San Pedro Hotel Unsold; Bids Called Too Low : Real Estate: At auction, the high offer for the Sheraton was a fraction of what it cost to build it.

The Sheraton Los Angeles Harbor Hotel in San Pedro remained on the block Thursday after an auction brought in a disappointing high bid of only $7.5 million, one-fifth the cost of building the project.

Owners of the 244-room hotel, which opened less than three years ago as part of efforts to revitalize downtown San Pedro, had hoped to get at least $13.8 million for the site. They rejected the high bid, which came from an unidentified group of Taiwanese investors.

“There were no real buyers there,” said Warren Breslow, a partner in Goldrich & Kest Industries of Culver City, which owns the hotel. “Certainly, it appears that we will have to wait it out until the hotel market gets better.”

Hotels have struggled in an overbuilt market, luring tourists and business travelers with low room rates. The rates at the Sheraton, at 601 S. Palos Verdes St., averaged $43.64 per night in the first three months of this year, down from $52.69 a year earlier.

The Sheraton, which lost $1.5 million last year, could break even or make a profit this year through a pending agreement with a major airline to occupy rooms at reduced rates, Breslow said. Meanwhile, there is no plan to scale back operations or close the hotel, he said.

“In order to maximize the potential of the hotel, it must be operated in a first-class way,” he said. “We’re going to continue to aggressively market it as a high-end hotel at modest prices.”

Parties who expressed interest in the hotel but didn’t make a bid will be contacted to see if they would be interested in buying through conventional means, said Jordan Richman, the Grubb & Ellis property agent representing the sale.

Some of the interested parties “don’t want to be involved in the auction process,” he said.

The hotel was among more than 30 properties owned by banks, corporations and insurance and credit companies up for auction at the Hyatt at Los Angeles airport.

Other properties, such as retail buildings and industrial sites, were sold, but another hotel also struggled to find buyers willing to pony up even minimum prices. A $4.5-million high bid for the Radisson Hotel in City of Commerce was rejected because the offer was about half of what owners were seeking.

“It’s the market,” Richman said. “There’s no rhyme or reason to it.”