Legal Battles Threaten Arts District Development

Mark Tarczynski is an EVP at Colliers International.0

LOS ANGELES—Arts District development could be on pause for at least two years, according to Mark Tarczynski , EVP at Colliers International . A series of lawsuits filed against the city and the former Arts District BID over the past several years have disrupted and are continuing to disrupt development in the submarket. Developer Yuval Bar-Zemer has been at the forefront of the debate, calling for an Arts District Specific plan and criticizing recent development plans put out by the city. At the end of last year, he and other Arts District stakeholders clashed over the Hybrid Live/Work development ordinance. Tarczynski says that the disagreements over development in the market could stall projects for years. “The government put an overlay zone on development in the Arts District that was supposed to make development easier, but that is being blocked by a lawsuit filed by individual stakeholders that aren’t happy with the overlay zoning,” Tarczynski tells GlobeSt.com. “There are a lot of people that want to keep the Arts District quaint with a lot of razor wire and graffiti, and the way that it is. Those people think that this overlay zone, which allows for easier development, will totally change the character of the neighborhood. If you are not entitled and under construction today, you are basically stopped until this lawsuit is settled. The way we look at it, development is stopped for two years.” According to Tarczynski, the overlay plan was meant to assist developers in getting entitlements, but many of the pioneers in the market thought the ease allowed developers to build projects that are inconsistent with the texture of the market, like One Santa Fe, which recently traded hands for $200 million. “The overlay zoning was designed to assist in getting entitlements, because most of the land in the Arts District is zoned M1 or M2, making it difficult or impossible to develop any kind of multifamily housing,” explains Tarczynski. “The overlay has resolved that, and it did put some restrictions on look and height, but apparently some people felt that those restrictions were not enough for the neighborhood stakeholders.” While these legal battles could stall development, Tarczynski says that developers will return once the issues are resolved. “Once that lawsuit is over, there will be more room for future development,” he says. “Capital seeks higher returns, so if in two years things are resolved and there is still demand, then capital will go there. I don’t think that people won’t return to the Arts District. However, in two years, a lot can happen. Who knows where the economy is going to be; who knows what the multifamily demand is going to look like? I am afraid that this two-year hiatus has the potential to stall growth than longer for two years.” Bar-Zemer was one of the first developers in the Arts District, but Tarczynski thinks that the change would ultimately be good for his properties. “He was one of the first developers in the area in the Nabisco Loft and Toy Factory Loft, and he was very successful,” he adds. “He is afraid that the new developments will change the character of the neighborhood, which they will, but they will change it for the better.” This is a dispute to keep an eye on.