Suit Won’t Stall Sheraton Project, Say L.B., Backers

Development of a $130-million Sheraton hotel and office complex, one of the largest yet approved for the downtown area, will move forward for now despite a legal challenge from a rival developer, city officials and project sponsors said this week.

Backers of the 500-room hotel and 24-story office tower said they still plan to begin construction in March on a prime block just north of the Convention Center, and city officials said acquisition of the site is continuing.

Up-Front Deposits

Illustrating the developers’ intent was $3.5 million delivered to the Redevelopment Agency on Monday, said lead developer Stanley Cohen. The money increased to $8.5 million the up-front deposits to buy the site, he said.

“I have no reason to believe that the suit causes any significant changes,” said Cohen, a Newport Beach businessman. City officials have assured him that their legal position is strong, he said.

Cohen added, however, that a lender has not yet agreed to finance the Sheraton project, although several have expressed interest. About $100 million in financing will be required, he said.

“There’s no lender to bounce this (lawsuit) off of,” he said. “If a lender were already involved, the lender might have a different view.”

A formal loan request will be submitted to prospective lenders in 30 to 60 days, when the project design is complete and costs are more certain, Cohen said.

Long Beach businessman Craig Caldwell, whose proposal for the same site was one of four rejected by the Redevelopment Agency in 1982, filed suit Aug. 14 against the agency, the City of Long Beach and Cohen’s development team, which includes the Taisei Corp., a giant Japanese engineering and construction company. Also named in the suit by Caldwell are two potential lenders, California Federal Savings & Loan Assn. and Citicorp Real Estate of New York.

Caldwell maintains that because he owns about one-third of the 3.3-acre project site, his proposal for a hotel and office building should have received preferential treatment from city officials. The site is the block immediately north of Ocean Boulevard and east of Long Beach Boulevard.

Caldwell’s suit is similar to one filed by another disgruntled owner-developer, which has stymied a major project across Long Beach Boulevard from the Sheraton site for three years. In that suit, Long Beach Savings & Loan Assn. blocked construction of a $78-million office building and entertainment center that would have included restaurants, movie theaters and an ice-skating rink.

Appeal Pending

The city won that case in Superior Court last year, but Long Beach Savings’ appeal probably will not be decided until mid-1986.

Long Beach Savings is represented by Los Angeles attorney Roger Sullivan, who also is counsel for Caldwell in his suit.

“There aren’t any significant differences between the two lawsuits,” said Deputy City Atty. Barry Ross, who is handling both. The Sheraton project has remained active, unlike the other, because of Cohen’s willingness to proceed despite possible legal complications, Ross said.

Caldwell’s suit asks for an injunction to halt the Cohen project. The city must answer the suit by mid-September and a hearing on the request for an injunction would occur after that, Ross said.

A central issue in Caldwell’s suit is whether the city should have given him “reasonable preference” when it chose the developer. State law requires such preference for owners of a redevelopment site if the owners submit a proposal consistent with city plans.

A Matter of Timing

But Ross maintained that Caldwell, who purchased six parcels on the site in 1979 and 1980, was not an owner when the city adopted its downtown redevelopment plan in 1975 and thus was not entitled to preferential treatment.

Ross said, however, that the issue of when ownership preference is applicable “is kind of an open legal question.”

The Redevelopment Agency adopted its position to prevent speculators, who may not have the best project, from gaining an edge simply by acquiring land, Ross said.

A second major Caldwell contention is that city studies of the Cohen project underestimated the traffic it would generate by about 70% and the amount of parking it would need by nearly 50%.

“If a judge agrees with us, then the project has to be redesigned and our project would have to be reconsidered,” said Sullivan. “He (Caldwell) is raising the issue for selfish reasons, but it will benefit the entire city.”

Requirements Met

Redevelopment Agency officials have said the Sheraton project meets city parking requirements and that contingency plans can be implemented to alleviate peak-hour traffic problems if they develop.

Caldwell has rejected purchase offers from the Redevelopment Agency, Sullivan said. He estimated the value of his client’s 53,000 square feet of property on “one of the most valuable developable sites in Long Beach” at $100 a square foot. The city offer was about $25 to $30 a square foot, Sullivan said.

David Biggs, project manager for the city, said Sullivan’s estimate of the offer was “well below” the actual offer. He declined to say exactly what that offer was.

Twenty-nine of 47 owners in the Watson Apartments on the site have agreed to sell, Biggs said Tuesday. One of the eight owners of the shops and businesses on the rest of the block has also agreed to sell, he said.

Agency directors on Monday approved condemnation actions against the rest of the property owners. Purchase prices will be determined either through continuing negotiations or in court, officials said. The agency intends to take possession of the property within three months. “The (lawsuit) does nothing to this project as far as we’re concerned,” said Redevelopment Officer Roger Anderman. “We think it’s important that the owners and residents know that we intend to proceed.”

The Sheraton project was approved in July, ending three years of delays by Cohen, who had searched for a partner to invest in the venture. Taisei agreed in May to invest about $25 million, Cohen has said.

Community correspondent Sue Corrales contributed to this story.