Part 3A: Risk Analysis - Regulatory & Community Challenges & & Part 3B: Financial Stress Scenarios & Risk Mitigation

Executive Summary

While Parts 1-2 established substantial valuation opportunity, this section examines execution risks that could delay, diminish, or prevent value realization.

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Key Findings:

The gondola project (2018-2025) demonstrates severe regulatory challenges
CEQA review requires 5-7 years minimum with high litigation risk
Community opposition is well-organized and legally sophisticated
LA presents 2-3x greater difficulty than comparable projects elsewhere

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I. The Gondola as Warning Signal

In 2018, the Dodgers proposed a $500 million aerial gondola connecting Union Station to the stadium. This relatively modest project's struggles reveal the challenges facing any major development.

Gondola Project Status (2018-2025)

2018: Announced with 2022 completion target
2019-2020: Environmental review begins, opposition emerges
2021: Draft EIR released, 2,000+ critical comments received
2022: Legal challenges filed by community coalitions
2023: Revised EIR required, additional studies mandated
2024-2025: Still in regulatory review, 7+ years with no construction

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Primary Objections:

Visual impact on historic neighborhoods and parkland
Inadequate environmental analysis
Concern about precedent for larger development
Opposition to private benefit from public airspace
Gentrification and displacement fears

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Gondola vs. Ballpark Village: Scale Comparison

Factor	Gondola	Ballpark Village
Physical Scale	1.2 mile transit line	130 acres, 2-3M sq ft buildings
Land Use Change	None (uses airspace)	Massive: parking to mixed-use
Traffic Impact	Reduces vehicle trips	Adds 10,000+ daily trips
Community Benefit	Public transit option	Primarily private development
Current Status	7 years, still not approved	Would face much greater opposition

Critical Implication: If a transit improvement takes 7+ years with sustained legal opposition, a massive mixed-use development would face exponentially greater challenges. The gondola represents the minimum baseline for opposition, not the maximum.

Organized Opposition Infrastructure

The gondola battle created well-organized coalitions with legal and financial resources:

LA State Historic Park Coalition: Environmental groups focused on parkland protection
Chinatown Community for Equitable Development: Anti-gentrification advocacy with experienced organizers
Elysian Park Neighborhood Council: Local residential opposition with City Hall connections
Los Angeles Conservancy: Historic preservation advocacy with legal expertise
Pro Bono Legal Representation: Environmental law firms representing coalitions

This infrastructure won't disappear. It will immediately pivot to opposing ballpark village, now with 7+ years of experience fighting Dodger Stadium projects.

II. CEQA Environmental Review Process

California Environmental Quality Act (CEQA) requires comprehensive environmental review for projects with significant impacts. For ballpark village development:

Six-Phase Process Timeline

Phase 1: Scoping (6-12 months)

Notice of Preparation filed describing project. Public scoping meetings identify environmental concerns. Agencies and public define scope of required analysis.

Phase 2: Draft EIR Preparation (18-24 months)

Comprehensive environmental analysis:

Transportation and traffic (intersection studies, freeway impacts, parking)
Air quality (construction and operational emissions, greenhouse gases)
Noise (construction and operational impacts on residences)
Visual impacts (high-rise visibility, lighting, shadows, viewshed changes)
Biological resources (if any sensitive habitat present)
Cultural/historic resources (Chavez Ravine history, archaeological surveys)
Hydrology and water quality (stormwater, drainage)
Utilities and infrastructure (water, sewer, energy capacity)
Cumulative impacts (combined with other reasonably foreseeable projects)
Alternatives analysis (reduced scale, alternative designs, no project baseline)

Phase 3: Public Review (45-60 days minimum)

Draft EIR released for public comment. Minimum 45 days, often extended. Public hearings held. For controversial projects: expect 1,000-2,000+ comment letters, each requiring written response.

