BUILDING A BETTER HOLLYWOOD; MERCHANTS TAKING TARNISH OFF TINSELTOWN.

Byline: Dave McNary Daily News Staff Writer

Much like an actor getting a makeover after falling off the A-list, Hollywood is rebuilding its glamour after decades of decline.

Property values and rental rates have been surging with gains of as much as 40 percent over the year; developers are flocking to the area; and a key national player is building a $385 million retail-entertainment center that will be the new home of the Academy Awards ceremony in 2001.

Most heartening, though, for those who have survived the lean years is the upswing in cold, hard cash being spent by visitors.

``Our business has improved dramatically,'' declared Robin Moore, general manager of the Hamburger Hamlet across the street from the legendary Mann's Chinese Theatre. ``It's been a good year for a lot of restaurants, with gains of 1 or 2 percent, but we're up over 10 percent in 1998. And that was on top of an 8 percent gain, so 1997 was no slouch either for us.''

A recently released Economic Research Associates survey showed that the Hamburger Hamlet isn't alone. During 1997 in the core area, movie business rose 22 percent, restaurants saw a surge of 14 percent, hotel activity was up 6 percent and retail sales increased 5 percent.

``Business has improved dramatically across every economic sector,'' said David Wilcox, senior vice president at ERA. ``Hollywood's future looks very bright.''

True, plenty of grittiness remains along Hollywood and Sunset boulevards, but observers now believe Hollywood may ultimately renew itself much like Times Square in New York has been reborn.

``We've been in Hollywood since 1953 and we've seen it go from its glory to its most trying times,'' said Michael Malick, vice president and partner at the Ramsey-Shilling brokerage firm. ``Now, it's returning. People who are getting in now are going to reap the benefits.''

Cleanup efforts

Hollywood was in a steep decline back in 1986 when the Community Redevelopment Agency proposed a 30-year revitalization plan costing $922 million. But those plans were tied up in litigation for several years and then stalled by lack of developer interest amid the recession of the early '90s and the 1994 Northridge Earthquake.

Observers say credit is due Mayor Richard Riordan and Councilwoman Jackie Goldberg for making Hollywood an economic priority in recent years. But they point most emphatically to the 1996 formation of a business improvement district on Hollywood between La Brea Avenue and McCadden Place. The owners committed to assessing themselves $600,000 a year for five years for cleaning, security and decorations.

``There have been many keys - dealing with the drug problem, getting the blame sport stopped, focusing on a common vision - but the formation of the BID meant a lot,'' Goldberg said. ``It was people putting money where their mouth was and assessing themselves real money.''

The immediate effect has been more visitors. ``The district's `clean and safe' program has had a marked impact,'' Wilcox said. ``The BID has been gaining a reputation as one of the nation's most successful.''

Tourists returning

Hollywood is known to most people as the amorphous part of Southern California where movies are made and dreams dashed. But it is an actual community as well; not an incorporated city but instead a seven-square-mile area of Los Angeles bounded by Mulholland Drive on the north, Melrose Avenue on the south, Crescent Heights Boulevard on the west and Western Avenue on the east.

Most of the world focuses on the stretch of Hollywood between La Brea and Vine Street, an area that draws the lion's share of the more than 9 million people visiting Hollywood each year.

``When tourists come here, you can tell that it's not quite what they had envisioned,'' Moore said. ``But it's also somewhere they want to spend more time because it's much cleaner with more security. Tourists are coming back and telling their friends.''

There's a long-term change under way, too, as major real estate operators swoop in. ``The formation of the BID sent a message to large developers,'' said Julie Kleinick, director of acquisitions and leasing for Albert Sweet Development. ``It was a signal that things were about to change for the better.''

In just the latest example, real estate investment firm Kennedy-Wilson announced Wednesday that the House of Blues has agreed to relocate its corporate headquarters from West Hollywood to an office tower on Sunset and Vine, and will be the anchor tenant in the building and occupy 33,000 square feet.

