Los Angeles magazine, February 2009

For almost two years, downtown commuters crawling along the Harbor Freeway each day have been treated to a nifty sideshow: construction of L.A. Live, the $2.5 billion monster development next to the Staples Center. Parts of the complex, such as the 7,100-seat Nokia Theatre, have been open for some time, while an assortment of restaurants and nightclubs is coming on line. The main attraction, a 54-story high-rise that houses a Ritz-Carlton hotel, a Marriott hotel, and 224 luxury condos, is scheduled for completion next year and should generate plenty of business for the underperforming Los Angeles Convention Center. The floor-by-floor progress can even be followed through time-lapse photography on YouTube.

L.A. Live is the most conspicuous element of downtown’s growth surge, and the developer, Anschutz Entertainment Group, isn’t exactly subtle in its hype. “Imagine being ‘in the moment,’ ” begins the Web site description, “when nothing else matters but what is going on around you right then and right there.” Supporters often describe what’s going on downtown as a “renaissance,” and from the clogged lanes of the 10-110 interchange, it would be hard to argue. Sparkling skyscrapers, a world-famous sports arena, spruced-up historic buildings, loft conversions, and now a brand-new entertainment district—Hollywood set designers couldn’t come up with a better urban scene.

Downtowns, of course, must be more than their skylines, and the truth is that development has hit a wall. Once L.A. Live’s convention center hotels are finished, construction cranes will be a rare sight for at least several years. By the end of 2008, the economic bust had essentially frozen all residential projects that lacked financing. The massive Grand Avenue development, which was to be the northern bookend to L.A. Live, with a mix of hotels, condos, and retail, has been on hold for months because the developer cannot get a construction loan. Completion of the first phase was scheduled for 2011, but that’s unlikely to happen.

Certainly downtown is not the only place where projects are in trouble. Plans for a 45-story luxury condo tower at Santa Monica Boulevard and South Moreno Drive (the old Jimmy’s location at the edge of Century City) have been shelved by the Irvine developer Suncal. Its main equity partner, Lehman Brothers, went bankrupt last fall. Next to the Beverly Hilton, the 9900 Wilshire condo development is adding a luxury hotel, since that’s the only way a new lending package can be approved. Such setbacks are a sign of the times, but downtown is being particularly affected because so many projects had been planned, from modest restorations to towering complexes.

“The business just looked too easy,” says Dan Rosenfeld, a principal with development firm Urban Partners LLC and a longtime champion of the area. “The perception was that housing prices could only move in one direction—up—and that all you had to do was get a building permit, put a project on autopilot, and it would make money.” The amateurs who jumped into the business, Rosenfeld says, “are going to find out that real estate is a two-way street, and it’s going the other way now.”

Heading into the recession, downtown had seen more than its share of success stories: a doubling of the population in ten years (it’s around 38,000), stylish bars and restaurants, and meticulous restorations of such architectural gems as the Eastern Columbia Building. “The irony of L.A. is that in spite of itself it has done the right thing,” says Rosenfeld, pointing to such uncoordinated additions as the Staples Center, Walt Disney Concert Hall, and the subway.

Still, it’s an uneven work in progress. Freeway congestion makes arriving in time for an evening concert a challenge, a big and well-entrenched homeless population is within a block or two of the high-end gentrification, and large sections remain deserted on nights and weekends (try finding a coffee shop open on a Saturday afternoon). First-time visitors often can’t get past the user-unfriendliness of the place: Thoroughfares are too wide, sidewalks are too narrow, blocks are too long, and an angled street grid makes it easy to get lost. Some of the hassles can be mitigated, but not without boatloads of additional investment dollars—and very little of that money is available these days. The economics are out of whack: Banks don’t want to lend unless developers are willing to take a smaller cut, and developers don’t want to build unless banks provide better financing.

Before the Los Angeles City Council passed the adaptive reuse ordinance in 1999, which streamlined the process of converting unused office buildings into lofts, downtown had 11,626 housing units. Today the number is 25,221, with another 22,180 slated to go up. But of that 22,180, only a fraction—4,362—are actually under construction. The rest are in development limbo, either stuck in the city’s lengthy entitlement process or lacking the money to get under way. “We knew when the boom was ongoing that some of the projects would not go forward,” says Carol Schatz, president and chief executive of the Central City Association and one of downtown’s chief advocates. “I think that’s reality. Stuff goes forward, stuff doesn’t.”