A New Lease on Life for an Old Hotel

Rob MacLeod strides through his mahogany and marble lobby, pointing out fluted pillars, etched glass, arched windows--stately spaces that once enclosed gourmet diners and the hottest nightspot in town, the Zebra Room.

Hope, Crosby, Gable, Grable, John Wayne, Liz Taylor. All were seen there through the years--dining, dancing, smooching or swimming in one of L.A.’s first Olympic-size pools, named for Esther Williams because she splashed there so often.

This historic, 14-story, stone-and-brick structure on Wilshire Boulevard near downtown was originally a residence for the rich. Then it was a luxury hotel, operated first by Hilton and next by Sheraton. Its elegantly proportioned rooms have high ceilings, huge windows, decorative moldings and other Old World amenities, including a fireplace in every living room.

When you think of affordable housing for poor families, this is not the kind of place you might imagine. The city’s housing sages couldn’t imagine it either. When MacLeod proposed to rehabilitate the old hotel for families with low incomes, they belittled the idea. Poor families are like everyone else, the authorities said. They don’t want vertical housing, no matter how handsome. They want fresh air, grass, an outside place for kids to play. They won’t even apply to rent apartments in a high-rise.

But MacLeod, a developer, was the only one willing to try and save the doomed historic structure, so officials decided to give him a shot. And they soon learned they’d been wrong about the building’s potential. When the office opened for applications, 5,000 people showed up to rent the 142 newly refurbished apartments.

In December the place celebrated its official reopening, as the MacLeod Townhouse, with apartments from 900 to 1,400 square feet, and monthly rents from $400 to $700. It is an experiment in progress--one that cost about $26 million--and is still controversial. But MacLeod, dubbed a visionary and an artist by some who’ve worked with him on the project, seems to be winning converts.

It all began benignly enough, says MacLeod, 56. He was sipping coffee at his Malibu beach home a few years back, brooding about his divorce, looking for something absorbing to do. Things were slow in real estate that year. MacLeod picked up the newspaper and read that the Sheraton Townhouse, a once-grand hotel, was doomed. “It was about to be demolished, literally slated to become a huge parking lot. City officials and preservation groups were at their wits’ end. They wanted to save the building, but they don’t know what to do with it--or how.”

Having been a real estate developer for most of his business life, MacLeod knew the what and the how, he says. He also knew there was a tremendous lack of affordable family housing in the neglected center of the city, especially near Lafayette and Macarthur parks. He could provide such housing by rehabbing this faltering old hotel.

He knew it wouldn’t be easy. But MacLeod isn’t a humble guy. He believed he had the brains, the guts and the deal-making savvy to get the job done. “I decided to do it as divorce therapy,” he says. “If I knew then what I know now, I might not have gotten involved,” he adds. Now there is no turning back.

City Councilman Nate Holden, in whose district the Townhouse sits, admits he was dubious of MacLeod’s plan. “I thought you should not put children in a high-rise. I didn’t want them running through the halls, hiding in elevators, causing havoc because they were cooped up in a huge building with no fresh air and no place to play. A high-rise is no place for little children to lead good lives.” Holden’s opinion was echoed by others in government and elsewhere--people who knew that vertical projects in other cities had become infamous crime-infested slums.

MacLeod knew the old script. But he had newer evidence to the contrary, he said. Those old-style projects were built with no humans in mind. There are newer high-rise, low-income buildings in San Diego and San Francisco that are quite successful. And his would be even better than those, he predicted.

“It will become the premier low-income development in the West--a place with fabulous, fabulous rooms, dedicated to a fine quality of life. It will offer amenities unavailable elsewhere, and its good people and their good vibes will radiate to enhance the entire Lafayette Park neighborhood. When you put good people in, they drive bad people away,” he still says earnestly, as if quoting Scripture. He saw it as his chance to do something “challenging and good.”

In addition to their doubts about vertical housing, bureaucrats in the city’s various offices are not partial to such highfalutin, self-congratulatory speeches. They were probably especially leery of the kind of East Coast, fast-talking cowboy who comes driving into the inner city from his Malibu digs, Jaguar convertible top down, clothes like well-worn lvy League leftovers--or Ralph Lauren’s faithful reproductions thereof. Some city fathers and mothers admit they gave MacLeod (a Dartmouth and USC business school graduate) a hard time--although he was their only hope of saving the huge building from imminent demolition.

“To let the building be razed would have increased urban blight, would have further ruined an already deteriorating neighborhood--not to mention it would have destroyed one of the truly historic landmarks in our town,” Holden says.

