Follow the Money: What the 8899 Beverly Developer is Paying the WeHo Council

UPDATE:  As of this morning, we’re at 63 percent of our goal of $5,500 in our Kickstarter campaign to fund an in-depth look at contributions to West Hollywood City Council candidates.  And the campaign ends in 24 hours!  If we reach our goal, the campaign is funded.  If we’re even a dollar short, Kickstarter closes the campaign without providing any funds to the Who Owns WeHo campaign.  So donate now if you want to know where the money is coming from for the upcoming Council election and who it’s going to.

A couple of weeks ago WEHOville launched a Kickstarter campaign to help us raise the money we need to take an in-depth look at who is funding the campaigns of those running for the West Hollywood City Council. With 12 days to go, we’ve reached only 22 percent of our $5,500 goal. We have, however, attracted some notable contributors such as Mayor John D’Amico, City Council candidates Larry Block, Mike Gerle and Lauren Meister and former Councilmember Lindsey Horvath.

Our expensive (and laborious) effort in 2012 to find where the money was coming from and who it was going to revealed that real estate interests were responsible for at least $217,000 in contributions — almost all to incumbents — in the last two City Council elections. That represents 30 percent of the $719,000 in contributions whose business connections our researchers were able to identify.

City vendors such as Athens Services, which recently convinced the City Council to extend its contract for 15 years without putting it out to bid, were a far distant second at six percent (and that’s not counting the donations Athens and others have made to Council member campaigns for countywide offices). But it adds up. All-in-all, the incumbents in the last City Council election got more than two-thirds of their campaign funding from people or businesses such as real estate developers and city vendors and billboard companies who don’t live in or own a business in West Hollywood but do want to make money here.

Do such contributions have an impact on the decisions our Council members make? There’s no way to know for sure. But WEHOville believes that reporting the contributions helps West Hollywood residents keep a sharp eye on their elected officials to make sure they understand that local residents and business owners —  not outside business interests — own WeHo.

Council members say they aren’t influenced by campaign contributions. But apparently real estate developers don’t agree. Consider the ever-evolving effort by Tyler Siegel and John Irwin, Beverly Hills developers, to get the Council to approve their project at 8899 Beverly Blvd. They and their family members and lawyers have spent thousands of dollars supporting West Hollywood Council incumbents — with Siegel and Irwin’s dollars flowing only after they bought that property in July 2012.

That’s no surprise considering the size of the gamble that Siegel and Irwin took. The men, former employees of the Related Companies, a New York-based real estate firm, spent a reported $40 million to buy the 49-year-old office building at 8899 Beverly Blvd. that is known as the former headquarters of ICM, the Hollywood talent management firm. At the time, the L.A. Business Journal described it as one of the largest acquisitions in recent years.

Siegel and Irwin had established their company only months before and already had made another big bet, buying up a two-and-a-half acre strip mall at the corner of Sunset Boulevard and Crescent Heights in Los Angeles with hopes they could get the City of Los Angeles to approve their plans to build 16-story and nine-story apartment towers and add more than 100,000 square feet of shops.

For the 8899 Beverly project, Siegel and Irwin’s Townscape Partners secured the backing of Angelo Gordon & Co., a New York City real estate investment firm that describes its mission as “exploiting inefficiencies in selected markets and capitalizing on situations that are not in the mainstream of investment opportunities.”

8899 Beverly is a good example of such a “situation.” Built a couple of decades before West Hollywood was established as a city, the building as it stands is seven stories taller than the limit the city now has set for such properties in that area. A developer who wanted to make any substantive changes would have to bet that he could convince the West Hollywood City Council to make a special change in its general plan, a overall development plan adopted by the Council in 2011 with much public input, and also change the zoning for the 1.7 acre lot.

Townscape Partners could have spiffed up the existing building and continued to rent it out. But with commercial brokers quoting gross rents for the building that would total only $3.8 million to $4.4 million a year (and that’s before operating expenses), it’s not likely that, even with an upgrade, 8899 Beverly would have yielded the return that an investment firm like Angelo Gordon & Co. is looking for.

So therein lies the gamble that Siegel and Irwin have decided to take. If Townscape can nearly double the size of the 90,000-square-foot building and sell it off as condominiums, which by some estimates are going for as much as $600 a square foot in West Hollywood these days,  it likely will gross more than $100 million.  That’s a nice return even after construction and redevelopment costs are factored in.

But how does one get an elected body like the West Hollywood City Council to set aside the general plan into which city staffers and local residents put so much work, and also to change the zoning, to accommodate an out-of-town developer? Townscape decided to follow the same path that other out-of-town real estate developers have. It quickly joined the West Hollywood Chamber of Commerce, whose president has spoken before the City Council in favor of the project. And it began doling out money to the political campaigns of Council incumbents.

Last year, Townscape gave $2,500 to a committee established to fight what turned out to be a successful effort to limit incumbent City Council members to three terms in office. Except for small contributions from the Sunset Tower hotel and Councilmember Abbe Land, that committee got all of its $14,000 in funding from outside developers and the lobbyists and lawyers who represent them. Siegel, Irwin and family members also donated $8,000 to Councilmember John Duran for his last City Council race and for his unsuccessful race this summer for the 3rd District Seat on the L.A. County Board of Supervisors. And Siegel gave the maximum individual donation of $500 to Jeffrey Prang’s Council campaign, as did Irwin. Jeff Haber, an attorney with Paul Hastings, which represents the partnership of Townscape and Angelo Gordon, has made the maximum individual donation of $500 to each of the Council incumbents in the past two elections and $500 to Mayor John D’Amico in the 2011 election.

Whether that money will buy the Council’s support remains to be seen. But it’s worth noting that, while the Planning Commission followed a well-reasoned recommendation by the city’s Community Development planning staff to reject the proposed 8899 Beverly expansion, the City Council still is on the fence about it.

At its Sept. 23 meeting, Councilmember John Duran gave the project his whole-hearted support. Councilmember Prang praised it. Mayor John D’Amico spoke against it. Councilmembers Abbe Land and John Heilman, who like D’Amico are facing re-election in March, wavered. The Council finally asked city staffers to discuss with Townscape the possibility of somewhat reducing the size of the project, whose existing building already is larger than permitted, and to assess the benefit of several million dollars in amenities that Townscape tossed into the public kitty at the last minute.

Will Siegel and Irwin’s $40 million gamble pay off? Will the thousands they and their family members and representatives donated to our City Council members help them get millions of dollars in return? The goal of WEHOville’s Kickstarter campaign is to help residents and local business owners in West Hollywood make an educated guess about that and similar efforts by telling you where the money is coming from and who it’s going to. Please consider a donation before Oct. 25 of any amount so that we can continue that effort. You can reach our Kickstarter campaign online to donate. And please let the candidates you’re supporting in the upcoming Council race know that a contribution by them would be one way to show that they believe West Hollywood should be owned by the people who live and own businesses here.