In the last decade, the upscale Los Angeles neighborhood of Westwood Village has lost some 200 hotel rooms as the handful of small hotels that once called the area home were replaced by luxury condos and apartment buildings.

Commercial real estate developer Kam Hekmat wants to reverse that trend by building a 250-room, luxury hotel in Westwood Village, the retail district between Wilshire Boulevard and the campus of the University of California, Los Angeles.

If all goes according to plan, it would be the neighborhood’s first newbuild hotel in about four decades.

Wilshire Gayley buildingHekmat, whose company, Indivest, owns two office buildings along Westwood’s Wilshire Corridor, is proposing a four-star hotel to be called the Gayley at Wilshire, on a lot that formerly housed a video store and a gas station.

Hekmat’s real estate investments in Westwood Village date to the early 1970s but do not include any hotels. To tackle the project’s design, he has hired New York-based Robert A.M. Stern Architects, whose hotels include Dallas’ Residences at the Ritz-Carlton and Atlanta’s Mansion on Peachtree.

The Gayley at Wilshire would complete a triangle of upper-end hotels in Westwood, joining Starwood Hotels & Resorts’ 258-room W Los Angeles Westwood at the northeast end of the Village and Kimpton Hotels’ 264-room Palomar a couple blocks east of the Village.

The area’s retail district was once famed for its dozens of theaters and frequent movie premieres, but its popularity as an entertainment destination has ebbed and flowed over the past couple of decades.

“It would revitalize Westwood Village, which is my home,” Hekmat said. “I think it’s needed in Westwood badly.”

Hekmat appears to have ample financial incentive to make the investment. Bruce Baltin, senior vice president at PKF Consulting in Los Angeles, said the average daily rate of hotels in West Los Angeles and Beverly Hills is expected to increase 6.3% this year, to $270, while occupancy will rise 3 percentage points, to 75%.

In fact, the city as a whole has benefited from an increase in both leisure visitors and business travel.

Los Angeles-Long Beach hotel revenue per available room for the first six months of the year rose 12.7%, the fifth-fastest growth rate among the country’s 25 largest hotel markets, research firm STR reported last month.

“There’s no reason the market shouldn’t be able to handle it,” Baltin said. “It’s still a pretty healthy market, and we have very little in the pipeline at this point.”

In addition to his hotel inexperience, Hekmat faces another stiff challenge: The only space available for it is a narrow, triangular lot that comes to a point at one of the busiest intersections in Los Angeles.

To work with such an odd-shaped plot, Hekmat and Stern Architects are proposing a building similar to New York’s iconic Flatiron Building.

The developer declined to reveal who will operate the property, saying, “Once we get further down the road, I’ll be investigating the best boutique operating systems and management companies.”

Hekmat is also pursuing financial help from the city of Los Angeles, in the form of a reimbursement of the transient occupancy taxes the hotel generates until it can turn a profit.

Hekmat wouldn’t disclose specifics, but with room rates possibly in the $400 range, occupancy at about 70% and Los Angeles’ hotel tax at 14%, that could mean that the city could reimburse the developer as much as $3.5 million annually.

Hekmat declined to say how much it would cost to build the hotel or when he would break ground, though he did estimate that construction would take 18 to 24 months.

In May, Pebblebrook Hotel Trust bought the 237-room Mondrian Los Angeles in nearby West Hollywood from Morgans Hotel Group for $137 million. At a cost of $578,000 per room, the Gayley at Wilshire would cost about $145 million to build, though PKF’s Baltin said that figure “could be on the high end.”

Hekmat is already a veteran player in the neighborhood. He developed Wilshire Boulevard’s 360,000-square-foot Center West office building, two blocks east of the proposed hotel site, in 1989 and acquired the 250,000-square-foot Murdock Plaza a block away in 2007.

In addition to the 200 or so hotel rooms Westwood Village has lost over the past decade, other nearby high-end rooms could soon be lost with the redevelopment of Century City’s iconic Hyatt Regency Century Plaza less than three miles away. The owners of that property are proposing to reconfigure the hotel’s 726 rooms into 394 rooms and 63 condominiums.

Wilshire Gayley renderingStill, Hekmat will face some serious competition:

• Westwood’s W was previously a senior citizens’ home, then the Westwood Marquis hotel before Starwood upgraded the property and rebranded it in 2000.

• Another nearby luxury property, the Palomar, was built in 1972 as a Holiday Inn.

• The Luxe Sunset Boulevard hotel in nearby Brentwood opened seven years ago.

• The market will expand further when the 103-room Hotel Bel-Air reopens in October after a two-year renovation.

Even so, W Westwood’s general manager, Ren Hinrose, asserted, “There’s still a lot of space. We’re not at where we were four or five years ago.”

Besides, Hinrose said, a new luxury hotel would bring further “excitement” to the Westwood. Nor does he see Hekmat’s lack of hotel-development experience as an obstacle to the new project.

“Kam Hekmat is a very astute businessperson,” Hinrose said. “I never discount what he’s going to do.”


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