Options That Were Unusual in L.A.

Some officials were more enthusiastically in MacLeod’s corner. Gary Squier, general manager of the Los Angeles Housing Department at the time and now a developer of affordable housing, says “housing that’s well-managed can work in any configuration.” And though California is dominated by low, garden-style apartments, he says, “that’s not the case in Chicago and Boston, where high-rise affordable housing has been successful.” In addition, Squier says, with the current density of L.A.’s population, and the even greater density to come, people with low incomes might never find housing if only low-rise buildings are built. There just isn’t enough affordable space for the number of people.

Jean Mills, a former finance officer at LAHD and now a vice president at Wells Fargo, appreciated “the uniqueness of MacLeod’s vision. He offered so many things unusual in urban L.A. housing: the huge swimming pool, a charter school on site, a complete vision for how he wanted the place to look and to enhance the lives of tenants. He did an incredible job with the finishes and the artwork.”

If you drive west on Wilshire from downtown, past the many once-great buildings that now stand unused, past the boarded-up storefronts emblazoned with graffiti, you might wonder how such gracious spaces on such a broad and lovely boulevard could be allowed to fall into dismal disarray. When you get to the Townhouse at Wilshire and Commonwealth, across from Lafayette Park, and hear MacLeod’s Byzantine tale, you might begin to understand.

The Townhouse and its grounds occupy most of a square block, with the remainder available for retail use. “The owners wouldn’t split it. You had to buy the whole thing,” he says. He put money into escrow and conceived a plan to transform 255 hotel rooms into 142 apartments, with parking, an on-site day-care center--which ultimately became a 130-student charter elementary school instead--a library, a swimming pool, play areas inside and out, an exercise room, and on the far side of the lot, a separate retail strip that he planned to include a market, a McDonald’s and other stores.

“I’m a risk-taker, but even I knew this was a gamble I might not win,” he says.

First, he had to get financing. None of the multitude of city and state agencies with money to offer for such things could easily believe his plan would work. But to seal the deal, he had to win a series of awards, in quick succession, from an array of governmental funds.

To get an LAHD residual receipts loan, he had to show plans not just for the residential part of the project, but for the commercial as well. This meant finding retail tenants to sign up for this less-than-ideal location before the project had even begun. Next, he needed a state low-income housing committee award. “Winning that one is like winning the lottery,” MacLeod says. “But if I did it, I could sell those housing credits to an equity investor, and the money derived would help purchase and develop the project.” He also had to win an Affordable Housing Program award and both interim and permanent financing for the balance of the project not funded by any of the above.

“You have to win them all. In succession. Not a single piston could miss, or the whole deal falls apart. If you do the math, your chance of succeeding might be about 8%,” he says.

Despite the odds, he succeeded.

He had no idea, he says, that his agony was just beginning. He next encountered problems his experience could not have prepared him for. Construction problems, mostly too complex to describe, were only equaled by the conflicts among different agencies.

The building, designated a historical landmark, had to be preserved with absolute accuracy. Take something as seemingly simple as window screens. The government decreed that MacLeod had to put screens on every dwelling’s windows. The preservationists said that screens were not historically accurate and that he could not put them on. The historians won. There are no screens.

Housing authority rules state that all windows must be at least 42 inches from the floor so that babies and other living things do not fall out. But preservationists said he could not change the original windows, which were beautifully huge, and which came nearly to the floor. Ultimately, all windows were fixed to open no more than 6 inches.

Exquisite handmade moldings on ceilings and around apartment entry doors were in disrepair and had to be restored. But there are no artisans left who do such delicate, detailed work. MacLeod’s team called three elderly master plasterers out of retirement to get the job done. The plumbing system was worse than predicted, a trash disposal system didn’t exist, the building needed totally new heating and air conditioning. The pool had problems not evident at first and needed all new lighting, heating and everything else.

More troublesome than all this, perhaps, was MacLeod’s own determination to give the building’s newest tenants an environment above and beyond what was required. He commissioned chandeliers historically accurate in mood and design. He commissioned art not just for the major public rooms, but for the laundry room and other unlikely spaces. His painters perfected a color he calls “mud” to paint wood that imitates the original mahogany.

Then came the work of selecting the tenants. That, too, has provided more angst than he is willing to admit, says an associate who worked with him. To qualify for the project, potential tenants have to earn less than 50% of the median income in the area, MacLeod says. He hired a management company to screen all applicants’ income statements to make sure they qualified and to check their credit ratings as well. “We wanted low-income people, but people who pay their bills.” Then he hired a representative to visit each of the likely candidates at their homes. “We wanted people who take pride in keeping their places up,” he says.

