Risky Business

Talk about a tough opening weekend. Hollywood & Highland, Tinseltown's much-anticipated $615 million shopping and entertainment complex, debuts Friday. On the surface, the gigantic megamall appears to have everything going for it. Its elegant Kodak Theatre will house the Academy Awards for the foreseeable future. Wolfgang Puck has committed to run the kitchen of the auditorium's ballroom. And nearly 90 upscale retailers have signed long-term leases.

But the pricey project, a dozen years in the planning, may be doomed from the start because of the soured economy. "Their timing is, to put it charitably, not exactly what the doctor ordered," says Kurt Barnard, a longtime business analyst and editor of Barnard's Retail Trend Report. "Right now, very upscale luxury products are at best limping. For this mall to even limp, it'll need crutches."

It's not just the rotten economy dogging retailers lately. Shop owners know that Americans are also concerned about safety from terrorist attacks in public spaces. And while these problems exist at all malls and retailers across the nation, they're particularly worrisome for boosters of the Hollywood & Highland project. Insiders had hoped the complex would pull this specific area of Los Angeles--a trash-laden, decrepit region of town--out of its 40-year decline.

With the Hollywood stars lining the sidewalks and Grauman's Chinese Theater nearby, this district once epitomized the glamour capitol of Los Angeles. But it's been a couple generations since it lured anyone to come and stay other than teenage runaways and junkies. "Tourists would come here to see the Chinese Theater and the footprints but they'd stay for only 15 minutes and get right back on the bus to leave," says Donna Hemer, project manager for Hollywood's Redevelopment Project Area.

Indeed, this area of Hollywood has been dilapidated for so long that it's hard to imagine Clark Gable ever spent a moment there. But he did. In the '30s and '40s, stars gathered along Hollywood Boulevard to attend their film premieres in the city's most elaborate movie houses. The Egyptian and El Capitan theaters were extraordinary architectural monuments to the local product--each with rococo embellishments and grand staircases leading to ample balconies. But by the last quarter of the past century, it looked as if many of Hollywood's best buildings would be demolished and sold for scrap.

Then in 1985, the Community Redevelopment Agency stepped in and began to plan Hollywood's economic revival. The Egyptian and El Capitan theaters--on the same street as the Hollywood & Highland complex--were refurbished to their original luster. Several grand office buildings were renovated to attract high-rent tenants. Planners wanted the project to serve as the town's social center. By 1998, when the Canadian-based megabuilder TrizecHahn first broke ground on the ambitious mall, it seemed like a brilliant plan. The American economy was hotter than it had ever been.

But Friday, as Hollywood & Highland opens its doors and 425,000 square feet of retail space, things look much different.

Since Sept. 11, tourism in the Golden State has nearly vanished. State officials estimate California will lose about $2 billion in visitor spending through next June. TrizecHahn had envisioned that half its patrons would be from out of town. Anticipating that many of the tourists would come from the Pacific Rim, the developer lured high-end retailers like Louis Vuitton and Celine. The shopping center's look is Babylonian, with oversized temple columns and two enormous, gaudy white elephants. Come December, a 640-room Renaissance hotel decorated in luxe midcentury modern will open up next door to the complex. But will there be any guests?

All this makes retail analyst Barnard wring his hands. "If they were putting in a Wal-Mart, I'd say wowee, they're going to rake it in. But high-end retail right now is down in the dumps."

Even if that's true, TrizecHahn is putting on its poker face. "We see Hollywood & Highland as a new American landmark," says Beth Harris, the complex's senior director of marketing. She says they have a firm commitment from the Academy of Motion Picture Arts and Sciences to hold the 2002 Academy Awards there. Several major studios have booked upcoming premiers at the neighboring Grauman's Chinese Theater and their gala after-parties at Puck's ballroom. And a glass-backed television studio in the complex that overlooks the famed Hollywood sign--akin to the one on the "Today" show that overlooks Rockefeller Plaza--has been reserved by a few music-video programs.

Redevelopment officials had hoped a very successful Hollywood & Highland would lead to more investment nearby. But they'll have to work fast. Even TrizecHahn itself may not have enough faith in the project. During the last month, it has put the shopping and entertainment mall on the market, saying it wants to move its focus away from retail development and more toward office buildings. What's next, an opening-day discount sale?