Los Angeles landmark-designated Century Plaza Hotel was purchased in 2008 with plans to build two towers, renovate the hotel, and offer 100,000 square feet of retail space. 900 EB-5 investors contributed $450 million into project, which is still unfinished. But this project — and perhaps all mega developments in big cities — faces challenges because of COVID-19 that may impact that market going forward.
Twelve years into the purchase of the Century Plaza Hotel, there may be bigger questions than answers for the luxury Los Angeles development, backed by substantial EB-5 money. Long before the pandemic crippled the world economy, the site area was highly coveted for both commercial and residential interests. But the developers struggled to get not only plan approval but financing. They eventually obtained approval for plans in 2013 and found the capital to start building — include a whopping $450 million from 900 investors.
The project achieved $300 million in pre-sales — normally a very impressive number — but $1.5 billion in condos still need to be sold. While industry experts point to the fact that sales pick up as a development nears its end, a couple factors may throw a wrench in the sales plans: COVID-19 being a big one.
Though the crisis hasn’t halted construction, the virus could substantially change the future of the Los Angeles residential market. The Century Plaza’s target is affluent older people; in the past, this demographic enjoyed condo living but since the pandemic struck, many of these people may no longer be confident in high-density living in a huge city.
“Covid’s not helping,” says Mike Leipart, a longterm new-development agent. “But it’s a long race, and whatever happens on one mile of a marathon is not going to be make-or-break.” Still, for a development asking $2,500 per square foot, and whose main selling points include a mall under the condos, as well as top-notch condo amenities, many wonder if this luxury project will still have the same interest it had in the pre-COVID-19 world.
While the steep price-tag and the pandemic present serious questions for the residential element of the development, the commercial future of the project is far from certain. 100,000 square feet of retail space remains ominously empty for now. While sources indicate there is some retail interest, nothing is firm as the projects gets closer to the finish line.
Big real estate developments in big cities were once considered the safest of EB-5 investments. This Los Angeles project ticks all the traditional boxes: Over $1 billion in financing. A 394-room hotel. 331 condo units. 100, 000 square feet of retail space.
But in a new world defined by a killer virus with no cure, these big numbers might all be reduced to just one big question: Can a mega-luxury project in a densely populated city like Los Angeles still be viable?
Many people, including 900(??) EB-5 investors, are praying the answer is yes.
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