Each potential candidate was told that if they moved into the Townhouse, they would have to donate time each week to help keep the property maintained. MacLeod calls this the first “community management program” in the West. Tenants select from an array of jobs and committees on which they can work: the guest reception desk, the landscape and garden committees (there’s a rose garden and a tenant vegetable garden), the hall and trash collection committees, to name a few. The prospect of work deterred almost no one, MacLeod says. The apartments were quickly filled, and there is a long waiting list. About one tenant per month moves out, and the apartment goes to the next person on the list.

The MacLeod Townhouse started accepting tenants about two years ago. Still, the kinks are not all worked out--which is why MacLeod delayed the “grand opening party” until December.

Not All Tenants Are 100% Pleased

If he’s aware of any lack of enthusiasm among some tenants, he doesn’t admit to it.

Informal chats with a few of them reveal that, though they appreciate the beauty of the building, they’re not without criticisms. “I love the historic aspect of this place and my apartment,” says G. Victor Mann, 40. “You can see the history and feel it.” He also likes his fellow tenants, and the fact that there is hardly any crime.

But elevators keep breaking down, he says, and he wants MacLeod to open the exercise room, “where there’s lots of equipment but no one’s allowed to use it yet.”

Other tenants said they “have no time to work in the building” two hours a week and repeat that elevators are a big problem. “My husband was stuck in one for two hours,” said one tenant who wouldn’t give her name. Another complained that the parking isn’t convenient enough.

Signs in the well-maintained corridors indicate another problem for the management: “No smoking in fire stairwells. $500 fine for violations. All floors are under video surveillance. This is final warning. No exceptions.”

By and large, MacLeod says tenants respect and care for the building very well. And well they should, says Russ Wyluda, who was general contractor for the project. He calls the undertaking immense by any standard. “The Aswan Dam and Staples Center were probably bigger,” he says with a chuckle. “But this was the largest construction in Los Angeles at the time it started.”

He also says it has the greatest infusion of fine design and art of any affordable project he’s ever seen--more even than many market-rate housing complexes. “What’s more, these people have more spacious apartments than you would find at some very pricey places, like the Marina City Club,” says Wyluda.

The tenants’ quibbles are just part of the reason why many a less-persevering guy would have given up on this project long ago, some of his awed colleagues say. First, the concept of high-rise housing for poor families is not yet accepted among urban experts; MacLeod’s project will either help prove or disprove whether it will work in the long run. Further, his is not a money-making proposition. Although he says he’ll profit from the retail stores not yet in place, the building is dedicated to low-income families for the next 55 years, which means even his teenage sons won’t be able to rent the Townhouse apartments at market rate--at least not until they are old men.

No matter; MacLeod seems to love the uncertainties. He maintains his office at the Townhouse, where he arrives most days around noon. He spends mornings at his beach properties, he says. He is building “a few architecturally special” homes along the shore to sell for $2 million to $4 million each.

He says that on good days, his heart is in the center city, with the Townhouse and its people. On bad days, he asks himself, “Who needs this?” He can live quite nicely, thank you, without the aggravation. If things don’t go right, he can stop right now, pick up his marbles and walk away. Not from the Townhouse, but from future center-city plans he has in mind.

So far, the good days outnumber the bad, he says. Many detractors have turned into admirers. He has won a Golden Nugget award from the real estate industry for excellence in affordable housing projects.

Jasper Williams, director of commercial development at the city’s Community Development Department, says MacLeod is having a “significantly good impact” on the area. “He’s creating jobs and places for local residents to buy food and other products where they had no place to go before. It’s been challenging.

“Most of us just look and see a new building or a market. We don’t know what it takes to get it there. It takes a guy with real vision. You’ve got to have vision and you’ve got to have hope. You can’t be a cynic, or you won’t see the upside of things and you won’t persist. I have a lot of respect for Rob. He had a difficult vision to implement, and he’s getting it done.”

MacLeod Hopes to Cast a Wider Net

Yes, it’s been a monumental effort, MacLeod concedes. But he has much more in mind, if the fates and the city mothers and fathers are with him. He wants to improve Lafayette Park, which sits across from his building, surrounded by chain-link fence and often inhabited by nogoodniks. He wants the park to teem with kids playing sports, studying music and dance, using new facilities he hopes to help get built there. He wants it to be a place for community meetings and performances.

Then he wants to move a bit farther east, and do the same for McArthur Park--until the whole lower Wilshire area is restored to vibrancy and health, much the way it was when his Townhouse was young.