The City Council this week chose a $125-million high-rise hotel and office project for a 20-acre redevelopment site just west of the San Diego Freeway.
The winning design, submitted by Andrex Development Co. of Los Angeles, includes a 16-story office building and a 14-story Marriott hotel that will be the two tallest buildings in this low-rise city. The current height limit is six stories.
The project will include two hotels with a total of 462 to 486 rooms, 500,000 square feet of office space and three high-quality restaurants.
Projected income to the city’s general fund, through bed and sales tax revenues, is $7.5 million over 10 years. Councilman Steve Andersen said he hopes the revenues would be used to reduce or eliminate the city’s 3.5% utility tax.
The site, bounded by the freeway, Rosecrans Avenue, Isis Avenue, the Santa Fe Railroad and 147th Street, is now occupied by a mixture of businesses and residences that the city will buy.
Six Proposals Rejected
Andrex won out over the other finalist, Watt Investment Properties Inc., which had proposed a $185-million project with more office space (1 million square feet) and fewer hotel rooms (300). Six other proposals were rejected earlier by the city staff.
City officials said Andrex was chosen because it offered a more attractive financial package and its smaller office space will mean fewer rush-hour traffic problems. James Mitsch, city chief of general services, said the Andrex proposal, with less emphasis on office space, posed less risk for the city in case of a glut of office space.
The selection of Andrex is merely the beginning of the redevelopment project. The city has yet to come to a firm agreement with the development company, acquire land from the 63 property owners in the area, relocate residents and businesses, and sell $5 million in bonds to finance part of the project.
If all goes according to plan, Andrex will start construction in 18 months to two years and finish two years later.
What the council did Monday was direct the city administration to put together in the coming week an agreement to negotiate exclusively with Andrex. If Andrex and the city administration cannot come to terms, the council directive ordered the administration to go back to Watt.
In the current proposal, land acquisition, relocation and demolition costs are projected at $28.6 million, with Andrex, bankrolled by Wells Fargo, putting up $23.6 million and the city selling tax-increment bonds for the $5-million remainder. Under tax-increment financing, the city will pay off the bonds using the increase in property tax revenues generated by the new construction.
In a key concession, Andrex agreed to accept parcels acquired by the city as soon as the city obtains the deeds, according to Bud Cormier, assistant redevelopment director.
Insisting on a more customary arrangement for redevelopment projects, Watt wanted the city to acquire parcels and hold them until they could be turned over in large batches, a process that would add $850,000 annually in borrowing charges to the city’s cost, Cormier said.
Andrex was organized in 1980 by developers Howard Mann and Gene Rosenberg.
Mann said the firm, based in the 1100 block of West 190th Street in the Los Angeles city strip near Torrance, completed $75 million in construction projects in the last three years and expects to be involved in projects valued at $250 million during the next three years, including the Hawthorne redevelopment project.