Turning Tinseltown Around
CIM Group has made a significant investment in Hollywood. Its goal: to make a great place — for residents and tourists alike.
Randall Shearin

Hollywood & Highland Center has added a host of new tenants that are focused on the residents of the immediate area.

Hollywood, California-based CIM Group is doing something great for its hometown. It’s buying a lot of properties around Hollywood Boulevard and redeveloping them into places where residents, as well as those looking for a little piece of Tinseltown, can find what they are looking for.

CIM is among a few developers that have taken charge of turning around Hollywood. For anyone who has been there, Hollywood is a lot different than portrayed in the movies. Its downtown, located along and off the spine of Hollywood Boulevard, is several blocks of historic buildings, mostly used as office, apartments and hotels, with ground floor retail. A few all-retail developments, and a few blocks of single-level retail and restaurant space, also exist. For many years — and in some buildings still — retail in Hollywood consisted of restaurants and mom-and-pop tourism-oriented tenants.

“Supply outstripped demand ten-fold for the last 20 years in Hollywood,” says Jeff Kreshek, principal-leasing for CIM Group. “There were nothing but empty spaces and no tenants.”

CIM and other developers have made a significant effort — and a huge investment — to turn Hollywood around over the past several years. That effort has begun to pay off, with major retailers like Virgin Megastore, H&M, Whole Foods and Zara signing deals, and trendy restaurants like Geisha House and Dakota locating in downtown Hollywood.

Hollywood & Highland Center includes the Kodak Theatre, home to the Academy Awards.

The most significant property that CIM has purchased is the Hollywood & Highland Center, located at the famous intersection of Hollywood Boulevard and Highland Avenue at the epicenter of downtown Hollywood. Originally conceived as a tourist center that would give those looking for Hollywood a place to identify with, Hollywood & Highland never really hit its mark with its original tenant mix. However, there were many redeeming factors about the center, including the Kodak Theatre, home to the Academy Awards. Since its offices were just a few blocks away (CIM has had its headquarters in Hollywood since 2000), CIM saw the troubled project as an opportunity to create something for the community while incorporating draws for tourists as well.

“Instead of looking at Hollywood & Highland Center as an isolated project unto itself, we looked at it as a piece of a larger district,” says Kreshek.

Indeed, for CIM Group, acquiring Hollywood & Highland in 2004 was like getting the jewel in the crown. Between Highland and LaBrea along Hollywood Boulevard, the company has acquired most of the retail on the south side of Hollywood Boulevard and a majority of the retail on the north side. The company has also acquired other assets, like office buildings with retail on the ground floor, which are strategic to turning the area around.

“Controlling so much property in the area has allowed us to master plan what this two-block stretch is going to look like,” says Kreshek.

In 2003, CIM acquired a retail project at 7021 Hollywood Boulevard. The center formerly housed a movie theater and several entertainment uses, most of which had gone dark. CIM renovated the project, adding tenants like Longs Drugs, LA Fitness, DSW Shoe Warehouse and Fresh ‘N Easy, a new grocery concept, to create a place for the neighborhood to shop and work out.

“Our biggest emphasis is making sure that this area appeals very heavily to the locals,” says Kreshek. “The tourists are a great addition and a huge piece of what makes Hollywood great. You have to make Hollywood work off a consistent customer base, not a transient customer base. We are focusing on the 1 million people who live within 5 miles.”

CIM has been bringing in tenants that appeal to locals as well as tourists. One of the biggest deals that the company has signed in recent months was H&M, which will open a large format store in a space formerly occupied by Hamburger Hamlet, across the street from Hollywood & Highland Center.  The location was one of the first two deals that H&M signed in Southern California. Other leasing changes include the replacement of the duty free DFS store with Virgin Megastore. Guess is also locating in a space that formerly housed Brookstone. CIM has also created a shopper loyalty program at Hollywood & Highland Center that is specifically for locals. It gives residents discounts and special perks at the center’s retailers. Through that program, it has built a database of 91,000 people, whom the center can speak to directly through e-mail.

“Every single move we’ve made with Hollywood & Highland Center has been about the locals and the customers that we need to have in this district,” says Kreshek. “We want to make Hollywood & Highland Center a community gathering place and the center of the Hollywood district.”

The company has also done a number of focus groups with residents  to get their input.

“Allowing the neighborhood be a part of what we are deciding to do has been beneficial for us and for the center,” says Annette Bethers, marketing director for Hollywood & Highland Center.

“You would be surprised how many e-mails we’ve gotten thanking us for putting a drug store in the area,” adds Kreshek. “It’s not a sexy use, especially for Hollywood, but there isn’t a drugstore for a long distance.”

The changes have meant good things for Hollywood. National and regional chains are starting to realize that they must be in the market as part of their Southern California locations. For CIM, it is a sea change from when it first began acquiring properties in the area. Several years ago, for instance, the company had the choice of a check cashing branch or a convenience store for a property it held at Hollywood Boulevard and Cherokee Avenue. CIM decided it would take neither deal and hold out for a better tenant. Now, the area is teeming with upscale independent retailers and restaurants like Geisha House and Napoleon Perdis Cosmetics.

“Forces like the Hollywood Business Improvement District, the Hollywood Chamber of Commerce and the city, as well as the hard work of a lot of individuals, have been the driving force behind the city’s turnaround,” says Kreshek.

Hollywood is not at the point where leasing is so easy that the city can sit back and relax. There is still a lot of work to be done, says Kreshek. The area east of Highland still has some fractional ownership issues, so it hasn’t been as easy to create a larger district. However, CIM and other owners have held out for the right tenants, and, as more locate in Hollywood, the retailers will approach the landlords looking for sites. Other landlords have already caught on. One developer is turning a run-down office building into residential space. Nearby, at Sunset Boulevard and Vine Street, CIM is taking a 22-story office tower with 7,500-square-foot floorplates and adapting it to residential, with four units per floor. Each unit has unobstructed views for as far as the eye can see. At 7046 Hollywood Boulevard, CIM is taking an obsolete office building and converting it to apartments.

Zara has recently signed a deal for 6904 Hollywood Boulevard.

“Every day it becomes less and less risky to be a tenant in Hollywood,” Kreshek says. “We are getting retailers and restaurants saying ‘tell me more’ rather than ‘no.’ They are hearing the success stories of the right tenants in the right places. There is still a lot of property left to lease and a lot of people left to educate and convince that this is a viable atmosphere for retail.”

One of the latest retailers to sign a lease was Zara, who will only open locations in Hollywood, Westfield Topanga, Third Street Promenade and Westfield Century City. When Hollywood keeps that kind of company, it helps validate other retailers’ choices. A strong office market, strong residential market, strong retail market, tourism, and the local market density, it is the perfect storm for retail success.