Cash Return for State : Caltrans Expands Freeway Airspace Leasing Program

Over quail egg shao mai and steamed duck, guests dining in the Chinese restaurant at the new Mediterranean-style Hotel Los Angeles will gaze out over a familiar sight--the traffic-jammed Hollywood Freeway almost within arm’s reach.

Located on Vermont Avenue just minutes from Downtown, the nearly $20-million hotel is nearing completion on a large, triangular parcel of land formed by the sweeping Vermont on-ramp and the freeway itself. The sprawling structure all but overflows the site.

Only steps away workmen are busy at another large construction job between the freeway’s widely separated north and southbound lanes. There a huge self-storage complex, including special sections for motion picture and tape archives and two sound stages, is going up beneath and beside the freeway lanes.

Showcase for Caltrans

Both the hotel and storage facility are being developed within the freeway right of way in state-owned airspace--a term that refers to leased space above, under or next to a building or freeway. Occupying highly visible sites, these two projects have pushed the Hollywood Freeway--among the Los Angeles area’s busiest routes--into a showcase spot in the California Department of Transportation’s suddenly accelerating statewide airspace program.

“Following Administration policy, the program is being emphasized and expanded for the cash return,” said Otto Kihm, Caltrans’ statewide airspace manager. “It’s a way to get more revenue for the state highway fund because each dollar raised in California brings in more federal dollars. It also means getting this property back on the tax rolls.”

Caltrans officials, who say California already is leading other states in developing unused airspace, describe the Hollywood Freeway projects as an attempt to attract more varied uses, such as hotels, restaurants and other revenue producers, to airspace created by land that Caltrans purchased for freeways but didn’t use.

These projects also could pave the way for airspace directly above the freeways to be used for high-rises. Some transportation and city planners see the time when land limitations will force developers to build above freeways in heavily developed Downtown areas.

Questions Raised

Yet despite the airspace program’s widening scope, questions have been raised by some city planners and residents about the value of using airspace in densely populated areas where traffic congestion, zoning and other matters already are problems. There also is concern about the visual distraction caused by identifying signs so near the freeway that they seem to jump out at motorists and about the effect of large structures, such as rows of repetitive storage units, on a settled residential neighborhood.

Monty Gordon, who said he has lived in the neighborhood for four years, seems to have a typical reaction. He said the self-storage property, formerly used by Caltrans as a maintenance yard, looked like a dump then, but “it’s better now.”

But Gordon said that Vermont Avenue traffic, where it crosses the freeway, is “always congested--it’s already a mess.” He said he believes that with the Caltrans projects, the “traffic’s going to get worse.”

Dave Lessley, a senior Los Angeles city planner who is familiar with the area, also is bothered by traffic on Vermont and the space between the freeway lanes that, he observed, “seems like an odd use (of land) for storage.” City planners, though, found that both projects--the hotel and self-storage facility--conform to zoning regulations and the area’s community plan.

Unlike air rights, which may be purchased and transferred to other locations by developers, Caltrans’ airspace is permanently bound to a specific site. While the space is a critical part of the freeway system, it is space not directly needed for the freeways’ operation. Technically it includes the land and space beside freeways, above some and under others, that often is considered excess or wasted. The state, though, has no intention of selling it.

Since Caltrans began leasing airspace in the late 1960s, most of the leftover sites have been used for commercial parking lots, car storage yards and small commercial/industrial plants and offices such as those under the Santa Monica Freeway viaduct in downtown Los Angeles.

Some variations have started to appear. For example, a restaurant and office building grace the junction of Interstate 8 and Interstate 805 in San Diego; an automobile agency is next to the Glendale Freeway in La Canada Flintridge and another restaurant, the Rockin Robins, is using a slice of right of way next to a freeway ramp in downtown San Francisco.

Other Sites to Lease

They are among the 380 active airspace leases on California’s freeway system, but Caltrans has a list of 450 sites that will be available in the next few years. Most are parcels measuring a few hundred square feet, but some range up to many thousand square feet. The largest leasable parcel on Caltrans’ books is the Interstate 8-Interstate 805 site in San Diego, which encompassing 10 acres. The lease for the new self-storage facility at Vermont covers about seven acres and is worth more than $14,000 a month to Caltrans.

Its next-door neighbor, the Hotel Los Angeles, has less than half the space--about three acres. But it “stands out so much,” as a Caltrans official put it, that the lease is nearly as much--$12,000 a month.

Three years ago the state was taking in about $3.5 million a year from airspace rentals, which come mainly from Los Angeles, San Francisco, San Diego and Sacramento. Since then skyrocketing property values have pushed the return to $4.75 million a year.

