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Rising Construction Costs Boost Price Tag for Grand Avenue Project

Developer says that 40% hike won't `significantly' alter architect Frank Gehry's design.

September 21, 2006|Scott Timberg | Times Staff Writer

Despite what it says is a nearly 40% increase in construction costs for phase one of the planned $1.8-billion Grand Avenue project in downtown Los Angeles, the developer said this week that the hike is unlikely to "significantly" affect the design and will probably only modestly expand the budget.

The main effect of rising costs, said Tim Carey, a senior vice president in developer Related Cos.' Los Angeles office, will be a tighter belt at his company and a search for more efficient means of construction. Although he declined to elaborate, he acknowledged that it could mean a more modest design from architect Frank Gehry, whose plans for phase one include a 47-story glass-curtained tower east of Walt Disney Concert Hall, with boutique hotel rooms and condos -- in the architect's trademark sculptural style. The plan also includes a second, less elaborate 25-story residential tower.

Gehry's office declined to comment and directed a reporter's queries to Bill Witte, president of California projects for the New York-based developer.

"We're trying to finalize this with Gehry right now," Witte said. "The changes will, if any, be in degree and not absolutes. There's no one thing that fixes your costs."

The Grand Avenue plan is an unusual public-private partnership initiated by a number of local businessmen, including Eli Broad, who, like the architect, referred inquiries to Witte. Broad is chairman of the Grand Avenue Committee.

Witte said his company is facing "the same issue that everybody is confronting now," with prices for materials, especially steel and concrete, going up. He added that "a hidden part is that the construction business is so busy, so you don't get competitive bids."

The mixed-use project's first phase was budgeted at $750 million in 2003. Carey said the budget for phase one, as well as for the entire project, is likely to increase modestly, but by how much is not clear. He said that when Related Cos. goes before the city and county next year, most likely in spring, just before the start of construction, it will present a revised budget.

He added: "We're not changing the program. We still have two towers with 400 market-rate units and 100 affordable apartments, a 275-room hotel and 300,000 square feet of retail and a 1,500-car parking structure."

Carey said the same increase in construction costs is affecting projects around the world, especially in areas where real estate prices are still rising and new projects are booming.

Even so, he said he doesn't expect consumers' costs for condos or hotel rooms to change substantially because they are set by the market. "We're not going to be able to simply raise our prices because our costs get higher."

More efficient engineering, especially in the project's structure and parking design, can make the project less expensive, Carey said. "We're making some really good progress. But I think everybody's facing it."

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