Korman Makes a Quick Switch on Plans for 8500 Sunset Blvd.

8500 Sunset Blvd.

Faced with a West Hollywood law barring short-term stays in apartment buildings, Korman Communities apparently has changed its plans for the condominium towers it recently acquired at 8500 Sunset Blvd.

In a press release yesterday, Korman announced that the 80 units in the east tower on the site will be leased as apartments rather than short-term corporate rentals, as it originally had announced. The 110 units in the west tower, which Korman also had planned to use for short-term corporate rentals, now will be available only for rentals of one month or more.

The units in the two buildings at that location were being marketed by CIM Group as condominiums until recently, when CIM sold them to Korman and the Brookfield Property Group. The acquisition price is unknown, but the value of the property has been estimated at $250 million. Korman said then that it planned to turn the buildings into one of its AKA hotels. Korman operates 11 such hotels, which offer extended stays to corporate executives in locations such as Beverly Hills, where rooms rent for a minimum of one week for as much as $1,000 a night, and rentals of only one night in other locations in New York, London, Philadelphia

8500 Sunset Blvd.

However corporate rentals have been banned in West Hollywood, part of a move by the City Council to prevent housing for residents from being taken off the market. 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.

It’s likely that Korman’s plan to rent rooms for one month would still require approval by City Hall because it would effectively be operating the west tower as a hotel. John Keho, the city’s assistant community development director, said the city is in discussion with Korman about the plan, which wouldn’t comply with the building’s designation as a residential property.

In the press release announcing its new plan, AKA President Larry Korman said “Our intention with this acquisition is to operate annual luxury apartments in one tower and Korman Communities’ industry leading furnished residences available for stays one month or longer in the other tower. We are committed to working collaboratively with the City of West Hollywood and abiding by all local laws.”

Turning the building into a hotel would be controversial, given concerns among owners and managers of the city’s existing hotels about the number of new hotels already coming into the market. With the recently completed but not yet opened “1” hotel (formerly the James), the city now has 19 hotels with 2,346 hotel rooms. New hotels approved by the city or already under construction such as the Edition and the Kimpton La Peer would add another 447 units. Other planned projects that haven’t received final approval would add 496 rooms, bring the total to 3,575 rooms. Those projects include 8950 Sunset, Robertson Lane and 7811 Santa Monica Blvd.

A study of West Hollywood’s thriving hotel market by CBRE Hotels, an industry consulting firm, has predicted a major impact on room rates if the seven hotels under construction, those permitted but not yet under construction and those in the existing permit process are completed. CBRE projects the current 85% occupancy rate would fall to 68% by 2020. The study predicts that by 2026 that rate will have risen only to 80%.

The hotel room occupancy tax is the largest single source of revenue for the City of West Hollywood. The tax is 15.5%, with 3% of that allocated to the city’s marketing and tourism bureau. The CBRE study found that the projected increase in hotel rooms would not reduce that revenue. The city’s 2016/17 fiscal year budget projects $23 million in hotel tax revenue. The CBRE study estimates that with the new hotels it will reach $36.8 million in the 2020/21 fiscal year.

  1. How was this built by CIM entertaining the thought of condos or apartments on the earthquake fault which according to WEHO law is not allowed? One step further, hotels house humans also, are they a less important category? This project appears to have been problematic from the start.

  2. The city should grant this project an exemption to operate as a hotel. Operating as short term apartment rentals greater than 30-days means the city loses out on the hotel bed tax, and still gets all the negative impacts such as traffic.

  3. Would be interersting to know who was on the Planning Commission that approved this project, the vote and likewise the City Council.

  4. So, now, after completion, the units become rentals…without any inclusionary affordable units? How convenient. Wouldn’t want the riff-raff living on Sunset…except, of course, on the street.

  5. So after all of the time, noise, traffic backups and hillside view-blocking size of these buildings, they still aren’t sure what the site will be to be used for? However, what is known for sure is that they create a huge, irretrievable footprint in the city and will continue to cause traffic headaches throughout all of the surrounding streets for the rest of time. Our City Council needs to take their blinders off and realize that each of them now wear this project as their legacy.

