The Los Angeles City Council is weighing a plan to issue a $30-million loan that would allow the owner of the Hollywood & Highland shopping mall to retrofit a theater so it can house a decade of performances by Cirque du Soleil.
CIM Group, which owns Hollywood & Highland but leases the Kodak Theatre within the mall, hopes to bring the acrobatic performances to the venue starting in 2011. In exchange for the loan, CIM and its partners would pledge to create at least 858 jobs, according to the proposal.
Council President Eric Garcetti has already thrown his support behind the loan, saying Cirque du Soleil will be a major tourist draw. "People will come to L.A. just for this," said Garcetti, whose district includes the Hollywood mall.
But Councilman Dennis Zine questioned the wisdom of putting so much loan money into a single project. With Sacramento lawmakers raiding city redevelopment funds to balance the state budget, neighborhoods are at risk of losing money for economic development projects, he said.
"If you take that $30 million and spread it throughout the city, then that $30 million could generate $100 million," said Zine, who represents part of the West San Fernando Valley.
The 12-year loan is scheduled to be discussed today by the council's Housing, Community and Economic Development Committee. Under the proposal, the loan would be provided to TheatreDreams LA/CHI, LP. CIM's Urban Real Estate Fund is part of that partnership, according to a CIM Group spokeswoman.
Officials with the city's Community Development Department, which is processing the loan request, estimate that the city has already invested at least $127 million in Hollywood & Highland. Working with the original owner and developer, the city spent $66 million on the construction of an underground parking garage and $32.3 million to acquire the land underneath the Kodak Theatre and help build it.
CIM Group, which bought the mall complex in 2004, has been trying without success to secure private financing for the Cirque shows, said Ninoos Benjamin, economic development director with the city's development department.
"Banks are not lending right now," Benjamin said.
CIM Group said the money would pay for alterations, including construction of a rehearsal center and a sub-stage 45 feet below the existing stage. The loan would come from the federal Housing and Urban Development Department under a program that requires that at least one job be created or retained for every $35,000 spent.
Benjamin said he did not have an analysis that explains the type of jobs that would be created by the Cirque shows. But CIM Group released a statement saying the events would create 858 jobs at Hollywood & Highland in the retail, restaurant and entertainment fields.
"The Cirque du Soleil show will be both a viable engine of activity that will protect the advances that Hollywood has made over the last 15 years and a flagship entertainment franchise for the city of Los Angeles," the statement said.
CIM Group has gone to the council seeking financial assistance with other development projects. The redevelopment agency voted in May 2008 to provide $14.3 million to help CIM Group build a shopping center in Mid-City that contains a Lowe's home improvement store.
The Lowe's portion of the project stalled last year after CIM Group saw part of its financing disappear in the economic downturn, said Andrew Westall, a senior deputy to Councilman Herb Wesson. However, the company could break ground within months if the cost of construction materials and labor continues its sharp decline, he said.
Redevelopment officials also agreed to provide CIM with a $4.35-million loan to refurbish the Reseda Theater into a dinner theater. Although work was supposed to begin last year, the construction has been pushed back to spring 2010, officials said. Once the project is completed, the city would turn ownership of the theater over to CIM Group, city officials said.
The average Cirque du Soleil ticket is expected to cost $110 per person, according to city officials. Under the agreement, the Kodak will host at least 368 Cirque shows per year. As long as average attendance reaches 60% to 65% of capacity, the borrowers would be able to repay the loan, Benjamin said.