Phase 4: Final EIR Preparation (6-12 months)

Responses to all comments prepared. Additional analysis if significant issues raised. Final EIR includes comments, responses, any revisions. May require recirculation if substantial changes made.

Phase 5: Certification & Approval (3-6 months)

Planning Commission review and recommendation. City Council consideration. CEQA findings adopted. Mitigation monitoring program approved. Project entitlements granted (or denied).

Phase 6: Litigation Period (1-3 years)

30-day window for CEQA lawsuits after approval. Trial court proceedings: 6-18 months. Appeals possible: 6-18 additional months. Project cannot proceed until litigation resolved.

Realistic Total Timeline:

Best case (cooperative): 3-5 years
Expected case (normal opposition): 5-7 years
Worst case (sustained litigation): 7-10 years

Key Environmental Issues Requiring Extensive Analysis

1. Transportation and Traffic Impacts

Development would generate significant new vehicle trips:

Residential (2,500-3,500 units): 5,000-7,000 daily trips
Office workers (500K-750K sq ft): 3,000-5,000 daily trips
Retail/restaurant visitors: 2,000-4,000 daily trips
Total: 10,000-16,000 new daily vehicle trips

Required transportation analysis:

Intersection level of service analysis at 20-30 locations
Freeway segment analysis (I-5, US-101, SR-110)
Parking supply and demand analysis
Transit service adequacy assessment
Bicycle and pedestrian safety analysis
Construction traffic impacts (years of heavy truck trips)
VMT (vehicle miles traveled) analysis under new state guidelines

2. Air Quality Analysis

Construction emissions over multi-year construction period
Operational emissions from 10,000+ daily vehicle trips
South Coast Air Quality Management District thresholds (LA is non-attainment area)
Health risk assessment for sensitive receptors (nearby residences, schools)
Greenhouse gas emissions analysis under state climate goals (SB 32, AB 32)
Consistency with regional air quality plans

3. Visual and Aesthetic Impacts

High-rise buildings (15-30 stories) visible from Elysian Park, surrounding neighborhoods
Nighttime lighting impacts on adjacent areas and parkland
Shadow studies showing impacts on adjacent properties throughout year
Changes to historic viewsheds and scenic vistas
Visual simulations required from multiple key viewpoints
Consistency with design guidelines and community character

4. Noise Impacts

Construction noise over years-long construction period (pile driving, excavation, building construction)
Operational noise from increased traffic on local streets
Commercial activity noise (restaurants, entertainment venues, loading docks)
Impacts on adjacent residential neighborhoods
Compliance with city noise ordinances
Potential for late-night noise conflicts

5. Historic and Cultural Resources - The Most Sensitive Issue

This will be the most contentious and politically charged aspect:

Chavez Ravine's Painful History: 1950s displacement of Mexican-American families from Palo Verde, La Loma, and Bishop communities for "public housing" that was never built. Land later transferred to Dodgers (1958). Deep community wounds remain.
Chinatown Proximity: Adjacent historic Chinatown district with cultural significance
Dodger Stadium as Historic Resource: Built 1962, approaching historic status (50+ years old)
Archaeological Sensitivity: Potential for Native American cultural resources
Cultural Landscape: The land itself has cultural meaning to displaced communities

Unique Challenge: The cultural/historic resource analysis will be extremely difficult because opposition will frame any development as compounding historic injustice. The narrative will be: "First they stole the land from Mexican-American families in the 1950s for 'public housing,' then gave it to the Dodgers, now they're developing it for private profit." This is emotionally powerful and politically difficult to counter.

CEQA Alternatives Analysis - A Hidden Trap

CEQA requires analysis of alternatives that could reduce environmental impacts while still meeting project objectives. For ballpark village:

Required Alternatives:

No Project Alternative: What happens if project not approved (required by law)
Reduced Density Alternative: 30-50% less development (reduces impacts but also financial returns)
No Residential Alternative: Office/retail only (may be more acceptable to community but less profitable)
Alternative Configuration: Different building layouts, heights, or phasing
Alternative Site: May be required to consider developing elsewhere if this site creates unavoidable significant impacts

The Trap: CEQA requires identification of the "environmentally superior alternative." If that alternative is significantly scaled back, it creates legal and political pressure to approve the smaller version rather than the full proposal. This could reduce returns by 30-50%.

