The developer of the Grand Avenue project in downtown Los Angeles said Monday that completion of the $3-billion redevelopment effort will be delayed until 2012 because of difficulty in obtaining construction loans amid the real estate downturn.
The Frank Gehry-designed high-rise project is seen as a linchpin in downtown's revitalization, and the delay is the latest sign that the loft and condo craze in the city center is cooling off.
Grand Avenue was originally supposed to begin construction last fall, but that date has been pushed back several times.
The project's first phase -- which includes a shopping center, a hotel and two residential towers -- was once slated to be completed in 2009, but officials at Related Co. now say 2012 is a more likely target.
Bill Witte, head of Related California, said he now believes that construction will begin in the first quarter of 2009 and emphasized that the project is not in any jeopardy. A fund controlled by Dubai's royal family has invested $100 million, and Related is close to naming another major equity partner (an earlier partner, the California Public Employees' Retirement System, pulled out, saying it was over-invested in the downtown real estate market).
But even with the equity, Related has yet to secure a construction loan.
"Nothing else has changed," Witte said, adding that finalizing a construction loan is "not likely in this climate until the beginning of next year."
Grand Avenue is one of several mega-developments around the nation that are in trouble because of the credit crunch. In Seattle, developers recently shelved plans for a $7-billion development downtown, citing the poor economy. Huge projects in Las Vegas, Phoenix and New York have also been scaled back or delayed, including part of the Gehry-designed Atlantic Yards in Brooklyn and a $14-billion development of the area around Penn Station.
"All major projects -- no matter where you are in the U.S. -- have this same problem," said Jack Kyser, senior vice president and chief economist for the Los Angeles County Economic Development Corp. "People are very cautious about lending money, no matter how good the business plan may look."
The delay has caught the attention of city leaders, some of whom say they are watching Grand Avenue's fate closely.
"There's a lot riding on it for downtown," said Councilwoman Jan Perry, who represents the area.
