Will Korman’s AKA Residences Gamble Win in WeHo? (It Did in Beverly Hills)

Korman Communities has claimed it didn’t know that existing West Hollywood law would bar it from renting out on a short-term basis 190 apartments in the two buildings at 8500 Sunset Blvd. that it purchased last year and that are valued at a reported $250 million.

Now Korman has to figure out how to respond to a decision last week by the West Hollywood Planning Commission. The Commission rejected an appeal by Korman of a ruling by interim city Planning & Development Services Director John Keho that Korman’s rental of furnished units in one of those buildings for as few as 31 days is illegal. That building contains 110 units. The other building’s 80 units are being rented as conventional unfurnished apartments.

West Hollywood permits the short-term rental of a room in a single-family home whose owner is present. And it completely bans the sort of corporate short-term rentals that are Korman’s business.

Given the money Korman has put into the project, an appeal of the Planning Commission’s decision to the West Hollywood City Council seems likely.

Korman found itself in a similar situation in 2012 in Beverly Hills. But in that situation, Korman didn’t claim ignorance of the city’s zoning requirements. Korman purchased an 88-unit building at 9355 Wilshire Blvd. and 155 N. Crescent Dr. and turned those apartments, with tenants who typically signed one-year leases, into housing for corporate executives or wealthy celebrities who would be in town for at least a month. That met the requirements of Beverly Hills, which deemed short-term rentals those of fewer than 30 days.

Then Korman quickly reached out to the Beverly Hills Planning Commission and City Council, asking that it be permitted to rent apartments for as few as seven days. The City of Beverly Hills granted Korman’s request, effectively making what once was an apartment building into an Airbnb for the wealthy, where units now rent for as much as $1,000 a night for a minimum of seven days in a building that includes a 24-hour resident service team, a high-tech fitness center, a full-service business center with executive boardroom and free high-speed Internet access, a lounge, a cafe, en-suite dining, same-day valet dry-cleaning and laundry service.

Beverly Hills’ rationale? According to documents from the Beverly Hills Planning Division, the property sat in a mixed-use zone, which is what allowed it to contain both residential and commercial space, and thus converting to short-term leases wouldn’t have an inordinate impact on nearby residences. The Planning Division also saw it as an innovative approach to housing in an era when short-term rental services such as Airbnb and VRBO were growing rapidly.

While it approved the Korman AKA Residence, the Planning Division proposed more tightly regulating short-term rentals in single-family and multi-family neighborhoods, essentially banning there what it was permitting at the AKA Residence.

“On November 12, 2013, VRBO listed 73 vacation rentals in Beverly Hills, approximately 45 were described as single family residences including 28 houses, 7 villas, 1 castle, 1 country house, 2 bungalows, and 6 estates,” said a report from the Planning Division. “The remaining appeared to be multi-family in nature.”