[Continued in Part 3B: Financial Stress Scenarios and Mitigation Strategies]

& Part 3B: Financial Stress Scenarios & Risk Mitigation Part 3B: Financial Stress Scenarios & Risk Mitigation

Part 3B: Financial Stress Scenarios & Risk Mitigation

[Continuation of Part 3A]

III. Market Absorption and Financial Stress Analysis

Residential Component: Can the Market Absorb 2,500-3,500 Units?

Proposed Scale: 2,500-3,500 luxury residential units

Development Timeline: 10-15 years (phased construction)

Required Annual Absorption: 170-350 units per year

Market Context and Challenges:

Downtown LA currently absorbs 800-1,200 luxury units annually across all projects
Dodger Stadium location is 3-4 miles from downtown employment core
Limited walkability compared to downtown—highly car-dependent lifestyle
Transit access dependent on gondola or other significant improvements
Competing supply: approximately 5,000 units in planning/construction in downtown LA
Location lacks established residential amenities (grocery stores, services, retail)

Risk Assessment: Moderate to High. While annual absorption numbers appear feasible on paper, the location's car dependency and distance from downtown employment centers make units less competitive than downtown alternatives. Pricing would likely need to be 10-20% below comparable downtown units to compensate for location limitations.

Office Component: The Weakest Link

Proposed Scale: 500,000-750,000 sq ft Class-A office space

Market Context (Post-2020 Transformation):

LA office market fundamentally changed by work-from-home normalization
Class-A downtown vacancy currently 18-20% (historically high, normal is 10-12%)
Office demand declining as companies reduce square feet per employee
Dodger Stadium location not an established office market (no cluster effect)
Competing supply: millions of square feet of new and renovated space downtown
Lack of nearby services and amenities office workers expect

Risk Assessment: High. Office fundamentals are weakest of all asset classes. Development may require:

Rents 15-20% below downtown comparables
Generous tenant improvement allowances ($80-100/sf vs. typical $60-70/sf)
Extended lease-up periods: 3-5 years vs. 1-2 years for prime downtown buildings
Possible need for anchor tenant pre-leasing before construction starts

Retail/Restaurant Component: Most Viable

Proposed Scale: 200,000-300,000 sq ft

Market Context:

Retail performing best in sports developments (Battery, Ballpark Village success)
Experiential dining and entertainment most successful uses
Game-day traffic provides built-in customer base (81 home games + playoffs)
Non-game-day success depends on critical mass of residents and workers

Risk Assessment: Moderate. Most likely component to succeed, but performance highly dependent on residential/office lease-up creating daytime and evening population. Early phases may struggle on non-game days until critical mass achieved.

Financial Stress Scenario Modeling

The base case valuation in Part 1 assumed optimistic conditions. Here are three scenarios showing impact of changing assumptions:

Variable	Base Case	Moderate Stress	High Stress
Development Timeline	10-15 years	15-18 years	20-25 years
CEQA/Approval Process	3-4 years	5-7 years	8-10 years
Construction Costs	$400-450/sf	$475-525/sf	$550-600/sf
Residential Pricing	$800-900/sf	$700-800/sf	$600-700/sf
Office Rent (annual)	$45-50/sf	$38-42/sf	$32-36/sf
Lease-Up Time	12-18 months	24-36 months	36-48 months
Exit Cap Rate	5.0-5.5%	5.5-6.0%	6.0-6.5%
Affordable Housing %	10%	20%	25%
Projected IRR	15-20%	10-14%	6-10%
Total Development Value	$2.5-3.5B	$1.8-2.5B	$1.2-1.8B

Critical Observation: Under moderate stress conditions (longer timelines, slightly lower rents), project remains viable but returns decline from "exceptional" (15-20% IRR) to "good" (10-14% IRR). Under high stress conditions (major delays, significantly lower rents), returns approach typical real estate performance (6-10% IRR), eliminating much of the extraordinary value creation identified in Part 1.

