Port Says It Will Build Office Itself
The Port of Los Angeles has severed negotiations with the company that was to develop a downtown San Pedro office tower, deciding instead that the Harbor Department will put up the building itself.
The decision, approved Wednesday by the Los Angeles Board of Harbor Commissioners, comes after five years of delays on the project. It was welcomed by local business leaders and politicians, who believe the long-overdue building can be erected more quickly with the Harbor Department in charge.
Port officials said this week that the port could complete the building by 1992.
May Affect Hotel Complex
But the cancellation of negotiations may jeopardize another pending deal that calls for the same company--HCT Inc. of Hollywood--to develop a hotel and retail complex at the port’s World Cruise Center.
HCT officials did not show up at the harbor commissioners meeting. Referring to the office project, a company vice president said: “We’re not about to come and beg for anything.”
But in a stinging press statement headlined “HCT Accuses the Port of Bad Faith,” the company claimed that the hotel deal may fall through, that port officials had “some hidden agenda” and that the port had made behind-the-scenes attempts to get an unnamed local developer to take over the project.
“You don’t go for almost three years and have the rug pulled out from under you unless somebody’s changing the deal for some hidden reason,” HCT Vice President Cyril Chern said in an interview. “I can’t put my finger on it, but I know that there’s some aroma emanating from down there that I don’t like.”
Port officials denied all of the allegations in the release.
Mark Richter, assistant director of property management for the port, said the two parties had simply reached an impasse.
According to both sides, negotiations had been continuing seriously for a year and a half but broke down over the port’s decision two months ago to seek an option to purchase the office tower. Chern and Richter said the sides could not agree on how to determine the building’s value.
Chern said the port insisted on an arrangement that would prevent HCT from making a profit and, perhaps, force the company to take a loss.
Replied Richter: “That is simply not correct. . . . It was never predicated on a no-profit basis.”
According to Chern, his company has spent $348,000 over the past three years on preliminary plans for the office tower, which is to be built across the street from Harbor Department headquarters, on a site that has been slated for redevelopment by the City Redevelopment Agency.
As far back as June, 1983, the port announced plans to develop a commercial office building with at least 100,000 square feet of space at that site, bounded by Palos Verdes Street, Harbor Boulevard, 3rd and 5th streets.
The port owns the land; it purchased a portion of the site on the open market and bought the remainder--2.6 acres--from the redevelopment agency in December, 1983. At that time, the port entered into an agreement with the agency to select a developer and adhere to a development schedule. The redevelopment agency has the authority to take back the land if the schedule is not met.
Little progress has been made since then. The agency has issued to the Harbor Department four extensions on its development schedule and has resisted local demands to take the land back from the port. The port is now four months behind on the latest extension.
Port officials said HCT has submitted various ideas for the design of the project, but none have been approved. The latest design involved a two-phase, 400,000-square foot complex with enough parking for 1,300 cars.
“After all this time, we are in a sense starting from scratch,” Richter said.
The delays have prompted repeated complaints from San Pedro business and community leaders, and from the redevelopment agency. Last month, agency Administrator John Tuite wrote the executive director of the San Pedro Peninsula Chamber of Commerce that “the agency has also been frustrated by the apparent inaction by the port regarding development of these parcels.”
Reasons for the delays vary. At one point, community leaders charged that port officials were dragging their feet because the harbor commissioners feared the new office building would obscure the view of the main shipping channel from their 5th-floor offices. Commissioners have said they bought the land to preserve the view by having control of what would be built there.
More recently, port Executive Director Ezunial Burts said progress lagged because market conditions were unfavorable for leasing the proposed building. In an October, 1987, interview, Burts said: “It is not enough to simply construct an office building and have it stand empty.”
The lack of tenants is one reason local business backs the port’s decision to build the office tower. It is difficult to obtain financing for a development unless tenants are secured in advance. With the port backing the project financially, that problem will be removed.
