An $18-million hotel project that local boosters predict could transform downtown into uptown and spur a retail renaissance in San Pedro has been approved by Los Angeles city officials.
Community Redevelopment Agency members on Monday unanimously approved plans for a 216-room, eight-story hotel in the Beacon Street redevelopment area. The project, announced at a time when a host of developers say they intend to build in the South Bay, will be located on a two-acre tract that overlooks the harbor's scenic Main Channel.
The plan is expected to be presented to the Los Angeles City Council within a month for final approval.
Los Angeles will reap an estimated $300,000 annually in taxes from the hotel, according to redevelopment officials.
Construction on the hotel project is scheduled to begin in early 1986 and be completed the following year. It will be built by Beacon Street Hotel Associates, a newly formed company composed of investors from the Westside development companies of Goldrich & Kest Industries and The Walter Co.
Slumping Business District
Approval of the hotel project ends years of anticipation and frustration for area businessmen eager to turn around San Pedro's slumping central business district.
Community leaders, including Councilwoman Joan Milke Flores, who represents San Pedro, repeatedly have expressed a desire for a hotel to be built on the site, saying it would serve as a prime attraction for business travelers and tourists and give a shot in the arm to downtown merchants. The area has suffered over the years as a handful of large retailers moved to malls or other commercial developments in outlying areas.
The old buildings on the planned hotel site at Palos Verdes and 6th streets were demolished more than eight years ago. The land has remained empty, creating a giant eyesore and making it difficult to lure new investment dollars into the business district, according to local businessmen.
"How would you like to have a downtown with a huge vacant lot at one end?" asked Bob Bershad, a San Pedro party supply dealer who serves on a Chamber of Commerce committee for downtown revitalization. "This hotel will really be the crowning jewel. We ought to dance in the streets when that first shovel hits the ground."
"This is the project the community has been waiting for ever since they started knocking down buildings on Beacon Street," said LeRon Gubler, executive director of the San Pedro Peninsula Chamber of Commerce. "The whole idea of the redevelopment agency was to give a new identity to the downtown area, but the projects that have been built so far have not created the spark or interest needed to create other development."
The Beacon Street urban renewal project began in 1969. Bounded by Palos Verdes, Mesa, 2nd and 7th streets, the 60-acre project was undertaken after federal money was obtained to raze more than 200 buildings in a blighted area that had been known for its brothels, bars and run-down hotels.
Over the years, redevelopment agency officials have guided the development of at least eight office, commercial and residential projects in the area, as well as a public plaza and a park. Except for the parcel of land where the hotel will be built, only about four acres in two small parcels remain to be redeveloped.
The hotel site originally was earmarked in 1981 for the construction of 212 high-priced condominiums by Shapell Industries, a Beverly Hills development company. However, the company, citing rising interest rates and the sagging housing market, backed out of the agreement in 1983, causing redevelopment officials to renew their search for a suitable developer.
Beacon Street Associates was chosen from four proposals submitted to the agency. The agency had asked that the proposals include plans for the development of two adjoining acres, but later decided to develop the land separately after the bidders failed to provide the redevelopment agency with enough information, primarily financial, to reach an agreement, said Dick Bauer, a real estate officer for the agency. The land is one of the two remaining parcels left to be redeveloped.
Bauer said Beacon Street Associates will pay the city $1.8 million for the land, a price he termed a very good return for the city. The figure translates into $20 per square foot, or $8,333 per hotel room, he said.
By comparison, a proposed plan by a developer to construct a 13-story Hilton hotel in Carson adjacent to the Civic Center calls for 6.3 acres of land to be sold by the city for about $5 million, or $17 per square foot, according to Aldolfo Reyes, Carson's redevelopment project manager. The plan has not yet been approved by city officials.
Successful Track Record
Jerry Grimaldi, project manager for the redevelopment area, said Beacon Street Associates was selected because of its investors' successful track record in developing major projects, the design concept it submitted, and the community's positive reaction to the company's proposal.
While it might appear, especially to local merchants, that the agency took an inordinately long time to work out a contract with a developer, the task typically is time consuming, he said.
"I think what people fail to realize is that a development is not like a manufacturing firm where you produce widgets and produce so many thousands of widgets every day," Grimaldi said. "Delays are just the nature of the business itself."
Despite plans by developers to build six hotels in the South Bay, stretching from Gardena south to Carson and Harbor Gateway, Grimaldi and Manny Aftergut, manager of the hotel project for Beacon Street Associates, predicted that the San Pedro hotel can get a jump on the competition and carve out a niche catering to corporate travelers who call on Port of Los Angeles officials, and tourists expected to visit the community once the nearby World Cruise Center is completed.
Cruise Ship Companies
The port-owned center, which is under construction in the harbor near the Vincent Thomas Bridge, will house the growing number of cruise ship companies that have moved to the West Coast in recent years in search of new customers.
"I think the hotel will be one of the early entries into the market," Aftergut said. "There has been a boom in hotel building nationwide, but San Pedro and the Port of Los Angeles have not been part of that boom. We're confident the hotel will be built and be a community and economic success."
In addition, both men said that based on marketing studies, there appears to be a shortage of hotel rooms in San Pedro. At present, there are four motels in San Pedro, and the largest, the 115-room Sunrise Motor Hotel, operates at or near capacity most of the time, they said. The Sunrise, about a block away from the planned hotel, was built several years ago as part of the redevelopment project.
Aftergut said the hotel would be operated under a franchise agreement. He said that at least four companies have expressed a strong interest in operating the facility, but no contract has been signed. He declined to identify the companies.
In addition to the 216 rooms, Aftergut said, the hotel will include banquet facilities, retail shops, a restaurant and parking for 250 vehicles. There is enough room on the site to allow later construction of a second eight-story tower with 100 rooms, he said.
Aftergut said Culver City-based Goldrich & Kest Industries has developed large properties in Southern California for more than 20 years. The company's work primarily has been in large residential developments.
The Walter Co., headquartered in Beverly Hills, has built hotels for a similar length of time, he said, and owns hotels in four cities, including Los Angeles and Anaheim, that are operated by Holiday Inn. Until recently, the firm owned an interest in Harrah's Marina casino in Atlantic City, N.J., he said.