The Cost of Regulatory Delay

Every year of delay before construction begins costs real money:

Property Taxes: $5-7M/year (on land assessed value)
Security and Maintenance: $2-3M/year (keeping parking lots operational)
Opportunity Cost of Capital: $20-30M/year (money tied up earning nothing)
Construction Cost Inflation: 3-5% annually on $1.5-2B budget = $45-100M/year
Total Annual Cost of Delay: $72-140M per year

Impact of Extended CEQA Process:

2-year delay beyond base case: $144-280M additional cost
5-year delay (high stress scenario): $360-700M additional cost

This doesn't kill the project, but it meaningfully reduces returns and increases break-even risk.

IV. Why Los Angeles Is Uniquely Difficult

Comparative Analysis: LA vs. Successful Projects Elsewhere

Factor	Atlanta (Battery)	St. Louis (BPV)	Los Angeles
State Environmental Law	Moderate	Moderate	CEQA: Strictest in US
Entitlement Timeline	18-24 months	12-18 months	36-60+ months
Litigation Risk	Low	Low	Very High
Community Opposition	Minimal	Minimal	Well-organized, sustained
Political Environment	Pro-development	Pro-development	Mixed, progressive councils
Historic Baggage	None	None	1950s displacement
Affordable Housing Mandate	0%	Minimal	15-25% typical
Construction Costs	$200-250/sf	$180-220/sf	$400-500/sf
Labor Environment	Non-union, lower cost	Mixed	Heavily unionized, high cost

Fundamental Difference: Los Angeles presents 2-3x greater execution difficulty than any comparable sports development. Higher costs, longer timelines, greater political complexity, and more organized opposition create a substantially different risk profile than "proof of concept" projects in Atlanta or St. Louis.

V. Infrastructure Requirements and Public Costs

Transportation Infrastructure

On-Site Infrastructure (Developer Typically Pays):

Internal street network and utilities: $50-80M
Parking structures (2,000-3,000 spaces @ $50K each): $100-150M
Pedestrian infrastructure, plazas, landscaping: $20-30M
Subtotal: $170-260M

Off-Site Infrastructure (Often Public Cost):

Freeway interchange improvements (I-5, US-101, SR-110): $150-250M
Local street widening and improvements: $50-100M
Transit improvements (if not gondola): $50-100M
Regional bike/pedestrian connections: $20-40M
Subtotal: $270-490M

Total Transportation Infrastructure Need: $440-750M

Typical Negotiated Split: Developer pays $220-380M (on-site + some off-site), Public pays $220-370M (major regional improvements)

Utility Infrastructure

Water supply upgrades (mains, reservoirs, fire flow): $30-50M
Sewer capacity expansion: $40-60M
Stormwater management systems: $25-40M
Electrical distribution (substations, underground): $50-80M
Gas distribution and telecommunications: $35-60M
Total Utility Infrastructure: $180-290M

Utilities typically split 60/40 developer/public utility, with costs ultimately passed to ratepayers.

The Public Subsidy Debate

The developer will argue public infrastructure investment is justified by:

Economic development benefits (construction jobs, permanent jobs, tax revenue)
Regional infrastructure improvements benefiting broader community
Advancing public policy goals (transit-oriented development, housing production)

Community groups will counter:

Private development generating private profits should not require public subsidy
Public funds should prioritize affordable housing and community needs
This represents "privatizing profits while socializing costs"

Likely Outcome: Developer pays all on-site costs plus 50-70% of adjacent off-site improvements. City/state pays for major regional infrastructure (freeway work, major transit). Result: $150-300M in public infrastructure investment to enable private development.

