Port Cancels Deal for Firm to Build San Pedro Hotel

The deal is off between the Port of Los Angeles and a Hollywood developer who wanted to build a hotel at the port’s World Cruise Center.

The Los Angeles Board of Harbor Commissioners on Wednesday canceled its negotiations with HCT Inc., which had plans for a hotel and office-retail complex at the cruise center. The move came two months after the port severed talks with HCT on a different project--a long-awaited office tower the port proposes to build in downtown San Pedro.

The port will develop the office tower itself but intends to look for a new developer for the hotel.

“It was their choice, not ours,” Mark Richter, assistant director of property management for the port, said of Wednesday’s action on the hotel project. Richter said that after negotiations for the office tower broke down, HCT officials told the port they were no longer interested in moving ahead with the hotel.

The company viewed the two projects as a package deal. In an interview two months ago, HCT vice president Cyril Chern said it was necessary to present them to lenders as one project in order to obtain financing.

Port officials, however, maintained that the two projects were not--and had never been--connected.

“The port had already terminated negotiations for the office building,” said HCT lawyer Rick Stein. “From that point forward, the relationship has always been, I think, irreparably damaged.”

Indeed, when the office deal fell through, HCT said the hotel deal was in jeopardy. At that time, the company issued a stinging press release that accused the port of dealing in bad faith and having “a hidden agenda.”

According to Richter, port officials subsequently telephoned and wrote to HCT in an attempt to pursue negotiations for the hotel, but were rebuffed in two letters from Stein.

In a Sept. 1 letter, Stein stated that HCT would continue working on the hotel project only if it could also develop the office building. On Sept. 28, the lawyer wrote that HCT was terminating its relationship with the Harbor Department but would consider resurrecting its dealings if the port would issue “the proper contractual and monetary assurances” to the developer.

By that, Stein said in an interview, he meant that the company wanted signed development agreements allowing it to proceed with both projects, plus reimbursement of $300,000 that HCT said it had spent on plans for the office tower.

In light of Wednesday’s vote by the commissioners, Stein said he filed a claim against the city of Los Angeles asking for the $300,000, as well as an unspecified amount of lost profits on both projects.

The claim, filed with the city clerk’s office, is a precursor to a possible lawsuit, Stein said.

HCT obtained the exclusive right to negotiate for the office tower in 1985 and obtained a similar agreement for the hotel project the following year.

The office building is proposed for a site across Palos Verdes Street from Harbor Department headquarters, on property that has been slated for redevelopment by the Community Redevelopment Agency. Although HCT submitted various ideas for the design of the project, none were ever approved. The latest design was for a 2-phase, 400,000-square-foot complex with enough parking for 1,300 cars.

Option Sought

Negotiations for that project broke down when the port decided to seek an option to purchase the office tower. The two sides could not agree on how to determine the building’s value.

The design of the hotel also had not been finalized, and HCT plans for it went beyond what the zoning permitted.

According to Richter, Los Angeles officials have awarded the Harbor Department a variance that permits a maximum of 240 rooms, 7 stories high, with “limited guest facilities and services.”

However, Richter said the project HCT proposed contained 200,000 square feet of office and retail space that, he said, is not permitted by the variance and is beyond the scope of an environmental impact report the port prepared for the project.

Richter said port officials asked HCT to conduct a new environmental impact report for the project, but the company failed to do so.

Replied Stein: “That’s strictly after-the-fact rationalization (for breaking off negotiations). That’s backpedaling.”