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CMA
June 01, 2018  

Related Team Seeks Financing for LA Project

A Related Cos. joint venture is seeking a $456 million loan to finance the construction of a long-planned mixed-use complex in Los Angeles.

The floating-rate loan would fund the hotel and retail portions of the $1 billion-plus project, on South Grand Avenue, across from the Walt Disney Concert Hall. The joint venture is pitching the assignment to lenders directly, without using a broker.

Related and its partner, China-backed CCCG Overseas Real Estate, plan to separately finance the complex’s residential component via a $308 million offering of tax-exempt bonds. Those securities would be backstopped by a letter of credit from one or more banks.

The project, in the works for many years, has been repeatedly shelved. Local officials awarded the development mandate to New York-based Related in 2004. Plans inched along, but the recession of 2008 delayed construction for several years.

In 2013, architect Frank Gehry was chosen to redesign the complex. Gehry had also designed the Disney concert hall, which was completed in 2003 and is the home of the Los Angeles Philharmonic.

Last year, CCCG Overseas Real Estate pledged $290 million of equity for the project. Though based in Singapore, that company, also called CORE, is an affiliate of one of China’s largest state-owned companies.

The project, dubbed The Grand, will encompass a 314-room hotel; a 39-story residential tower with 323 apartments and 113 condominiums; and some 200,000 square feet of retail space that would include a 450-seat theater, shops and restaurants. About 20% of the apartments would be set aside for lower-income tenants.

Gehry’s latest design, filed in January, calls for a hotel and residences in separate buildings, with an open area in between. Several lower floors of each building would have landscaped terraces with restaurants and stores. Construction is scheduled to be fully under way later this year, with completion estimated in 2022.

The site, currently used for parking, is on the block bounded by South Grand Avenue, South Olive Street and West First and Second Streets. Los Angeles County owns the underlying ground, which Related leased a few years ago.

Market pros said that lenders would have to get comfortable with the project’s moving pieces. In addition to the construction loan and tax-exempt financing, the Related partnership plans to line up foreign capital via the federal EB-5 program. Also, the site is a bit removed from the central downtown area near Staples Center, where development has been focused over the last decade. What’s more, some lenders cited a recent slowdown in construction proposals because of concern about the sustainability of leasing demand following the construction boom of the past five years.

In 2014, Related completed the 271-unit Emerson luxury apartment tower at 225 South Grand Avenue, one block away.