AKA Appeals City Decision that Its Short-Term Luxury Rentals Are Illegal

A rendering of the 8500 Sunset Blvd project

Korman Communities, operator of the luxury AKA extended-stay hotels, is appealing a decision by the City of West Hollywood that it is violating the law by renting rooms in the eight-story west tower of at 8500 Sunset Blvd. for short-term corporate stays.

The appeal will be heard next Thursday by the West Hollywood Planning Commission and has drawn objections from a number of local hotel owners and operators.

John Keho, the city’s interim director of planning and development services, issued a ruling in November of last year that Korman was using the 110 units for “temporary lodging,” effectively making it a hotel. Those units, part of a project by the CIM Group, initially were intended to be condominiums, as were the 80 units in the adjacent east tower.

When Korman and the Brookfield Properties Group bought the east and west towers from CIM last summer, they announced that all 190 units would be used for short-term corporate rentals. Korman operates 11 other luxury short-term rental properties, including one in Beverly Hills. Korman quickly backtracked on that plan when it discovered that city law bans such short-term corporate rentals in West Hollywood. On July 10 of last year, Korman announced that it would lease the 80 units in the east tower as unfurnished apartments with a minimum one-year lease and rent the furnished 110 units in the west tower for stays of 30 or more days — an apparent effort to avoid violating the city law against short-term rentals. Those rentals began in January. Currently, rents for a 31-day stay range from $270 a night ($8,370 for 31 days) for a “studio,” which is a fully furnished, one-bedroom unit with a kitchen, to $650 a night ($20,150 for 31 days) for a “two bedroom premium suite.” That 1,260-square-foot unit includes a kitchen along with a washer and dryer and two “spa-like baths.”

Research by the city’s Planning and Development Services Department turned up evidence online that AKA was promoting the West Hollywood building as a hotel and that websites offered users an option to “reserve” a unit, a term typically use to make a hotel room reservation. In a report to the Planning Commission, the department also noted that information found online promotes the building as “a smart way to travel for two weeks or longer” and says the rooms can be rented online at the AKA West Hollywood website, https://www.stayaka.com/aka-west-hollywood. Such online rentals are not typical for apartments, where a tenant usually has to go through a more rigorous application process, including a credit check. The AKA West Hollywood website currently does not accept reservations for stays of fewer than 31 days.

That and other evidence led to KeHo’s decision that Korman was operating a hotel and not necessarily renting the units for long term stays. City officials speaking off the record also have noted that a rental of 31 days or more can be cancelled by the renter after a shorter stay, effectively making the unit a short-term rental. Keho’s decision was that Korman is in violation of the development agreement that CIM Group had reached with the city and the required environmental impact statement, which didn’t anticipate short-term rentals.

The Planning Commission has received emails and letters from managers of most of its major hotels supporting Keho’s decision and asking that Korman’s appeal be denied. Those hotels include the Ramada Plaza Hotel, the London West Hollywood, the Chamberlain West Hollywood, Le Montrose Suite, Petit Ermitage, the Andaz West Hollywood, the Jeremy, the Mondrian LA, the Standard Hollywood and the Sunset Marquis.

“The city has more than 1,000 new hotel rooms that have either opened, are under construction or in planning, more than doubling the current inventory of rooms and more new hotel rooms are being opened in Los Angeles than in any other city in the United States,” said Rod Gruendyke, vice president of the Sunset Marquis. “Aside from the clear legal impediments of their strategy, AKA should not be permitted to shift the balance in the city from residential to transient use for a brand new residential project they purchased knowing full well both the the permitted (and unpermitted) uses for the site.”

Norbert Relecker, the general manager of the Mondrian and chair of the Visit West Hollywood board of directors, noted that the REV Par index (revenue per available room) for area hotels has declined 5.7% compared to that in neighboring communities. “We do not need to place more strain on the hotel economy than there is already,” Relecker said. “Our Visit West Hollywood organization is working hard on marketing our area and promote what we have to offer.”

In a letter last Fall contesting the city’s decision, Korman’s lawyer William Delvac, argued that AKA is not using the building as a hotel, saying that hotels have an average stay of three to four days compared to the minimum 31-day lease at the AKA building. He also argued that the average hotel room is 350 square feet, while the apartments at 8500 Sunset average over 1,000 square feet and that nothing in the city’s zoning code actually requires a rental agreement of more than 31 days.

