Wary of High Bid, Panel Delays OK of Cabrillo Bathhouse Development

A plan for a Pomona partnership to convert San Pedro’s historic Cabrillo Beach bathhouse into a restaurant and retail complex has been put on hold after the Los Angeles Board of Recreation and Parks Commissioners questioned the financial viability of the proposal.

The Pomona partnership--which calls itself the Hurricane Gulch Development Co., after the popular San Pedro windsurfing spot--was selected for the project by the recreation and parks staff over a joint bid from the San Pedro Bay Co., headed by local developer Gary Larson, and the Santa Monica-based Janss Corp.

Reservations Expressed

But at their meeting Monday, commissioners expressed reservations about granting a long-term lease to Hurricane Gulch because its plan for operating the renovated bathhouse indicates that the city would receive 10 times as much rent over a 10-year period as it would under the San Pedro Bay Co. plan. Commissioners worried that Hurricane Gulch could not live up to its promise.

The Hurricane Gulch proposal calls for the city to receive 6% of the gross receipts generated by the project, while the San Pedro Bay Co. plan calls for vendors in the project to pay Larson’s company between 6% and 7% of their gross receipts, and for the city to receive 6% of that amount. In the early years of the operation, Larson’s company would pay the minimum annual rent of $24,000 required by the city of each bidder. Hurricane Gulch, based on its 6% formula, projects paying far more than the minimum.

The difference, according to a staff report submitted to the commissioners, is dramatic. Over a 10-year period, Hurricane Gulch would pay the city $2.8 million, while the San Pedro Bay Co. would pay $280,000.

Both Defend Figures

At Monday’s hearing, Larson complained that the Hurricane Gulch plan is not financially feasible, while defending his own figures as accurate. But Charles Pilcher, one of the four Hurricane Gulch partners, also defended his figures as accurate.

“Our proposal is within a reasonable range,” said Pilcher. “It is on the high end of it, but it is within a reasonable range.”

This confounded the commissioners, who indicated that the Hurricane Gulch bid offered too much and the Larson bid too little.

“When I see that kind of a difference between proposals and I have both parties stick to their numbers, I’m left with a very, very uncomfortable feeling,” said Commissioner Dominick Rubalcava.

“The discrepancy is unreasonably large,” said commission President J. Stanley Sanders.

And after Larson acknowledged that he could have hiked the city’s receipts had he skimped on renovation costs, Commissioner Mary Nichols questioned whether the department staff had placed too much emphasis on rental income and not enough on preserving the aging building, which once housed the Cabrillo Marine Museum but has been vacant for eight years.

Information Sought

The commissioners instructed the recreation and parks staff to report in more detail on both the rent and preservation issues. They also asked Larson and Pilcher to submit additional information supporting their arguments. A decision is expected at the next meeting, Sept. 11.

But unless the commissioners decide to reject both bids and seek new proposals, they will be forced to accept one or the other as is. After the meeting, Larson said it would be a mistake for the commissioners to seek new bids because the delay would allow the bathhouse to deteriorate further, making the project unattractive to potential developers.

A staff report submitted to the commissioners says Larson’s bid and the Hurricane Gulch bid are essentially the same with respect to renovations.

Both bidders propose to invest some of their own money in the renovation. Larson said his plan calls for him to spend $2 million to offer tenants a completely restored building. At Monday’s meeting, Pilcher said Hurricane Gulch proposes to spend $900,000 to provide a renovated shell, with tenants adding $700,000 in their own improvements, including some plumbing and electrical work.

Restaurant Planned

Both companies propose to bring in a large restaurant as the major tenant. Hurricane Gulch is negotiating with El Torito Restaurants, a national chain. The San Pedro Bay Co. proposal includes Gugie’s Lobster Pot, a restaurant that began operating in San Pedro in 1919. According to Larson, Gugie’s lost its 22nd Street site nearly two years ago due to construction at the Cabrillo Marina and has been awaiting the commission’s decision before relocating.

In interviews after the meeting, Larson said his proposal is geared primarily to attract San Pedro residents. But Fredric Hope, a partner in Hurricane Gulch, said: “We feel that that site, rendered properly, will bring people down the hill from Palos Verdes and over the bridge from Long Beach.”

Larson and Hope, who were once partners, suggested the restaurant/retail complex idea in July, 1987. Their plan prompted the recreation and parks staff to issue a formal request for proposals. Larson and Hope subsequently parted company and became competitors.

After Monday’s meeting, Larson, who has restored other historic buildings in San Pedro, complained that the recreation and parks staff did an inadequate job of analyzing the financial aspects of the two proposals.

Bids Thoroughly Analyzed

But Keith Fitzgerald, the parks department analyst who reviewed both proposals, said the bids were thoroughly analyzed and that Larson made an error in judgment. Larson’s “spectacular job” on the Arcade Building in downtown San Pedro does not necessarily qualify him for the bathhouse contract, Fitzgerald said.

“He’s in effect asking that the building be donated to him in exchange for his renovation,” he said. “We don’t donate city property so that people can make a fabulous profit off of it, which is exactly what he’s doing.”

Larson, meanwhile, says he is tired of such suggestions. “We’re being made out to be lining our pockets in gold while we’re stealing from the parks department,” he said. “It really irritates me.”