L. B. May Underwrite Some Costs of Last Hotel Along Its Oceanfront

The city has taken the first step toward financial participation in a proposed $200-million oceanfront hotel and office complex.

The city’s Redevelopment Agency, which has the resources to help pay for the project and would realize millions in tax revenue if it goes through, agreed last week to join negotiations between a partnership headed by Long Beach businessman and arts booster Harry Newman, and the Tidelands Agency, which administers the state-owned property. The Redevelopment Agency will be asked to contribute to the cost of preparing the land for development.

City officials say they are anxious to move the project ahead because it would utilize the last major undeveloped oceanfront property in the city, and incorporates walkways that would ultimately link the downtown to the shoreline. They note that the developers face unusually high costs to ready the site for building, plus the expense of setting aside at least six acres for parkland. The parkland is required by the city’s Local Coastal Plan.

Now Used for Parking

The 528-room Westin Hotel and two office buildings would be built on 16.3 acres of land northwest of Pine Avenue and Shoreline Drive. The property is currently leased to the Convention Center for parking. Tidelands Agency officials say they are counting on money from the new hotel and office lease to help offset revenue losses from tidelands oil property that resulted when the price of oil dropped.

Newman and his associates have joined with Koll Co., a Newport Beach partnership, in a 50-50 partnership, to form Shoreline Park Associates. The half of the partnership Newman heads includes his own company, Newman Brettin Properties, Cushman Realty Corp., JPI Development Co., and James Gray, chairman of Harbor Bank.

Gray is also a Long Beach harbor commissioner. The Harbor Commission is semi-autonomous, and not part of the city’s Redevelopment or Tidelands agencies. Carolyn S. Sutter, general manager of the Tidelands Agency, said she had thought about the connection and concluded that it does not present a conflict of interest.

Deputy City Atty. William H. Keiser agreed, although he said he has not studied the issue closely. “I believe the harbor board would not be in the chain of authority on this,” Keiser said. “If he’s not involved in making the contract, then there isn’t any violation.”

Consulted With Attorney

Gray, who described himself as “a very minor partner,” said he has been assured by his personal attorney that there is no potential conflict.

In addition to a hotel, the project includes 472,000 square feet of office space, 51,200 square feet of retail space and 2,224 parking spaces. Plans to incorporate space for the Long Beach Art Museum in the project were shelved after a potential donor backed out of the deal, Newman said.

Redevelopment Agency Director Roger C. Anderman said the agency may help pay to relocate utilities and a water injection well currently on the property, and install a complex, costly water system for firefighting. Relocating the injection well, which keeps the shoreline from sinking as oil is extracted, could cost $3 to $5 million, said Sutter.

Anderman said “it is not uncommon” for the city’s Redevelopment Agency to spend millions of dollars on site preparation for major redevelopment projects.

Negotiations between the Tidelands Agency and Shoreline Park Associates slowed last spring, after Tishman West Management Corp., a 50% partner, dropped out of the project, Sutter said.

Plans Move Rapidly

They have been progressing rapidly since July 22, when the Koll Co., a Newport Beach partnership, agreed to take over as managing partner.

The new partnership is seeking another partner, which would “supply all funds required to develop the property,” according to the joint venture agreement between Koll and Newman. Newman, general partner and chairman of Newman Brettin Properties, said he has discussed the project with several potential financiers, whom he refused to identify.

The agreement leaves open the possibility of also adding major tenants to the partnership. Sutter said Westin Hotels may be one of them.

Sutter said she is optimistic that a lease agreement between Shoreline Park Associates and the Tidelands Agency will be reached by the time Shoreline’s 120-day negotiating agreement with the Redevelopment Agency expires. The Redevelopment Agency’s contribution may be included in the lease or may be part of a separate agreement, Anderman said.

Any lease agreement would have to be approved by the State Lands Commission, Sutter said.

Also last week, the agency gave conceptual approval to plans by Kendrick Sterbentz Enterprises Inc. of Long Beach to build three apartment towers on the 3.5 acres formerly occupied by the Pike Amusement Park. Conceptual approval is a preliminary step, which means agency members like the proposed land use. It may be followed by a competitive selection process, in which the agency advertises for bids from competing developers.