    As for the developer’s rendering of the proposed completed project at the top of this article: I have NEVER seen that stretch of Sunset Blvd so clean, shiny and free of pedestrians, cars, trash, and homeless people during the day as depicted in that drawing. If that picture was the dream scenario that the City Council saw as part of the completed project, then they have not walked/driven down Sunset Blvd in the last 20 years.

  6. I don’t understand this. However, I recall from years ago at a Planning Committee where small old house on South Orlando. The developer filed as a new apartment, the before completion, filed for it to be a condo.

    The Planning Commission were in ‘hysterics” all saying things like cheating, scam, illegal scam ….yadda yadda yadda…

    The assistant City Attorney was present, and said City frowns on builders who try this, however it is NO illegal.

    In that old case, it was clear they could build it without The Planning Committee forcing their OPINIONS and forcing change to superficial exterior details.

    Despite the City Attorney saying it was not illegal, and that case, the Developer followed everything necessary to make the switch, the geo/power trip of that mix of Planning Committee Member denied it again lectured the developer’s representative who was their, but the Committee thought it was the owner, an so: after an attempt to shame with scathing allegations of fraud type of criminal intent.

    The Representative didn’t care, they said work on it and make changes to fit the city. The rep then said, ok, I will tell the developer, and the frustration was so obvious on all the Committee’s faces.

    As it was propely done in that case, it had to be approved, but the developer did face improper delay …. but only on this one issue, after most of the building was done.

    Personally, I thought that developer in that case was very smart to build one type, and near end, switch to another.

    My point: I don’t know this project nor the full history and why the developer requesting a change in type of housing is probably just a political move (like I saw in the unrelated story I just brought up”.

    I see it as being “not a done deal” on both sides (city/builder) weather the requested change to condo …. Is it a political move? Is the City “in on the plan ??

    What will be end result ??? But I suspect the City will get more of what they want than the developer gets. Or not? We only have unofficial reports to get any information at all.

  7. ” Whoever planned these buildings we’re[sic] idiots.” – Shane

    The credit belongs to those who approved this monstrosity. That would be WeHo and it’s vaunted Planning Director, staff, Urban Planner and City Council.

    It will stand as another great case study on how to sweet talk a willfully ignorant city with developer bait and switch.

  8. These buildings are FUGLY. How this prison looking building was agreed upon and built is a mystery. And those billboards blocking the windows? Who thought anyone would appreciate those out their windows, condo, apartment, or hotel. Whoever planned these buildings we’re idiots.

  9. If they can get this approved, someone might want to keep an eye on those “minimum 30 day rentals”…same rule is supposed to apply at some of their other properties too, wink, wink.

  10. @Ben: Yes back to the beginning. Scrape the lot and begin over. Or take a giant write off and donate the land….. A PARK designed by Rios Clemente & Hale would be a dream.

  11. As to the fact that the new owners have uses different than what were approved for the building in mind, doesn’t the project have to now undergo a new approval process, including traffic impact studies and an EIR?

  12. Let the developer lower the prices and sell the condos as proposed and built. I’m watching too many switcheroos on these developments. Maybe those condos just weren’t worth a million or two each. Not up to us to bail out the project.

  13. Now you see it, now you don’t. The shenanigans of this venture will be very amusing albeit also annoying.

    The sad part about this all is that the city and residents are left with this forgettable structure, dare not say architecture, a veritable coat hanger for billboards. It sets a low bar for any future development on Sunset with billboards as a component. There is no incentive to design anything more than the most bland backdrop as they feature billboards as art that keeps on giving. The city unfortunately must own its part of this scheme which will never be a visual attribute.

  14. How about sticking with the plan to sell them as condos? No buyers? Then just rent them out as apartments with normal lease terms like at least one year.

    I’m sure Korman “wants” to comply with all local laws unless those laws interfere with their business plan. But the law banning these types of short-term rentals was on the books BEFORE they bought these condos and announced plans to rent the rooms like an extended-stay hotel. Hard to believe that their legal council didn’t tell them about the laws in West Hollywood before they dropped $250 million on the mixed-use property. Let’s hope the law doesn’t get changed just to fit their corporate business model.

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