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The Real Deal Los Angeles

Sunset Blvd complex owners demand WeHo pay $40M

Damages claim follows council vote that Korman Communities was violating rental ban
September 14, 2018 04:17PM

John Duran, Mayor of West Hollywood and 8500 Sunset Boulevard

The City of West Hollywood could be headed for litigation unless it can settle a conflict over short-term rentals at a tower on Sunset Boulevard.

This week, the owner of the towers called “AKA West Hollywood” filed for $40 million in damages, claiming WeHo was discriminating by prohibiting “hotel” use at its 8500 Sunset complex.

The claim was filed after the city council voted on Sept. 4 to reaffirm its stance that the owners were in violation of approved operations. The city council will likely deny the payment, and it could lead to litigation if the matter is not settled, according to a report from WeHoville.com.

The owner of the building, BPREP 8500 Sunset LLC, is controlled by Korman Communities and the Brookfield Property Group. They contend that the city’s decision creates a precedent that no unit can be rented for less than one year, and that the determination is “discriminatory, arbitrary and capricious” because it targets BPREP.

The company bought the property from CIM Group in June 2017 for approximately $186 million, The Real Deal reported. Soon after, city officials learned that Korman was operating the building as “an extended stay hotel” named “AKA West Hollywood.” In June 2017, officials notified Korman that those short-term corporate rentals had been banned in the city.

In their response, Korman and BPREP explained their intentions to comply with the law by renting their 80-unit east tower with one-year leases, and its 110 market-rate units in the west tower on extended-stay basis of more than 30 days.

But in November, city staff found that the units were not being rented on a “long-term basis” and still in violation. Korman appealed that decision to the city council, which voted on Sept. 4 to deny the appeal.

The claim filed this week will be reviewed by the city attorney and presented to the city council at a future meeting. [WEHoville.com] — Gregory Cornfield