Despite a sagging market for office space and a potential glut of hotel rooms, the City Council and Redevelopment Agency have jointly approved construction of three office buildings and the downtown's fourth new hotel since 1980.
The proposed hotel, a 500-room Sheraton on Ocean Boulevard near the Convention Center, is part of a $130-million project that includes an office building of 24 stories and 400,000 square feet.
City officials also unanimously approved Long Beach-based IDM Corp.'s $33-million development of two six-story office buildings with a total of 200,000 square feet on the old Buffums department store site just west of the Civic Center.
Many Offices Vacant
Newport Beach businessman Stanley Cohen, who has held exclusive rights to the Sheraton site since 1982, said he now sees a "window" for new projects in the overheated construction boom that has left about one-fourth of Long Beach's downtown offices vacant and promises to produce 10 new downtown hotels or major hotel additions this decade.
Office space in the downtown area has doubled to 2.1 million square feet since 1982. And if all the hotel rooms now proposed were completed, the number of rooms would jump from about 2,650 citywide to 6,200 by 1990. Almost all of those new rooms would be in the downtown and adjoining harbor areas.
"I think the timing is just fine," Cohen said. "Only one other office building (IDM's) will be completed before we are in March, 1988. By then the existing inventory will have been absorbed."
Completion Next June
The situation is much the same for the Sheraton in the hotel market, Cohen said. "We've always meant to be the third hotel, behind the Hyatt and the Ramada," he said, "and that's where we'll be."
Actually, it will be the fourth new downtown hotel, following the 235-room Holiday Inn, opened in 1980; the 521-room Hyatt Regency, completed on the oceanfront in mid-1983; and the 380-room Ramada Renaissance Hotel at Ocean and Long Beach boulevards, now under construction and expected to be completed by next June.
The Hyatt has been highly successful, and local hotels in general, fed by a booming tourist and convention business, have had above-average occupancy rates.
Construction of the Sheraton, an on-again, off-again proposition for three years, now appears certain, Cohen said.
The project gained new life in May when North American Taisei Corp., a subsidiary of Japan's largest engineering, construction and real estate company, became Cohen's partner in the development.
Taisei will provide at least $25 million in capital for the joint venture, Cohen said. In addition, Marubeni Corp., Japan's largest trading company, is negotiating with Taisei to also participate financially, Cohen said.
With Taisei and perhaps Marubeni as investors, construction loans are no longer a problem, Cohen said. He said that banks and savings and loans are coming to him with loan offers.
That a corporation of Taisei's stature would make the Sheraton project its first U.S. development "says a lot about Long Beach," Cohen told the City Council. "The reality of Long Beach is finally catching up with expectations."
Council members noted that another giant Japanese construction firm, Kajima International Inc., is a partner with IDM in the proposed $450-million World Trade Center, which is expected to break ground a few blocks away in January.
Cohen, also a co-developer of the nearby Crocker Plaza office building, said the two-year construction of the Sheraton will begin next March on the block bounded by Ocean and Long Beach boulevards, 1st Street and Elm Avenue.
When completed, the 14-story hotel will be linked to the office tower by a five-tiered atrium. A 1,450-space subterranean parking garage is included in the project.
Parking Question Raised
The possibility of insufficient parking at the Sheraton was the only subject of contention during the Tuesday hearing. An attorney for competing developer Craig Caldwell said recent traffic and parking studies indicate the hotel will have 50% less parking than is needed during peak hours.
In response, Redevelopment Agency Director J. Edward Tewes said the Sheraton project meets city requirements for parking and he does not think problems will develop. If they do, he said, he has contingency plans.
The Redevelopment Agency has begun a nine-month process of notifying owners of 21 businesses and residents of 72 apartments on the Sheraton site that their properties will be purchased by the city and that they will be required to move.
The project is expected to bring the Redevelopment Agency a $1.3-million to $1.5-million annual share in property taxes after its completion, the agency has said.
City's Busiest Builder
Two blocks west of the Sheraton, IDM, the busiest builder in the city, expects to break ground on its three-quarter-block office complex this summer and complete it within one year, spokesmen said.
The project, which will wrap around the 80-year-old Bank of America building, is bounded by Pine and Pacific avenues, 1st Street and Broadway.
At the center of the red brick office buildings and parking garage will be a courtyard, featuring a restaurant, fountain and sculpture, said IDM executive David Ball.
A key feature of the IDM proposal is its abundance of parking. Its four-story parking structure includes not only the required 400 spaces, but an additional 150 for the Bank of America building, which is being refurbished. Another 100 spaces also will be included for future needs.