Planning Commission Rejects Korman Appeal

With a unanimous vote, West Hollywood’s Planning Commission ruled Thursday night that the AKA West Hollywood at 8500 Sunset Boulevard is operating as a hotel and not a luxury residential apartment building, as its owner contends.

The property was not approved for a hotel or “temporary lodging” and is therefore in violation of the city’s zoning ordinances and the project’s approvals and subject to potential fines.

The key issue of contention during the three-hour hearing was the fact the city’s zoning ordinance fails to expressly define “long-term basis.” City staff presented an argument that long-term is one year, but AKA West Hollywood offers leases on its furnished apartments starting at 31 days in length.

Eric George, an attorney representing AKA, said the typical renter of an AKA apartment is someone going through a divorce, families whose homes are being renovated, or actors/musicians/artists in town for work.

During public comment, resident Victor Omelczenko pointed out that several large apartment buildings in the city, including the Dylan, the Huxley and the Avalon, offer one-month or two-month rental options on their websites, as well as longer rentals.

However, those seem to have flown under the radar, whereas AKA West Hollywood is more obvious since the AKA brand is known for operating luxury, extended-stay hotels in several major cities across the country, including the 88-unit AKA Beverly Hills. AKA also operates some “serviced apartment residences” in areas which are not zoned for hotels, such as the 110-unit one in West Hollywood.

City staff pointed out AKA is behaving more like a hotel than an apartment due to the fact it offers maid service and a concierge, something associated with hotels, not residential units. Staff also noted both Google and Yelp classify AKA West Hollywood as a hotel. They also showed that a charity is auctioning off a three-night stay at AKA West Hollywood.

Attorney George, of the Century-City based Brown George Ross law group, noted the units at AKA West Hollywood are 700 to 1,000 square feet, whereas a typical hotel room is 350 square feet. He also pointed out that each unit has a washer and dryer, as well as full kitchens. People renting units must sign detailed, multi-page leases and wait 48-hours before check-in. Renters are subject to a credit check, must pay a full month’s rent in advance and if they leave before the end of the 31 days, they do not get a refund.

However, Commissioner Adam Bass said, as an experiment, he rented an AKA studio unit online (and later cancelled), was only asked for 15-days rent, and was not required to provide information for a credit check. The total for a one-month stay was $9,405, coming out to about $300 a night.

City staff noted the city always intended the property to be residential units, pointing out that the 2005 development agreement for the property at the southwest corner of Sunset and La Cienega boulevards included a “density bonus” and required the property to have “affordable units” for low-income residents, two things associated with residential units, but not hotels.

“When this project was entitled, it was understood it would be for housing,” said Commissioner Sue Buckner. She noted that in 2005, when the development agreement was approved, “short-term basis” and “long-term basis” didn’t need to be explicitly defined since vacation rental companies like Airbnb did not exist.

The city banned vacation rentals in residential apartment buildings in March 2018. Similarly, the city banned corporate rental housing in Feb. 2017.

The Los Angeles-based CIM Group built the property with two nine-story towers, but Pennsylvania-based Korman Communities and New York City-based Brookfield Properties jointly purchased the lot in June 2017.

The project’s east tower, the one closest to La Cienega, includes 80 residential units which Brookfield is renting as unfurnished apartments with one-year leases. The west tower, along Sunset Boulevard, which includes 110 residential units, is the one in dispute.
The commissioners were particularly disturbed to learn that Korman and Brookfield did not notify the city of its intention to buy the property prior to the sale.

Jonathan Moore, a managing director for Brookfield, reported that the CIM Group did not want the city notified until completion of the sale. Moore said Brookfield was excited to be a part of city as “special and unique” as West Hollywood.

Commissioner David Aghaei asked why they would spend $300 million on a property without first checking whether the use as an extended stay hotel was allowed.

Attorney George reported that two different law firms read the development agreement prior to the purchase and they saw no problem with the plan.

The Commissioners were also disturbed that the Environmental Impact Report (EIR) only examined the project as a residential building, noting the impacts for a hotel would be very different.

Also troubling was the fact that the 11 required “affordable units” in the west tower were not yet assigned (the eight affordable units in the east tower are occupied) and that Brookfield was requesting to move those 11 units into the east tower. A Brookfield representative said the east tower units are larger and unfurnished, noting people often want to bring their own furniture to their new apartment.

The Brookfield representative reported that Peter Noonan, the city’s acting director of the Human Services and Rent Stabilization Department, suggested waiting to assign the affordable units in the west tower until this matter was settled. However, Noonan was not present at the meeting to confirm that statement.

During public comment, several residents feared approving AKA for as an extended-stay hotel would set a precedent and open the door for other apartment buildings to follow suit.

Resident Elyse Eisenberg said the city does not need another hotel on the Sunset Strip, but does need more residential units. Resident Joyce Heftel noted that AKA is not paying transit occupancy tax and “not adding to the neighborhood.”

Managers of many of the major hotels in town were present at the meeting and also sent letters contending that AKA was operating as a hotel. Those hotels include the Ramada Plaza Hotel, the London West Hollywood, the Chamberlain West Hollywood, Le Montrose Suite, Petit Ermitage, the Andaz West Hollywood, the Jeremy, the Mondrian LA, the Standard Hollywood and the Sunset Marquis.

Speaking for that group of hotel managers, John Douponce, general manager of the Chamberlain, said, “If you open this to short-term rentals, it will never close.”

Commissioner John Altschul noted the entire matter was an issue of semantics. He expressed hope that the city and Brookfield can reach a settlement before the matter goes to court, something that will cost millions of dollars.

However, before it goes to litigation, AKA can appeal the Planning Commission’s decision to the City Council.

After the meeting, Eric George told WEHOville that the contract was lawfully written and Brookfield stands by it.

“AKA’s 8500 Sunset project is a win for all components of the West Hollywood community, including the growing sector of artists and others interested in multi-month rentals,” George said.

“AKA has scrupulously followed the law and the terms of the development agreement with the City. We are therefore disappointed that the Planning Commission voted against the project, and in so doing effectively amended the city code to forbid all West Hollywood multi-month rentals that are a month or longer, but less than a year in length. This project has been in the works for some 20 years and AKA remains committed to seeing this project through.”

The project, originally known as the Sunset Millennium, was first approved by the City Council in 1999 as a hotel-office-retail complex to be developed in three parcels. In 2005, the project was altered to include a residential component with 190 units in two towers on the middle of the three parcels. Those 190 units were approved to be sold as condominiums.

In 2011, the CIM Group purchased the project after the City Council agreed to reduce the required public parking spaces by approximately 375 spaces and eliminate a tunnel under La Cienega connecting the parking garages on each side of the street, plus allow the 190 residential units to be rented as apartments.

Commissioner Lynn Hoopingarner noted that if that change from condominiums to apartments hadn’t been approved, this matter would never have arisen.