If you’re looking for a place for a luxurious extended stay in West Hollywood that you or your employer can write off on your taxes, you might want to take 8500 Sunset Blvd. off your list for now.
The two condo buildings at that location, which contain a total of 190 units, were sold recently by CIM Group to Korman Communities and the Brookfield Property Group. Korman says it plans to turn the buildings into a corporate extended-stay hotel.
However, West Hollywood City Attorney Mike Jenkins confirmed to WEHOville today that such a use would be a violation of a city ordinance prohibiting the use of apartments, condos and houses as corporate housing. Corporate housing typically involves a company entering into a long-term lease for a residential property and then letting various employees or clients use that property for short term stays for work.
Rental of a residential unit for fewer than 31 days is a violation of the city’s ban on short-term rentals such as those booked through Airbnb. The City Council clarified last year that that ban includes corporate short-term rentals.
Korman currently operates 11 “extended stay” hotels, including five in New York City (one of which is the AKA United Nations), the AKA White House in Washington, D.C., three hotels in Philadelphia, one in London and one in Beverly Hills. Rooms are available at the Beverly Hills AKA for a minimum one-week stay at a rate of $4,500 a week.
Jenkins said that Korman had not reached out to the City of West Hollywood before the acquisition. The Real Deal, a real estate and development industry website, quotes sources who have said that the mixed-use building was valued at $250 million. According to the Real Deal, CIM Group will maintain ownership of the first-floor retail space, which will house a 22,000 square foot Fred Segal store.
To make good on its investment, Korman Communities would have to convince the City Council to reverse its ordinance banning corporate rentals. As of publication, WEHOville has been unable to get a comment from Korman Communities about this issue.
“The project has a development agreement,” said City Councilmember Lauren Meister, referring to a contractual agreement between the developer and the city that governs use of the property. “Aside from the fact that extended stay, short-term rentals and corporate housing are not legal in our city (residential rentals must be 31+ days), any changes to the project must go before Council.
“This project continues to evolve into something different than what was originally presented to the public. The design changed, we lost 380 parking spaces, an underground tunnel connecting the East parcel with the West parcel was eliminated as was a pedestrian bridge across La Cienega. And we lost a theater.
“If the new owner is looking to change the Residential component to Hotel, based on my experience with the hotel item I brought forward, it will certainly be an interesting conversation.”
Meister was referring to her proposal to declare a short-term moratorium on new hotels until the city could do a further study on their impact on the local economy. The conversion of the 8500 Sunset buildings from condos to hotel rooms, along with completion of other hotel projects that are under construction, already permitted or are under review, would increase the number of hotel rooms in West Hollywood by 83%
Mayor John Heilman proposed a ban on short-term rentals in 2015, saying such rentals would have a negative impact on the availability of housing in WeHo, where rents have grown sharply in recent years. In 2016 the City Council agreed in a three-to-two vote to make clear that the ban included short-term corporate rentals. Heilman and Councilmembers Meister and Lindsey Horvath voted yes on that, and council members John Duran and John D’Amico opposed it.
“Although turnover in such circumstances is typically less frequent than that involved in short-term vacation rentals, the high turnover remains disruptive to the stability of residential communities,” Heilman said in his proposal of the ordinance to the City Council. “Further, when residential units are used for commercial activity such as vacation and corporate rentals rather than the purpose for which they were constructed, the supply of affordable and market-rate housing in the city is diminished and the ability of the city to achieve its housing goals is compromised.”