LVMH Concedes Probable Defeat in Cheval Blanc Beverly Hills Vote

Peter Marino architect

As bad as much of Wednesday’s news was in the world of the Arnault family’s LVMH, smart investors and AOC were more intrigued with what has to be a very surprise election result in Beverly Hills, California.

Who would think that Bernard Arnault’s intentions to build one of the most exclusive hotel properties in America would hit a brick wall in one of America’s top shopping zip codes.

When we first wrote in 2020 about the LVMH plans for a Cheval Blanc Hotel in Beverly Hills, it seemed to be on cruise control, a fait accompli. The story of what all went wrong here is a textbook example of not only loving the California lifestyle— as some top LVMH executives do.

It’s also a case of dealing with a really rich community that is divided around ‘real estate development’ no matter how exclusive. And also, of not considering the power of workers and unions, which is comparatively strong in California, as it is in France.

LVMH Has Conceded Probable Cheval Blanc Defeat

Reading Wednesday LVMH headlines for the week, and hitting “more” beyond the 11B in Arnault’s financial losses this week, I could not believe the headline.

As of May 24 [Wednesday], the “no” votes on the two measures required to greenlight the hotel project lead by about 50 votes.

On Friday afternoon, with only 135 vote-by-mail ballots left to be counted, LVMH conceded that it had lost the unexpected, razor-thin referendum organized by labor and select Beverly Hills residents.

My instincts say there’s a solve here, but LVMH issued a statement saying that they accept defeat on building a Cheval Blanc at that location.

"Although some votes remain to be counted, it now appears that Measures B and C have fallen short by a narrow margin, overturning the results of a comprehensive, years-long review and approval process," said Jessica Miller, a LVMH spokesperson. "We are proud to have worked with so many residents, civic leaders and business owners who supported this once-in-a-generation investment that would have delivered hundreds of millions of dollars in city funding and a beautiful gateway project for the Golden Triangle. If the final vote count confirms the voters' rejection of our project, we will respect the outcome, and will not bring the hotel project back in any form."

Issues Igniting the Cheval Blanc Defeat in Beverly Hills

Labor was upset that there were no provisions included for affordable housing in a larger Los Angeles area that’s enduring an affordable housing crisis of epic proportions. Anti-development residents joined forces with Unite Here Local 11 hotel and culinary workers.

They launched a person-to-person campaign to gain 10% of registered Beverly Hill voters to request a special election that might override the Fall 2022 approval of the project by the Beverly Hills City Council.

A room at the new Cheval Blanc Paris overlooks the Seine. PHOTO:ALEXANDRE TABASTE for the WSJ Magazine.

When the Cheval Blanc Paris opened in August, 2021, WSJ Magazine titled their overview Inside Paris’s Most Enchanting New Hotel. New York architect Peter Marino described the Cheval Blanc Hotels project to WSJ, saying: “This is sort of a pet project of Mr. Arnault,” says Marino, “a kind of ultimate statement of LVMH.”

The LVMH folks love California for its democratic spirit. Well — they just got a taste of it. But California needs LVMH, too — which is way too committed to racial justice and social justice, to say nothing of it deep pockets, to be thrown to the curb.

This local article outlines the issues around the Cheval Blanc. Note that LVMH does own the real estate — acquiring the old Brooks Brothers corner in 2018, if you are familiar with Beverly Hills. And here is the LA Times deep dive into the special election for Cheval Blanc.

LVMH Made A Huge Mistake Buying Votes

Hiring former politicos in Beverly Hills to make their LVMH case irritated monied voters living there. In a city with a mere 22,160 registered voters, LVMH spent at least $2.9 million on the Cheval Blanc election campaign.

That sum that far overshadowed opponents’ spending and is an astronomical amount of about $815 an affirmative vote for LVMH. Equally bad, if one argues that pouring money into promoting the Cheval Blanc position was worth about $400 for every vote cast — including the ones that caused people to vote against the hotel, it’s a terrible PR position for LVMH.

Had LVMH treated this business negotiation like selling their luxury brands, they would have expanded their team to be more in touch with all the people affected by the new Cheval Blanc. AOC would have told them they were on a suicide mission.