Kennedy-Wilson executive Nick Kanieff noted that monthly lease rates for the building are now $1.75 per square foot, up 30 percent over the going rate a year ago. ``We bought the building in September with a 70 percent occupancy and it should be close to fully leased by April,'' he said. ``It's a testament to the revitalization and renaissance in the Hollywood market.''

Property costs rising

Some commercial properties now sell for $100 per square foot, more than double the rate in 1995. CUNA Mutual Life Insurance is now asking lease rates of $2 per square foot for offices in the El Capitan building, also more than double the rate four years ago.

Kerry Morrison, the district's executive director, said, ``Owners are beginning to get unsolicited offers on their properties and that's surprising to me. That really makes it possible for us to tell people with confidence that what we're doing is working.''

Notable recent manifestations of recovery come near the tourist core area with the reopening of Graumann's Egyptian Theatre and the renovation of the El Capitan Theatre building, which opened a Disney Store last month. ``The Disney Store sets a whole new standard for cleanliness and presentation in the area,'' Morrison said. ``It's a strong signal as to how retail can look in this area.''

The six-story El Capitan building has received a $5 million seismic upgrade to repair extensive damage from the Northridge Quake. ``The building was a minidisaster,'' recalled Jeff Rouze, CUNA's senior asset manager, ``and renovating it didn't make a lot of sense at the time because it was amid 50 years of decline in that part of the city.''

But CUNA gambled the investment would pay off and decided it would trumpet its efforts. ``We didn't want to suffer in silence,'' Rouze said. ``I think our project has provided an example where people could say, They're doing it so we can, too. It's a critical aspect of real estate development - you need to be able to cite examples.''

Last year's agreement between the city of Los Angeles and shopping center developer TrizecHahn, which calls for the $385 million retail-entertainment project adjacent to the Chinese Theatre, also is cited as a milestone. Groundbreaking took place three months ago for the center that will include a 3,300-seat theater for the Academy Awards.

``TrizecHahn is one of the world's largest property management firms so when they commit to an area, it's got to be taken seriously,'' Malick noted.

Other projects that have helped boost property values: a planned expansion of the Capitol Records building, and the Hollywood Marketplace office-retail project and an expansion-renovation of the Cinerama Dome, both on Sunset.

In an example of the burgeoning interest in prime properties, the CRA is negotiating with four developers over the southwest corner of Hollywood and Highland. The result might be a ``hybrid'' approach that would involve all the developers in a cooperative partnership that could lead to construction in 2000, according to CRA spokesman Jeff Skorneck.

``The level of interest in this project is tremendous,'' Skorneck said.

Steve Ullman, president of Grant Parking, said property owners are sitting pretty.

``There are a lot of buyers and not many sellers,'' said Ullman, whose company owns 1 million square feet in Hollywood. ``The area has obviously made huge strides. For people who never gave up, it's just so great to see.''

Observers believe the area's momentum will pick up, particularly as the subway reaches into Hollywood next year.

``Most everything that's planned is still on the drawing boards, so what you're seeing now is just the tip of the iceberg,'' Kleinick said. ``There are a lot of new players and new owners venturing in.''

Bright future

The optimism is spreading. The original Hollywood Boulevard BID has been expanded eastward 12 blocks to Gower Street, with the additional owners kicking in $1.53 million for three years. Another BID has been formed on Santa Monica Boulevard between Highland Avenue and Vine, dubbing itself the Hollywood Media District to focus on that area's ability to provide production and post-production services.

Kleinick reported that developers are scrambling to convert industrial space into office and entertainment production uses in the areas south of Sunset with lease rates running up to $2 per square foot. Her company is spending $2 million to change more than 50,000 square feet of storage space into 30,000 square feet of high-end offices with skylights and wood crossbeams, and 20,000 square feet of covered parking.

``We think the rents we'll get warrant the conversion,'' she said.

CAPTION(S):

Photo, Chart

Photo: A wise man rides his camel in the Hollywood Christmas Parade.

Gus Ruelas/Daily News

Chart: LESS ROOM AT THE INN

Improvements around Hollywood are attracting more visitors, as the hotel occupancy rate in the area exceeded the countywide average in 1997

SOURCE: PKF Consulting and Economics Research Associates

Bradford Mar/Daily News