As the Wilshire Grand inches toward completion, lawmakers are gearing up to funnel $60.8 million of tax incentives toward helping South Korean developer Hanjin International with its financing gap.
Last month, the City Attorney’s office drafted the creation of a trust fund for the 73-story skyscraper, according to city documents.
The city originally agreed to a $54 million tax break package for the mega-development in 2011. But since then, the developer tweaked several components of the project, such as consolidating two towers into a single 1,001-foot tall behemoth and increasing the number of hotel rooms from 650 to 889.
Most recently, Hanjin confirmed the construction of 400,000 square feet of commercial space in hotel tower, which qualified the development for an additional $6.8 million in incentive payments, which City Council unanimously approved in late 2016.
The city routinely doles out tax incentives for Downtown Los Angeles developers, who argue that large-scale hotel projects in the district are impossible without city subsidies, said Mitch Hochberg, president of the Lightstone Group, the developer behind Fig+Pico. The 1,001-room hotel is one of L.A.’s biggest proposed hotel developments and would rise at the corner of Figueroa and Pico Boulevards.
The cost of land and construction Downtown is too high to turn a profit without subsidies, Hochberg said.
“For quite a while, no one built any hotels Downtown,” he told The Real Deal in August. “You couldn’t make any money doing it.”
But more than a decade ago, that began to change, when AEG secured a whopping $270 million tax break package from the city for its L.A. Live development — setting a precedence for decades to come. Between then and 2014, hotel developers have been awarded as much as $508 million in tax benefits, the Los Angeles Times reported.
Last June, Related Companies landed a $198.5-million financial aid package for its Frank Gehry-designed hotel project across the street from the Walt Disney Concert Hall.