Meanwhile, Bills Pile Up at Laguna Niguel : Ritz-Carlton Proceeds With L.A. Plans
Even with millions of dollars in unpaid bills piled up at its luxury Laguna Niguel resort, The Ritz-Carlton hotel chain is working hard to make final arrangements to build a $35-million, 26-story tower in the Bunker Hill area of downtown Los Angeles.
Hotel industry sources said financing for the 330-room hotel is the only remaining obstacle and one that they believe will be overcome within the next several months. Three general contractors bidding on the project said they anticipate Ritz will select one of them within the next several months and schedule ground breaking by December. The project would have a completion time of two years.
Colgate Holmes, president and chief executive of Ritz-Carlton, a subsidiary of Atlanta-based W.B. Johnson Properties, acknowledged in a telephone interview that his company is negotiating to build a hotel on the site and has completed preliminary architectural design work, but he declined to discuss details of the project. “We hope to build a Ritz there, but we’re not in a position to make an announcement. Call me back in a few months,” he said.
Bunker Hill Associates, which is managing the entire development and is in negotiations with Ritz-Carlton, wouldn’t comment on the status of the hotel project. Don Cosgrove, associate administrator of the Community Redevelopment Agency in Los Angeles, said the developer is negotiating with a number of hotel chains.
Still, one Los Angeles consultant familiar with the project said “It’s been known in the industry for some time that a Ritz Carlton will be built.” One government official working on the project, who asked not to be identified said, “It’s going to be built.”
The hotel would be the lodging landmark of the $1.2 billion California Plaza, regarded by many as the city’s most ambitious on-going redevelopment project. The hotel would be located at the east end of the project on Olive Street. Besides the hotel, the California Plaza project also calls for three office towers, a condominium complex, a museum, a dance gallery and a number of retail shops and restaurants. The 11.2-acre California Plaza is in the second year of what is expected to be a 10-year development.
Despite its local debts, Ritz-Carlton is generally regarded as one of the world’s top luxury hotel chains. Its recent interest in Southern California is a sure signal of a strong local economy that can support costly hotels with nightly room rates exceeding $200.
‘A Point of Concern’
Scott Hatcher, chief estimator for the Koll Company, a Newport Beach development firm, said his company and three others submitted final project proposals to W.B. Johnson in early April. He said that Koll Company was not deterred by the fact that W.B. Johnson still owes millions to contractors of its year-old Laguna Beach resort. “It was a point of concern,” Hatcher said, “but not enough to keep us from submitting a proposal.”
But unlike the $100 million Laguna Niguel structure, which is primarily a resort, the proposed Los Angeles Ritz-Carlton would be an urban hotel geared for overnight business executives visiting nearby office buildings, said Ritz-Carlton’s Holmes. “They are two totally different markets. The two hotels would complement each other,” Holmes said.
Los Angeles would become only the second city in the world to have two Ritz-Carltons in its metropolitan area. The company recently opened two hotels in the Atlanta area, a 454-room hotel in Atlanta and a 573-room resort in Buckhead, a suburb of Atlanta. Holmes said both hotels are reporting occupancy rates near 70%.
Two Area Hotels
Bruce Balitan, a consultant at Pannell Kerr Forster, the Los Angeles accounting firm that specializes in hotel consulting, agreed that there would be ample room in the Southland for two Ritz-Carltons less than 60 miles apart. “There is a market synergy that would be advantageous to both of them,” he said. By building at two locations in the Southland, “It would only increase the overall awareness of the Ritz-Carlton in the local market.
Hotel experts said the Ritz-Carlton would have preferred Beverly Hills as a location, but company executives recently ruled the area out because of its strict zoning codes. Last year, Johnson Properties contributed nearly $60,000 to a campaign committee that unsuccessfully tried to convince Beverly Hills voters to overturn the city’s three story height limit on hotels.
The 394-room Laguna Niguel Ritz-Carlton is 90% owned by New Jersey-based Prudential Insurance Co., and 10% owned by Johnson Properties. Prudential purchased its stake in the hotel in late February, sparking speculation that Johnson Properties had cash flow problems as a result of the cost overruns at the Laguna Niguel resort. Johnson Property executives deny any financial problems and insist they had long intended to sell most of their interest in the hotel.
Another Hotel in Florida
Johnson Properties is also building an $80-million Ritz-Carlton as part of a joint venture in Naples, Fla. The 12-story, 474-room hotel was designed by Newport Beach-based Wimberly Whisenand Allison Tong & Goo Architects, Ltd.
Johnson Properties will manage the Naples hotel along with the two Ritz-Carltons it operates in the Atlanta area, and the original and most well-known of its structures, the Boston Ritz-Carlton which opened in 1929. The company also has license agreements with Ritz-Carltons in Washington, D.C., New York and Chicago.
George Brown IV, president of Johnson Properties, also said the company was studying San Francisco as a potential hotel site.
But even with new hotels planned, Ritz-Carlton developers still owe $4.4 million to five subcontractors of the Laguna Niguel structure, said John Stephens, executive vice president of Stotle Inc., the Los Angeles-based firm that was general contractor of the resort. While much of that bill remains unpaid, only $300,000 in claims are still being disputed, he said.
The five subcontractors still have lawsuits pending against the hotel. Ritz Carlton executives claim they were overbilled for some of the work, but contractors insist the billing was proper.