The Planning Commission will consider the appeal on Thursday at its meeting at 6:30 p.m. at the City Council Chambers, 625 N. San Vicente Blvd.

  1. A glut of supply means a scarcity of demand which always leads to unlawful competitive practices. They are open to a suit under Bus and Prof Code 17200 for Unfair, Unlawful and Deceptive Business Practices. The technical nature is Unfair Competition statute and the other hotels or the city sue under the business competitor angle. The City Atty can collect fines but the other hotels cannot collect fines or damages but they can get an injunction and attorney fees.

  2. The units inside and the hallway is horrible, AKA definitely made an oversight on the Corporate rental laws in West Hollywood. CIM is the developer on this originally and I’m shocked that there are not balconies most of these units with limited window openings, it was really bad $250 Million dollar deal, shame on Aka’s Real Estate Agent for not presenting better options to their client. They are doing the 20% to low income housing which at least is a good thing. The city is to blame for allowing such a bad design of the property.

    1. Actually the only 10% of the building’s units have been set aside for affordable housing. Rather than set aside an additional 10%, the developer made a required contribution to the city’s Affordable Housing Trust Fund

  3. I will be at the Planning Meeting this Thursday speaking AGAINST, AKA. If anyone needs any further information or support. Please feel free to reach out to me.

    We just fought and won AirBNB and this is an incredibly similar circumstance. Please WeHoans come out and make your voices heard!

  4. Saying one thing and doing another is not a surprise. Nor is being caught because of brazen online advertising.

    If you don’t shut it down now, the abuse will come in waves.

  5. Good God, what a monstrosity. Overpriced transient Airbnb. The “Sunset Strip” is a testimony to the crass and vulgar developers along with the sleazebag billboard schlockmeisters. Imagine living in this “thing” that looks like pre-wall Berlin and has turned the “Strip” into a concrete maze of two-bit architecture. The “taste” of West Hollywood leaders is visible on the strip. They all probably grew up next to a strip mall!

  6. Another example of Corporate America trying to pull a fast one. Some Corporations go as far as hiring sitting West Hollywood City Commissioners to draft their projects, using their influence to expedite the approval process and attempting to get a favorable outcome. With the thumb on the scale, some projects get through…. We need our friends and neighbors to become active, attend meeting and hold our West Hollywood City Hall employees, YES EMPLOYEES, to a high standard. A lot of questionable thing have been going on at 8300 Santa Monica Blvd, look for yourself. “LET YOUR VOICE BE HEARD” . Thanks John Keho….

    1. Do you actually have evidence of WH Commissioners drafting projects? Using influence is one thing, drafting is another. If this is true you should make it public knowledge.

      Of great interest to ALL residents should be the long running controversy over Beverly Hills residential projects at 1184 & 1193 Loma Linda funning afoul of ordinances. The Beverly Hills Courier March 9, 2018 edition is notable in its coverage of the main players in the community going to extraordinary lengths and expense to combat the nefarious actions of the developer, notably Anne Ostroff, a rocket scientist. A Guest Editorial by Robert K. Tannenbaum, a former mayor of BH and Manhattan Prosecutor also details the misdeeds occurring with members of city staff. It’s an eye opener and presents issues we as residents in WH may not have accurately or thoroughly described and aired.

      Knowledge is king!

    2. Please review the 923 – 931 Palm Avenue project as proposed by Dylan Corporation LLC, btw the Architect was West Hollywood Historical Preservation Commissioner Edward Levin. Somehow this project was put on the fast track, being schedule on West Hollywood Design Review Committee before it’s mandated hearing by the West Hollywood Historical Commission. The subject property consist of two Historical Landmark Single Family Homes. Friends and neighbors organized, exposed the conflicts with West Hollywood Municipal Code and presented their finding before the Historical Commission. My only conclusion is it is FAVORITISM or INCOMPETENCE??