AOC can’t speak to the anti-construction views of wealthy property owners in Beverly Hills. But the issue of affordable housing for workers — not in Beverly Hills — but in a location with transportation also available was a critical one.

We have major hospitality groups like Marriott opening daycare centers for executives’ children. Tyson Foods Inc. already provides off-site child care for beef plant workers in Amarillo, Texas, who work the evening shift.

American businesses do not want to deal with these issues. But the workers shortage demands that they do. Similar realities apply to where workers live in America, in relation to their jobs.

An Epic Shortage of Affordable Housing for Workers

Los Angeles is in a total crisis in having affordable housing and public transporation to Beverly Hills is a joke. From parts of downtown LA to Beverly Hills is 75 minutes one way by bus. And there is a shortage of housing there — in the poorest parts of downtown LA.

Speaking to a friend in California on Friday, he said that many workers sleep in their cars at locations away from the high-rent districts where they work and only travel home on their days off.

I don’t blame the hotel workers union for arguing that a hotel charging $2000 a night for a room should be concerned that workers not be sleeping in their cars during the work week, because they must live two hours away to afford the housing.

The union wanted zoning for affordable housing built into the project — even if the city of Beverly Hills had to negotiate with other surrounding cities to make it happen. No one was arguing for low-cost housing next to some Beverly Hills gated community.

These problems are acute in many American cities, although cars-loving California is among the biggest challenges for workers, who also lack access to efficient public transportation into the high-rent districts.

Always Hire a Couple Consultants Who Don’t Tell You What You Want to Hear

LVMH invested three years developing architectural plans, studies and analyses to make sure the first Cheval Blanc hotel in the U.S. was right for Beverly Hills.

Clearly some consultants were wearing blinders on critical issues.

Last November, the 109-room proposed Cheval Blanc hotel was approved by the Beverly Hills City Council on a 4-1 vote. The council justified their approval, saying that the new development would generate for the city some $778 million in unrestricted funding over the next 30 years, $26 million in non-earmarked funds and $2 million to support local art and culture.

John Mirisch, the only city council member voting against the project is shocked over this week’s vote, given the amount of money LVMH spent on the election. Mirisch served as Mayor in 2013, 2016 and 2019 and has a long family history connected to the film industry.

“We’re effectively doubling the value of their land,” Mirisch told the Los Angeles Times last fall. “And the city negotiated, from my perspective, a measly $28 million.”

"Indeed, the election results -- if they hold -- show that Beverly Hills is more than just a brand to be monetized. It's our home," Mirisch said in a new email to the press. "Fortunately, there is still a large number of residents who remain committed to fighting the uphill battle for our community against the forces of self-interest and greed."

The Cheval Blanc project did exceed existing zoning laws governing the four properties bought by LVMH. Councilman Mirisch argued that the deal was way too good for LVMH and gave not enough money to the Beverly Hills community.

Original Post: April 9, 2020.

LVMH Plans Cheval Blanc Hotel for Beverly Hills

Peter Marino architect

Move over Beverly Hills Hotel and Beverly Wilshire. LVMH has plans to up the ante on exclusivity with a new hotel in its Cheval Blanc collection, 115-rooms of high-end everything sitting at the corner of Rodeo Drive and Little Santa Monica Boulevard. The proposed hotel would replace the former Brooks Brothers retail store and the Paley Center for Media.

LVMH acquired the former Brooks Brothers site in late 2018, at a reported sum of $245 million. The hotel will be designed by architect Peter Marino, who has worked with LVMH on new Louis Vuitton Maisons in London and Seoul.

“Our approach started with the location and context of Beverly Hills, resulting in an innovative, modern, Southern California design,” Marino said. “Working with artists is an essential aspect of my work, and site-specific artworks are being commissioned for the new hotel, both inside and out.”

The Cheval Blanc Hotel Beverly Hills isn’t expected to open until 2025, with sister hotels in Paris and London also on the horizon. In London LVMH hopes to redevelop two streets in Mayfair for a hotel with linked restaurants, an underground spa, high-end retail shops and a Louis Vuitton cafe.

Related: LVMH Affiliate Buys Retail Property As It Builds Portfolio in Beverly Hills, California March 28, 2023