In a discordant 3-hour meeting on May 5, the Beverly Hills Planning Commission could not agree whether the draft development agreement regarding the $2 billion One Beverly Hills project and the city was consistent with the city’s General Plan.
As the city’s land use agency, the Commission makes recommendations to the City Council about whether or not to grant requested entitlements for developments. At its April 22 meeting, the Commission recommended certification of the Final Supplemental Environmental Impact Report (EIR), adoption of the General Plan Amendment, and adoption of the Overlay Specific Plan, the comprehensive document that regulates land uses, development standards, and operational standards for the plan area.
As for the draft development agreement, the report to the City Council reads as follows:
“The Planning Commission is unable to recommend whether or not the development agreement is consistent with the general plan, because the commissioners hold the differing views regarding consistency with the general plan and were unable to reach a consensus.”
A development agreement functions as a contract between the city and the developer–in this case, Alagem Capital Group and Cain International. The agreement assures the developer that the city will not change pertinent regulations during the term of the agreement. In return, the city can extract certain demands from the developer as conditions of the agreement.
The draft development agreement presented to the commission was largely similar to a development agreement approved for a 2017 project at 9900 Wilshire Blvd., which is now part of the current One Beverly Hills site. That project, proposed by Chinese real estate and media conglomerate Wanda Group, fell through before Alagem and Cain snapped up the property.
One of the largest new terms in the development agreement stipulates that the developer will pay a $100 million public benefit fee to the city’s General Fund over the course of eight years. For comparison, Wanda Group agreed to a $60 million upfront public benefit fee in 2016–an eye-watering sum at the time.
“As far as the general plan, I don’t see any conflict with the development agreement and the general plan. I think it’s a wonderful project, as I’ve stated, and it’s a wonderful benefit for the city–not only the project, but the finances involved as well,” said Commissioner Andy Licht.
Not everyone agreed with Licht’s assessment, though. Chair Peter Ostroff did not mince words in offering his opinion on the agreement, which he said the Commission only received on Monday evening.
“It does provide extraordinary benefits to the applicant, not the least of which is allowing two towers that are more than six times as high as the 60-foot maximum for high density multifamily residential units in the city and at least twice as high as anything else in the city,” Ostroff said. “But when it comes to the benefits for the city, I am very, very disappointed.”
One condition of his approval, Ostroff said, was that the developer would have to either construct or arrange for construction of affordable housing “at least at the minimum level of 10 percent of the 340 proposed dwelling units, which is what is required by the city’s Inclusionary Housing Ordinance for everybody else.”
While he acknowledged that the $100 million fee is a considerable amount, Ostroff said the city would not see even $60 million until August 2027 given how the payments are spaced out. Ostroff said that he looked at the figure with former City Treasurer Eliot Finkel to determine its present value and calculated the actual worth at between a high of $81 million and a “more realistic number” of $58 million. “So, $100 million is not $100 million. It’s a lot less than that,” he said.
The most contentious element of the draft agreement was that the $100 million public benefit fee relieved the development of its affordable housing contribution.
Commissioner Myra Demeter worried that a lump sum contribution to the city would not actually find its way to affordable housing.
“I also understand the City Council’s need for flexibility and determining the way they use [the public benefit fee], but we do have also a mandate to produce affordable housing in the next eight years, and we have to make sure that that money, partially, is used for that purpose,” Demeter said.
Ostroff broke down his objection by asking what the developer would make by not having any affordable housing. At the 10 percent level required in the city, that would equal 35 units of affordable housing. “They would receive $184 million more if all 340 units were market rate than it would receive if it had to provide 35 affordable units,” he said. Ostroff pointed out that the city’s Inclusionary Housing Ordinance offers an exemption for smaller developments between five to nine units, which can pay an exemption fee of $105 per square foot rather than provide affordable housing. Even if the exemption applied to larger developments over nine units, Ostroff said that One Beverly Hills would have to pay around $107 million for affordable housing alone.
Ostroff said that these figures made a “powerful point,” namely, “that every person, any developer, however small, who wants to build a multi-family project in our city of more than four units must make provision for inclusion of affordable units, except for the developer of the biggest project in the city’s history. Everybody else has to deal with affordable housing, but this developer doesn’t under the draft development agreement that exists, and this seems to me to be more than a bit unfair.”
According to Ostroff, current City Treasurer Howard Fischer described the agreement as “a very poor deal” and “lousy.”
Given these issues, Ostroff said that he could not find the draft agreement in compliance with the city’s General Plan and he urged the Commission to vote to ask the negotiators to return to the table to rework the agreement.
Although Vice Chair Lori Greene Gordon also found the agreement lacking in terms of affordable housing, her objections differed slightly from Ostroff and Demeter. She found the dollar amount acceptable but felt that the public benefit fee should be earmarked for specific purposes. “I’m going to ask the developer to build [the affordable housing], but I’m asking for this money going to the city to be earmarked for it and the city can use city-owned land and bring in a developer that is experienced in this area to develop this kind of housing,” she said.
Defending the project, President of the One Beverly Hills Project Ted Kahan pointed to a five percent municipal surcharge that would apply to new Wilshire Building luxury hotel rooms and expand to the Beverly Hilton starting in 2030–essentially a higher Transient Occupancy Tax (TOT). Additionally, the city’s own economic study of the project calculated that the project would generate $2.5 billion in taxes and fees for the city. “It is an extraordinary amount and an extraordinary contribution from a single project, and I dare to say three times what the Wanda project was proposing to contribute to the city,” Kahan said.
Even without a recommendation by the Planning Commission, the question of approval now falls to the City Council. The City Council will have a series of special meetings on the project on May 20, May 25, May 27, all at 7 p.m. The development agreement will specifically be addressed in the May 27 meeting.
