City Councilman Daniel Wong says he was hoping the city's annual Christmas party could be held this year at the new Sheraton hotel in Towne Center--a city redevelopment project that is taking shape alongside the Artesia Freeway at Bloomfield Avenue.
Instead, according to Cerritos officials and the hotel developer, city employees had better book a Long Beach hotel again this year. Only a steel skeleton is sitting on the idle hotel construction site.
Work stopped in late December and, despite months of negotiations, the city, the developer, and the bankers have been unable to reach an agreement that would allow construction to resume in time to open the hotel in November, as originally planned.
"The whole thing is the loan problem," Wong said.
Towne Center's developer, Transpacific Development Co. of Torrance, needs additional financing in order to keep construction going on the 203-room hotel, which is a key element in the 125-acre office and commercial complex that will also be home to the city's new Community Arts Center. Transpacific found a lender, but the bank wants guarantees from the city having to do with security for the loan.
City Can't Give Any More
"The lender wants certain things and the city doesn't want to give them and the city wants certain things that the lender doesn't want to give," said Transpacific President Peter Adams.
Wong said the lender "wants security. We have been giving it to the point where we cannot give any more or we become the developer or borrower ourselves."
Adams insisted that Transpacific has met the demands of both the city and the lender but declined to reveal details of the loan negotiations. "I think the remaining issues are between the city and the lender," he said.
Assistant City Manager Art Gallucci also declined to disclose details of the loan negotiations but insisted that the problem is between the developer and the prospective lender.
"Normally," Councilwoman Ann Joynt said, "we would not be involved with the lender, but this is more complicated than usual because we are the owners of the property."
Transpacific has a 90-year lease from the city for the hotel site. The hotel will be managed by the Sheraton Corp. Under the terms of the lease, Gallucci said, the city will get 5% of the revenue from rooms and banquet facilities and 2.5% of the food and beverage revenue, in addition to a bed tax and property tax.
While the city, the developer and the bank quibble over financial details, about 72 construction workers and 10 subcontractors have been off the job since December, according to Paul Matt, executive vice president in charge of construction at Peck/Jones, the Los Angeles firm hired by Transpacific to build the hotel. Even when an agreement is reached, Matt said, it will take a week or two to get work crews lined up again.
"I haven't rescheduled the project because I didn't know when it was going to restart," Matt said. He said the hotel is about 40% built, but there is no way that construction can be completed before the end of the year.
Progress on the hotel has been fitful from the start. A hotel room glut in Southern California and the October, 1987, stock market downturn made it difficult for Transpacific, which is also building office space at Towne Center, to obtain financing. To help prod development, the city is lending Transpacific $5 million to install streets and utilities. The city is also to lend another $5 million to build the hotel and $750,000 a year as an operating subsidy until the hotel becomes profitable.
Cerritos is not the only city to find that it has to make a considerable financial investment in order to get a hotel built. Compton has an unfinished hotel sitting alongside the Artesia Freeway, too.
Compton loaned its developer about $5 million last spring, only to have him stop work in November saying he needed more money. The Compton City Council recently agreed to come up with another $1.25-million loan so work could resume.