Conceptual designs for the Cheval Blanc luxury development, a mixed-use project that could generate $1 billion in tax revenue, were included in the staff report. (Rendering courtesy of Cheval Blanc Beverly Hills)

The Beverly Hills City Council on Nov. 1 approved the development agreement for the mixed-use Cheval Blanc project, clearing the last hurdle for a luxury development that will transform the northern end of Rodeo Drive and generate as much as $1 billion in tax revenue over a 30-year period.

The development, on the 400 blocks of North Rodeo and North Beverly drives, will include a hotel with 109 rooms, roughly 25,000 square feet of retail space spread over two floors, a private club for up to 500 members, restaurants, a wellness center and pool deck. It would be staffed by approximately 250 employees.

“This is a once-in-a-generation project,” Councilman Lester Friedman said.

After more than three hours of presentations and debate about the project during the Nov. 1 meeting, the council voted 4-1 to approve the development agreement, with Councilman John Mirisch voting no.

While council members including Mayor Lili Bosse and Vice Mayor Julian Gold said the project would reaffirm Rodeo Drive’s status as one of the world’s premier lifestyle destinations while enriching the city’s coffers, Mirisch argued that by approving a project that provides so few public benefits while catering to the “super rich,” the City Council had failed its constituents. “We were hornswoggled, we were shortchanged, we were bilked, we were shaken down,” Mirisch said.

Mirisch also cast the sole dissenting vote on Sept. 20, when the City Council approved the project subject to a development agreement.

The development agreement requires LVMH, the developer of the project, to pay the city a $26 million “public benefit contribution” and an additional arts and cultural contribution of $2 million. In addition to the city’s 14% transient tax, the agreement also establishes a 5% surcharge on room revenue, and it imposes a 3% environmental mitigation and safety fee on any future sale of the property.

Under the agreement, LVMH must begin construction within one year and complete it within five, although it allows LVMH to extend the construction and completion dates by up to three years, at a cost of $250,000 per month to the city.

If LVMH fails to open and operate the hotel within five years, the company must pay the city $52 million. This sum includes the forfeiture of the public benefit and arts and culture contributions, and an additional $24 million in liquidated damages.

Anish Melwani, chairman and CEO of LVMH North America, pointed to the forfeiture fee as an example of LVMH’s commitment to establishing a lasting presence in the city’s most famous shopping district.

“We’re not just saying it, this agreement literally puts our money where our mouth is,” Melwani said.

In addition to keeping construction to a five year schedule, the agreement also requires the hotel to operate at a quality consistent with other Cheval Blanc properties.

While Mirisch approved of the city imposing a fee on LVMH for failing to meet its construction deadlines or selling the project to another entity, he said that $52 million is “chump change” to a company as lucrative as LVMH.

In 2021, LVMH recorded more than $63 billion in profit, a 44% increase from the year before, according to a January press release. LVMH CEO Bernard Arnault is estimated to be the world’s second richest person, according to Forbes.

Mirisch also criticized the agreement for not earmarking any tax revenue to build affordable housing in the city, noting that guests who can afford to pay the average nightly fee of $2,000 per room – the penthouse suite costs $20,000 – can afford to pay a little extra to subsidize low income housing. But designating some of the revenue as affordable housing funding was a non-starter for the developers, he said.

Charlie Carnow, a research analyst for UNITE HERE Local 11, a union representing service workers, also criticized the agreement for not allocating revenue for affordable housing or detailing what public benefits would be funded by the contributions stipulated in the agreement. “The housing crisis is … the biggest issue for the country at the moment,” Carnow said. “If you listen to nothing else, I ask that the development agreement specifically set aside some money so that people who work here can have some hope of being able to benefit from this community’s excellent schools and excellent public services and not spend hours getting home on transit or in traffic.”

No Beverly Hills residents spoke against the project, though Mirisch said that does not mean that all residents support it, adding that many residents did not have sufficient time to review the development agreement.

While Gold acknowledged that in a negotiation, “you can always ask for more,” he said that the tax benefits from the project are “staggering,” and applauded the city’s negotiators for their work.

Before calling for a vote on the agreement, Gold reflected on the decisions made by previous council members, whose foresight turned Rodeo Drive and the city into the thriving destinations they are today.

“I have a sense that we’re sitting in a moment of time that’s similar,” Gold said. “This city has been very blessed in that we’ve had so many years of prosperity, but I think that we have to maintain that, and we have to continue to do stuff that continues to preserve our place as a desirable, luxurious place to be. We have to be aspirational.”

Bosse called the vote “emotional,” saying that as the daughter of immigrants who moved to Beverly Hills to chase the “American Dream,” she believes the development will ensure that the city continues to provide the same opportunities and quality of life it afforded her.

“I believe that having this project is going to enable our community, and our children and our grandchildren, to thrive,” she said.