VI. Risk Mitigation Strategies

Despite formidable challenges, there are strategies to manage execution risk:

1. Phased Development Approach

Phase 1 (Years 1-5): Retail and Entertainment District

Lowest regulatory hurdle (least environmental impact)
Builds on existing stadium traffic and fan base
Similar to successful St. Louis Ballpark Village Phase I
Generates revenue and proves market concept
Investment: $150-250M

Phase 2 (Years 5-10): Hotel + Limited Residential

Hotel benefits from Phase 1 activation and stadium events
Limited residential (500-800 units) tests market without overbuilding
More substantial but still incremental community impact
Investment: $400-600M

Phase 3 (Years 10-20): Major Residential and Office (Market-Dependent)

Scale determined by Phase 1-2 success and market conditions
By this point, development is established presence in community
Can be expanded, scaled back, or reimagined based on results
Investment: $800M-1.5B

Advantages of Phasing:

Reduces upfront regulatory burden (Phase 1 much easier to approve)
Allows market testing before massive capital commitment
Generates revenue that can fund later phases
Builds community familiarity and acceptance gradually
Provides flexibility to adjust to market cycles
Reduces financial risk by staging capital deployment

2. Community Partnership Strategy

Rather than fighting community opposition, co-opt it through genuine partnership:

Early Engagement: Begin community discussions 2-3 years before formal NOP filing
Community Design Advisory: Create formal role for community input in design process
Generous CBA Proactively: Offer 20-25% affordable housing before being demanded
Local Hiring Pipeline: Partner with community colleges for construction training programs
Community Ownership Component: Consider community land trust or co-op for portion of affordable units
Anti-Displacement Fund: $25-50M fund to help prevent displacement in adjacent neighborhoods
Community Benefit Space: Dedicate ground-floor space for community services, cultural facilities

Cost of Partnership Approach: $150-300M in reduced revenue and direct commitments
Benefit: Significantly reduces opposition, speeds approval process, improves political viability

3. Political and Coalition-Building Strategy

District Council Member: Secure Council District 1 support before citywide process
Labor Coalition: Build strong relationships with construction unions (creates thousands of jobs)
Environmental Groups: Emphasize sustainable design, LEED certification, transit orientation
Business Community: Frame as major economic development generating tax revenue
Housing Advocates: Highlight production of hundreds of affordable units addressing housing crisis

VII. Conclusions: Realistic Assessment

The real estate opportunity identified in Parts 1-2 remains substantial. However, execution presents significantly higher challenges than comparable projects elsewhere:

Regulatory timeline: 2-3x longer than other markets (5-7 years vs. 12-24 months)
Construction costs: 2x higher than comparable cities ($400-500/sf vs. $200-250/sf)
Community opposition: Well-organized with legal sophistication and political connections
Political complexity: Multiple veto points and competing interests in fragmented government
Historic sensitivity: Unique burden from Chavez Ravine's 1950s displacement history

These factors mean:

Timeline assumptions should be 15-20 years, not 10-15 years
Financial returns will be good (10-14% IRR) not exceptional (15-20% IRR)
Significant capital must be allocated to community benefits ($150-300M)
Patient capital with genuine 20+ year horizon is essential
Political and community engagement as important as financial engineering
Phased approach critical to manage risk and build acceptance

Final Assessment: The Dodgers real estate opportunity is one of the most valuable in professional sports, but also one of the most difficult to execute. Success requires not just financial sophistication but also political skill, community partnership, and willingness to accept longer timelines and lower returns than initially projected. The opportunity is real; the easy path is not.

© Randy T Gipe Next: Part 4 will examine value distribution—who ultimately benefits from the value created, how economic flows are structured, and what policy frameworks could better balance private returns with public benefits.

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Wednesday, October 29, 2025

Part 3A: Risk Analysis & Execution Challenges