‘Designer Hotel’ Opens as San Diego Vacancies Soar

Aventine, the Michael Graves-designed hotel-office-restaurant complex in La Jolla that held its grand opening Saturday, has already attracted some irreverent nicknames, including “Big Toast,” “Old Radio” and “Tombstone.”

The nicknames, all of which refer to the distinctive roof line that architect Graves designed for the 400-room Hyatt Regency hotel portion of the $150-million project overlooking Interstate 5, are a measure of the project’s distinction. San Diego, with its plain-vanilla skyline, has never seen anything like it.

What remains to be seen is whether Aventine can attract hotel guests and office tenants as readily as nicknames, a formidable task in light of San Diego’s overbuilt hotel and office markets. Vacancies in office buildings in Aventine’s neighborhood are pushing 40%, while San Diego County’s average hotel vacancy rate in January hit its highest level in more than a decade.

Not that Aventine’s financial future is in doubt. As with so many other recent Southern California office and resort developments, Aventine was built with financing from Japanese investors who can afford to wait patiently for the project to turn a profit.

But there is no question that Aventine is opening at a less-than-propitious time. The guest room count in San Diego County swelled by 37% in four years as the hotel industry geared up for last November’s opening of the San Diego Convention Center. And office construction in the city’s so-called Golden Triangle--Aventine’s neighborhood--shows no sign of abating, despite the vacancies.

Clearly, Aventine’s developers are hoping that the Graves-signature design will be a significant asset in the competition for office tenants and weekend tourists, most of whom come to San Diego seeking a room on or near a beach. (Aventine is 1 mile from the shore.) In fact, the Aventine is positioning itself as the area’s first “designer hotel.” Aventine Hyatt General Manager Steven Pelzer said his hotel’s “major amenity” is that it is the work of a “celebrity architect.” Each of the hotel’s rooms and common spaces are ornamented with distinctive Graves furniture and fixtures.

If the project does make a meaningful architectural contribution to San Diego, much of the credit belongs to Aventine developer Jack Naiman, who has built several million square feet of office buildings as well as a chain of upscale health spas called Sporting Clubs of America.

Naiman, an art collector and classical civilization buff, said in an interview that he intended all along to create a landmark on the 11.7-acre parcel at Interstate 5 and La Jolla Village Drive that he bought in 1984. At the time, the parcel was considered among the most desirable undeveloped sites in Southern California.

To obtain an appropriately monumental design, Naiman held a mini design competition between two of the country’s most distinguished architects, Graves of Princeton, N.J., and I. M. Pei of New York. Naiman’s instructions to the designers were to create “something romantic” but with a Roman flavor, hence the name Aventine, one of the seven hills of ancient Rome.

Graves won the competition with a startling design that is a Postmodern treatment of a number of Italian architectural icons, Naiman said, including medieval siege towers, Umbrian villas and the cathedral campaniles. The design’s principal elements were the 15-story hotel, a 228,000-square-foot office component, a sprawling health club and four restaurants.

Equally as striking as the hotel’s roof line is Graves’ office element, composed of three parts connected by a common lobby: a six-story palazzo, an 11-story tower and a campanile (or bell tower) of similar height, an unabashed knock-off of the Leaning Tower of Pisa.

But the project almost died because Naiman couldn’t nail down financing. During a two-year period, virtually every California lender turned him down. There were several reasons but, in general, banks were leery about funding a project that combined disparate elements such as hotels and offices in an interdependent whole, Naiman said.

One lender who asked not to be identified said that his bank was also concerned that Aventine was located too far--about a mile--from the University Towne Centre shopping mall and its expanding node of adjacent office buildings.

“Aventine was at the far edge of the whole process,” the lender said.

In fact, the office portion of the project opens this month with only 15% of the space leased, a relatively low figure, although project spokespersons say additional leases totaling another 15% of the space will soon be signed.

There also were concerns that Aventine’s hotel might have difficulty competing for weekend guests against La Jolla’s water-oriented hotels, and that Aventine’s 2,000-member Sporting Club of America element was too expensive for nearby residents who are seen as the primary market.

Finally, it took Japanese money to get the project off the ground. In 1987, Naiman announced that he had taken on three Japanese equity partners: Shimizu Corp., one of Japan’s largest general contractors; the Nissho Iwai trading company, which had worldwide 1988 revenue of $83 billion, and real estate investor TSA International.

The Japanese equity partners helped arrange a construction loan from Long Term Credit Bank of Japan and construction began in spring, 1988.

Neither Shimizu nor TSA were strangers to big-ticket U.S. real estate deals. One of Japan’s “Big Five” construction companies with revenues in excess of $7 billion, Shimizu bought a minority interest in Dillingham Construction of Pleasanton, Calif., in 1987 and subsequently signed a joint venture deal with Beverly Enterprises of Pasadena to build a chain of nursing homes in Japan.

Shimizu is also an investor in the $200-million Great American Plaza office-hotel project now under construction in downtown San Diego, as well as a $400-million redevelopment project in Santa Ana that includes two office towers and a hotel. Shimizu is also a partner in the $55-million Ritz-Carlton resort under construction in Marina del Rey.

TSA International, a Honolulu-based real estate investment company headed by Japanese deal maker Takeshi Sekiguchi, has major stakes in Westin hotels on the islands of Maui and Kauai as well as the 1,400-room Hyatt Waikoloa on the island of Hawaii.

Last year, TSA International became a major investor in the 560-room Four Seasons Aviara resort planned for Carlsbad.

Now that the challenge of building Aventine has been overcome, the one of making it a profitable property lies ahead. No one feels that challenge more keenly than Steven Pelzer, general manager of Aventine’s Hyatt Regency hotel, which must compete in an increasingly crowded San Diego County market in general.

The unprecedented boom in hotel construction since 1985, a bump in inventory that has proceeded much faster than room demand, resulted in San Diego County’s average hotel occupancy rate dipping to 53.7% in January. That’s traditionally a slow month for local hoteliers, but nevertheless the occupancy rate was the lowest in more than a decade.

The La Jolla market in particular has toughened with the opening of the Aventine Hyatt in January and the 400-room Sheraton Grand at Torrey Pines last November. In addition, a 210-room Ritz-Carlton is scheduled to open in late 1991 near UC San Diego.

Of the more than 40 architectural projects that Graves is currently involved with, several are located in Southern California, including the Walt Disney corporate office nearing completion in Burbank, the Metropolis master-planned redevelopment in Los Angeles, the Venice public library and the Institute for Theoretical Physics building at UC Santa Barbara.

Graves also designed the controversial Swan and Dolphin hotels at Disney World in Orlando, Fla. The 760-room Swan opened in January and the 1,500-room Dolphin is set to open in June. A spokeswoman for Graves said the Aventine Hyatt is the architect’s first hotel design actually to be built.