and Bank of America as co-leads.

With regard to the hotels and residences, the key was getting the reinvestment of the TOT approved by the city. We went through a couple of tough steps, losing Lew Wolff and his partners Apollo and Hilton as the hotel operator due to rising construction costs, and late last year KB Urban withdrew. Afterward, in order to get it done, we realized that we were going to have to step in and do it ourselves. We brought in a phenomenal equity partner in the McFarlane Group. We view them as solid partner in the development of the hotels and residences, and together we have secured all necessary financing in excess of $900 million with Credit Suisse First Boston as our lead bank. We're on our way. We are, as we speak, locking up GMP contracts with 3 major contractors to spread the workload and risk.

Author and planning critic Joel Kotkin recently wrote that "The whole of LA Live is an absurdity for a city like L.A., which has a huge and unsubsidized entertainment industry. Stuff like ESPN Zone and other packaged entertainment is unnecessary for a city like L.A. If you're bored in L.A., get another life." What's your reaction to Kotkin's assessment?

Tim Leiweke has made a key point in the past, and I think he's absolutely right, that so much of the entertainment, or content, that's created here in Los Angeles is not part of a public awareness. His view was to make LA Live a "content campus," where all the big live events occur in a more public place such as award shows, a rollout of a brand or new product, a community celebration, a Fashion Week or Electronic Expo. Those are events that bring people and products together. We have a great opportunity, with all the venues in LA Live, to create an extraordinary environment that doesn't exist anywhere else in the country: a true stage for the world's great events. I think that's what people and companies are responding to; that's what creating the value, and that is what people want to be part of.

You've been an interviewee of TPR's off and on for the 20-plus years we've been publishing. What has your learning curve been like over two decades of place-making?

Pretty humbling and quite amazing. As you can imagine, beginning at the Produce Market with Mayor Bradley and then to Union Station with Catellus, it's been fantastic to be a part of bringing great historic properties back to life. As a regular user of Union Station to shuttle to LAX or pick up family or friends, it has been particularly rewarding to see this icon reclaim its key role in our city life.

When I took this position at AEG with Tim, I had no idea that I'd be doing what I am now, traveling around the world working on the most exciting projects in our industry. I have the most amazing respect and regard for AEG's vision, courage and commitment to go beyond where everybody else has been-to set the bar in entertainment worldwide.

What did you mean when you used the word "courage" to describe AEG?

In the case of our hotel/condo project, following eight years working with many of the nation's best developers and hotel chains, we decided to step up and take it on ourselves. This was the most challenging project I have ever been part of and I don't think anything quite like it has been done anywhere before. We began with a large group hotel with major ballroom and meeting spaces, combined it with a five-star luxury brand, and then layered a huge number of serviced condos on top totalling over 2 million square feet, all during a time period when construction costs were rising and the residential market was slowing. It was daunting.

But our ownership said, "We've got to do this and now is the time." We were convinced that we could sell the units and get the hotels to a level of profitability, with the support of the TOT reinvestment to make it a worthwhile project. And I'm confident it will be.

Lastly, being able to take our ideas about making entertainment destinations to other places such as London, Berlin, possibly Shanghai, then adapt and reshape them to local customs and cultures, has been one of the most incredible and unexpected opportunities. AEG is a truly dynamic company willing to take significant risk to deliver the very best entertainment experiences to artists, our customers and partners.