^It all depends on the condition of and historical relevance of the interior of the building in question, and whether or not the developer wants to gain historic landmark status on the City, State, or Federal level. Generally the City (I've done a lot of work with the great folks in LA in my time at the Higgins Building) shys away from altering any original elements of the building, unless they are A) architecturally or historically insignificant or B) beyond repair or restoration. As a default setting, the City leans towards preservation and restoration, but I'm sure exceptions can be made - as they are clearly being done here.
For example, if the exterior of a building were to be still intact, but the interior completely gutted, I wouldn't be surprise - or upset - if the city allowed the kind of facadectomy projects that Chicago and New York have had (many of them very successful). There just aren't any to speak of in LA, frankly because it hasn't come up.
On a side note, even if I count the loft floors in that cutaway, the highest count I get is 13-14 stories. I have no idea where they're getting 16 stories from.
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"Then each time Fleetwood would be not so much overcome by remorse as bedazzled at having been shown the secret backlands of wealth, and how sooner or later it depended on some act of murder, seldom limited to once."
Against the Day, Thomas Pynchon
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