      1. Perhaps both. This project is a glaring example of an assault on the spirit of the Historic Preservation Ordinance and a commissioner who appears to have used his position to manipulate himself into the design seat perhaps by allowing the developer to believe he had the clout to fast track the project. Recusal from the proceedings have nothing to do with what happens behind the scenes. A previous commissioner and community “preservation” activist, also with a great deal of self interest is said to have a hand in the path.

        The design itself would make one’s head spin as it is largely without merit, most disrespectful of the dedicated Craftsman landmarks and a crude assault on the immediate community. A sensitive architect could have designed a meaningful project without all the maneuvering.

    1. The Sunset Millenium Project was misguided and mishandled from the beginning in the late 90’s and fraught with incompetence and chicanery. No one learned the lessons and got it on the right track. Now the city owns it and perhaps should legally own it.

  7. This property resembled a giant lump of coal when it was built.

    It now resembles a Lump of Coal Ghetto with aspects of the building boarded up or cordoned off.

    It also qualifies for the reason folks receive a lump of coal in their Christmas stocking.

    A disgrace on Sunset in every way.

    Korman should apply for a demo permit and get out or the City should practice some sharp litigation and take over the buildings turning them into affordable housing.

    A Win Win!

  8. Lets not overlook the fact that, by effectively operating it as a hotel while calling something else, they are also evading the hotel occupancy tax required of any other hotelier—and also thereby cheating the taxpayers of the city that allowed the project to be built.

    They knew (or, as experienced property owners, SHOULD have known) the encumbrances on the property when they acquired it. And they should either abide by those rules or sell it. I’m tired of developers taking the yard granted by city planners and then stretching it into a mile.

    Either follow the rules—or LEAVE. Either way, these are property owners our city MUST NOT cave in to—nor should ANY of our Council Members: THEIR FIRST and HIGHEST duty is to the voters—NOT to developers wishing to bend the rules by attempting “grease the wheels” with campaign contributions.

    1. Rick: Exactly. Korman Properties, its underwriters, etc. failed to do their due diligence before purchasing the property from the builder. I wouldn’t be surprised if the actual person who made the final decision thought the building was in Los Angeles!

      Now they’re in way over their heads and have therefore turned the matter over to high-priced lawyers in order to ‘fix’ the problem. The lawyers will be trying to maximize their billable hours on this case which means they will be looking for every loophole, no matter how ridiculous. The lawyers are likely the ones who came up with the current operating scheme with its shady loopholes as Rick described.

      The ultimate fate of this property will depend on who blinks first and whether there is someone at Korman competently looks at this deal. If WeHo blinks, we’ll get this eyesore along with some form of exemption to the ordinance for projects of a certain size. If they blink, the property will be sold as condos, or to another developer.

      FYI: While this isn’t my day job, this scale of development has been a part of my life since childhood and is something in which I have always been involved to some degree. I’ve seen a lot of the politics that go down behind the scenes and this is a textbook screw up.

  9. Sorry, but this seems like a hideous amount of money for rent in a rather bland and not very attractive (IMO) building. Actually, the buildings seems to be nothing more that a backdrop for billboard ads.

    1. Almost every new building on Sunset is incidental to its value as advertising. We, the City, has allowed this to happen. We get these large flat walls with no windows just to put a “tall wall” billboard. We should be demanding better design and the building’s primary function should be whatever it’s supposed to be (hotel, condo, retail, etc.). Who on earth would want to buy or live in one of those apartments that face a massive triangular billboard on Sunset? No one – and the developer knew it when they built those horrible units. None but the penthouse have a balcony – also something against the City’s code. Now, the City is expected to capitulate to the developer. No. Way.

      1. I believe when this project was approved by the Planning Commission, John D’Amico and John Altschul were members with the possible addition of Joe Guardarrama.

        Whether accidental or accidentally on purpose, this became an “easy pass”.

  10. I’m sure Korman’s attorneys advised them of the existing permitted uses of the buildings when they bought them. I’d love to see if they could sell them as condos – as originally intended and as sold to the City. Something tells me the inventory wouldn’t be selling fast given the looks of the buildings and the lack of any outdoor space (balconies) that should have been required but somehow didn’t get built. The City shouldn’t give in to these wealthy property owners who thought they could walts in and change the rules for their purposes.

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