Istithmar lays off 13 workers; sees US project delayed

Istithmar World will reduce its workforce by 13 employees, about 10% of its workforce, the company announced Sunday.

The layoffs follow news that Istithmar’s investment redevelopment project in Los Angeles, California, the Grand Avenue project, is likely to be delayed due to lack of funding.

While the Los Angeles project and the layoffs are not directly related, the two issues point to further squeezing of investment money available to proceed with planned projects around the world.

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“We remain confident of our investment strategy for driving long-term growth and above-average returns, and have adjusted our short-term business plan to capitalise on the opportunities that will open up when the economic recovery begins,” an Istithmar spokesman said this week.

“We have a clear plan to reallocate resources to areas where we see potential in 2009,” the spokesman added. “Our investments are diversified across a range of sectors and are backed by prudent leveraging and diligent financial planning. Istithmar World is positioned to weather the global challenges in the short term and focus on growth opportunities to continue delivering exceptional returns to its shareholders.”

The spokesman declined to elaborate on its financial resources, but last week Related Cos., Istithmar’s US-based partner in the Grand Avenue project, announced that it has agreed to pay financial penalties to the Los Angeles Grand Avenue Authority if it fails to begin construction by Feb. 15. The company agreed to pay $250,000 a month until construction begins.

Istithmar has invested $100 million in the project, giving it a 45% stake. Three Korean insurance companies, under the umbrella of the Honua Group, provided an additional investment of $100 million.

It’s unlikely that Related Cos. will break ground next month. If the project doesn’t begin construction by February 2011, Los Angeles city and county officials can renegotiate the contract.

The delay in building comes as no surprise to Related Co California president Bill Witte who told Construction Week in a September interview that funding had become increasingly difficult given the current global economic meltdown.

The $3 billion project is expected to revitalise downtown Los Angeles with a park, 2600 residential units, retail and restaurants and the five-star Mandarin Oriental Hotel, with luxury residences to anchor it.

Meanwhile, Related has completed 80% of the construction documents for the project and paid most of the costs for the design work. Construction for the park is scheduled to begin on time.