Sheraton Owners Say Sale Is Near : Tourism: Operators of the 3-year-old San Pedro hotel hope to reach a deal soon with an unnamed foreign group. Facility has lost money since it opened.
Owners of the Sheraton Los Angeles Harbor Hotel, the cornerstone of efforts to revitalize downtown San Pedro, say they are close to an agreement to sell the property to a foreign hotel investment group.
Goldrich & Kest Industries of Culver City, which has operated the hotel in the red since it opened three years ago, says it may reach a deal today or Friday. Company officials declined to disclose the name of the potential buyer. The company’s sales representative said the price would be more than the $11.5 million a Hong Kong firm had offered last week.
Still, the hotel is expected to be sold for only a fraction of its $36-million cost.
The sale would please Los Angeles Community Redevelopment Agency officials, who opposed an earlier offer by Marymount Palos Verdes College in Rancho Palos Verdes to buy the hotel and turn it into a dormitory.
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Councilman Rudy Svorinich Jr., who has proposed an aquarium for San Pedro, also opposed the Marymount deal because he believes the area will eventually flourish as a tourist destination.
The hotel “is pivotal to increasing tourism,” said Jeffrey Skorneck, the Community Redevelopment Agency project manager for downtown San Pedro. “To lose the hotel would be a big setback.”
When it opened, the city predicted the 10-story, 232-room Sheraton would attract business travelers and tourists. The hotel, at 601 S. Palos Verdes St., is near the Port of Los Angeles, Ports O’ Call Village shopping center and a cruise ship terminal.
But Goldrich & Kest has lost money ever since it opened the hotel, including $1.5 million in 1992. Occupancy rates have hovered at 61% and room rates have been about $40 to $45 per night--both below average compared to other South Bay hotels.
“It opened at the wrong time--during the recession--and it has been very difficult gaining momentum in a down market,” said Jordan Richman, a Grubb & Ellis Co. specialist in hotel sales who is representing Goldrich & Kest.
The Sheraton also has had to compete with hotels in Long Beach for cruise ship tourists and international trade executives, the groups of travelers that were expected to provide the bulk of the hotel’s business.
The hotel, however, has been successful at selling large blocks of rooms, particularly to airline flight crews, although at reduced prices.
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In July, Goldrich & Kest tried to auction the hotel for at least $13.8 million, but the highest bid was $7.5 million and the offer was rejected.
Earlier this month, Marymount Palos Verdes College offered $15 million for the hotel, but the Community Redevelopment Agency, which acquired the land for the hotel, and Svorinich blocked the bid fearing it would interfere with plans to boost tourism. A sale to the college would have been complicated because the hotel’s deed requires that it be sold to another hotel operator.
Last week owner Jona Goldrich said that he was nearing a deal to sell the hotel for $11.5 million to Hari Harilea, a Hong Kong investor, who planned to turn it into a Holiday Inn Crowne Plaza.
Goldrich pressed the redevelopment agency to accept the deal, arguing that otherwise he would have to close the hotel on March 1.
The agency gave tentative approval to his proposal, and made an arrangement to restructure $2.5 million in loans it made to Goldrich & Kest.
But with the new unnamed buyer in the wings, the Harilea deal apparently has fallen through.
The new buyer, which owns hotels in the Far East, is seen as attractive because it could tie marketing efforts at overseas properties to the Sheraton, Richman said.
The redevelopment agency, Skorneck said, is principally concerned that “the buyer (be) capable of running a hotel at least at an equal caliber of the present owner.”