There is little doubt about the value of the Hollywood Freeway’s Vermont Avenue airspace. An average of more than 230,000 cars pass there each day. Over the years the new Hotel Los Angeles’ triangular location has become a familiar Los Angeles landmark. For a time a savings and loan office resembling George Washington’s Mount Vernon home stood majestically on the site. Then in 1976 the building was moved 1 1/2 blocks south to a new Vermont Avenue address where parking and traffic problems were not as bad.

Access for Criminals

“It’s away from the freeway now--in a better location,” an association official explained. “(Besides) freeways and banks are a dangerous combination. Robbers love to visit banks (near freeways) and take off!”

Both the hotel and self-storage facility can thank the abrupt halt of California’s freeway building boom for their abundant airspace. State highway engineers originally planned to tie the Beverly Hills Freeway into the Hollywood, which was already built, at Vermont. But when the Beverly Hills route was abandoned, the Hollywood Freeway, having been designed for an interchange at that point, was left with an unusual, spread-eagled configuration.

For the new hotel, being almost on top of the freeway has its advantages. Its developers, Super Success Inc., feel that enhances the hotel’s central location, although it is not, they insist, a “freeway hotel,” even though its 210 rooms are sound-proofed.

General manager Ki Tong Yang describes it as a “Downtown hotel,” but, he says, its rates will start at about half those of Downtown’s best hotels. It also will have all the Downtown hotels’ conveniences, he points out, including a Continental-French restaurant--in addition to the Chinese dining room overlooking the freeway--a ballroom for 500, a pool and a spa. There also will be a Denny’s restaurant “in the garden” facing Vermont.

Temperature and Humidity

Developer Mehrdad Azarmi’s general partnership is investing $8 million in the self-storage project, including $3 million for the 1,200-unit first phase, which will be completed in March. Then work will begin, Azarmi says, on special vaults and storage facilities for motion picture film, television tape and entertainment industry archives. These vaults, under the freeway lanes at Vermont Avenue, will utilize 4- to 6-foot-thick road beds for roofs, allowing substantial savings in temperature and humidity control, according to Azarmi.

He says sound stages and related motion picture post-production facilities, the project’s final phase, will go up behind the freeway’s sound walls.

Although the Vermont Avenue neighborhood near the freeway appears to be declining, Azarmi says he sees “energetic changes.” He selected the Hollywood Freeway airspace site because, he explained, land is scarce and leases high, and the movie industry is close.

“The future will tell us if we’re correct,” he said.

While neighborhood residents have reacted to the airspace projects with mixed feelings, Caltrans insists there have been no complaints. Roger Williams, the agency’s Los Angeles area airspace manager, says Caltrans worked with the hotel on potential traffic problems. Furthermore, he said, the storage facility will be landscaped at street level to keep it from becoming an eyesore.

Caltrans also will be monitoring such things as signs and lights that might affect motorists’ safety and the freeway structure itself, according to Williams.

Long-Term Leases

Like many of Caltrans’ airspace tenants, the hotel and self-storage facility will be around for a long time. Both leases are for 55 years, a typical duration. Others have been written for as short as a day (for parking space for movie location companies). Caltrans says all its leases also contain clauses for the airspace as well as the improvements to revert to the state when contracts expire.

The developers pay no property taxes, but they are subject to possessory interest levies which, Caltrans says, generally run about 10% less.

Farther up the Hollywood Freeway from Vermont, two other large projects also have tapped Caltrans’ airspace bank. One is a handsome, privately built bridge spanning the freeway to Universal City; the other is another self-storage facility due to go up on a triangular parcel where the freeway goes over Vine Street.

Built with Caltrans supervision, the bridge spans the Hollywood Freeway in Cahuenga Pass. It was completed in 1983 under one of the agency’s longest leases--a 75-year agreement expiring Nov. 30, 2057. MCA Inc. constructed the span, which is the length of a football field, to improve traffic to its Universal City entertainment center. The company is paying Caltrans $1,916.67 a month, but the lease cost is also tied to increased attendance and ticket prices for Universal Studio tours.

Long before many of the existing airspace leases expire, some Caltrans officials believe, critical freeway stretches will be “roofed over,” transforming the freeway lanes into tunnels to get the most from airspace. High-rises will go up over the roofs. Likely spots are some sections of downtown Los Angeles’ Hollywood Freeway “slot” and the Harbor Freeway, and probably some routes through downtown San Diego and San Francisco.

Williams sees conversion of the freeways themselves to buildable airspace occurring first over the Harbor Freeway along Downtown’s western edge. There it would accommodate the central business district’s rapidly advancing westward expansion. “Eventually it will come to that,” he says.