Crystal Cove’s Sea Change

The planners and dreamers who hope to remake the seaside historic district of Crystal Cove State Park into a boutique resort can expect to face a skeptical public as they take the wraps off their long-secret plans.

Environmentalists and legislators already have voiced concerns about the effects of construction on marine life and about the state’s role to rehabilitate the only 1920s and ‘30s cottages on the Pacific coast.

Now, hospitality industry experts wonder how anyone can recoup the renovation expenses without turning the state-owned land into an exclusive enclave for the rich.

Indeed, the estimated $20 million to $25 million in construction costs to renovate or rebuild 46 bungalows and add up to 44 more units scared away major operators.

“It was just not economically viable for us,” said Brenda Follmer, a spokeswoman for Delaware North Parks Services, which operates Yosemite National Park. “It was going to cost a lot more to do it right than the revenue would cover.”

The state Department of Parks and Recreation estimates that the average nightly room rate will be $225, and those planning to renovate the district expect it will go a little higher. But hotel experts figure rooms will have to average more than $300 a night to pay off debts.

Those kinds of prices are out of the average wage-earner’s league, though a small number of the units are expected to go for $100 a night.

Undaunted, state parks officials and a consortium led by the Post Ranch Inn, the wildly successful and exclusive private resort in Big Sur, are poised to sign a contract to create a resort that they say will be available to everyone--rich and poor.

“I don’t think there’s any question it’ll work,” said Michael Freed, a general partner of Post Ranch, on which the Orange County project is modeled. “Nowhere on the coast is there a group of cottages from the ‘20s and ‘30s era. It’s a special place.”

Some in the hospitality industry agree, saying the resort would be so different and so unusual that it won’t compete with its high-end neighbor, the Ritz-Carlton hotel in Dana Point.

More important, they say, Freed’s track record would ensure that Crystal Cove would capture the imagination of wealthier patrons who would pay $400 a night to rent one of the bungalows for weeklong family vacations. Those customers, Freed acknowledges, will be paying the lion’s share of the costs.

But even Freed concedes that the state will have to wait five to seven years, at least, before its cut--5% of gross receipts--gives it the $1 million a year that it wants from the project. The state already is collecting $500,000 a year from the current tenants.

But ultimately, the question is whether the posh, modernistic Post Ranch concept can be transplanted to Crystal Cove, where the ragtag collection of homey, family-oriented cottages is listed on the National Register of Historic Places.

Freed has not done any marketing or feasibility studies on the Crystal Cove concept. The only one done, by state parks, is 4 years old.

“Post Ranch is a very, very exclusive, high-dollar operation, not a mom-and-pop tourist area,” said James Erlacher, a vice president for development at Marriott International. “I’m surprised the state would be making comparisons between the two.”

On the Crystal Cove beach, at the end of a summer-dry creek bed, the old general store that Vivian Falzetti uses as her art studio bears a faded sign that reads: “Crystal Cove Standard Time. Please set your clocks back to 1930.”

Falzetti, her husband and others in the 46 bungalows--six of which are vacant--are spiritual heirs of those who first built shacks on the secluded beach in the late 1920s on land owned by the Irvine Co., the county’s biggest landowner.

The shacks expanded into houses, with jerry-built utilities, and typified the funky beach hamlets along the coast. People came not so much to swim but to draw, to read, to write, to commune with nature--the ocean on one side, sheer cliffs on the other.

Crystal Cove is the only community left, “the last intact example of vernacular beach architecture,” according to the National Register. It is also the only stretch between Newport Beach and Laguna Beach that has road access to the sand from Coast Highway.

The Irvine Co. sold the 12.3-acre historic district to the state in 1979 as part of the 2,791-acre tract that became Crystal Cove State Park.

The state since has been trying to figure out what to do with the property, finally gaining the right several years ago to evict residents on a month’s notice. Residents, meantime, have made only the most necessary repairs, and some homes are so dilapidated that they can only be torn down and rebuilt.

“We don’t know how long we’re going to be allowed to stay,” Doug Falzetti said. “Some people already have been evicted.”

For 18 months, state parks officials have kept a tight lid on the bidding and negotiations with the consortium, known as Crystal Cove Preservation Partners. But in recent weeks, prodded by the news media, they and Freed have talked more openly about the project.

Under the contract, the partnership will design, finance, construct and operate 60 to 90 units in the historical district along with a restaurant, two small adult swimming pools, a children’s pool, a dive shop and educational sites, such as nature trails. The restaurant will have two areas, one offering a moderately priced menu and the other for more expensive tastes, Freed said.

A marine biologist will be available at the dive shop, now Falzetti’s art studio, to help divers learn more about life underwater.

Rooms--Freed wants only 70--are expected to rent from $100 to $400 a night. Some bungalows are expected to hold two units, and an unknown number of additional cottages will be built.

Freed hopes to take the same environmental approach he took at Post Ranch, where little damage was done to the land in melding--and operating--the 30 units into a site 1,200 feet above the Big Sur surf.

“Nothing will be visible from PCH,” he said. “We’ll put up a berm or something. No cars are permitted in the historic district except by the reception building and restaurant, and to drop off dive equipment.”

Crystal Cove is such a unique property that it should be able to command a premium room rate, said industry analyst Jim Burba of South Laguna. “But it will need a very high average room rate,” he said.

Certain economies of scale, such as eliminating any need for a marketing staff, could help to make it work, he said, though operators shouldn’t count on Post Ranch customers to help much.

Celebrities, such as Robert De Niro, Barbra Streisand and Robert Redford, who flock to Post Ranch aren’t likely to spend a week at Crystal Cove, Burba and others say. The celebrities are paying for privacy, and the cove won’t have much.

“They’re not going to pay that kind of money if they can’t get away from us,” said Sandy Genis, a former Costa Mesa mayor and member of several environmental groups.

“And,” she wonders, “will people want to go to the restaurant there if it’s full of sand and parents with whiny kids, who have runny noses and only want hot dogs?”

In the state’s feasibility study, researchers decided there was “ample support” for a boutique resort consisting of cottages and studios at Crystal Cove.

Places like Post Ranch and the prospective Crystal Cove “literally create their own markets,” the study said.

Additionally, Crystal Cove “should actually benefit in the long term from the establishment of the southern Orange County coast as a major tour destination with a critical mass of major hotels,” the report states.

But the report means little to Freed. He didn’t do any formal market research for Post Ranch or for his other two projects, the Jean-Michel Cousteau Fiji Islands Resort and the Lodge at Skylonda in Silicon Valley’s Woodside.

“We did some gut checks as to what works,” he said. “If I had followed the research that people gave me or would have given me, I wouldn’t have done any of the three.”

Hospitality experts say that developers, especially those creating luxury boutique hotels, often decide against conducting formal research.

But, said hotel analyst Bruce Baltin of PKF Consulting in Los Angeles, “it’s a good idea to get a second set of eyes on it. A project can get to be a labor of love, and you can lose objectivity.”

Freed hopes he can rely on a loyal following that has made Post Ranch one of the most fully booked resorts in the nation. Many of his customers, he said, also go to his other resorts.

That high occupancy is the key to making Crystal Cove a success.

Freed said he doesn’t use standard industry measures to figure out how he’s going to repay debts. Those measures determine average room rates by factoring in occupancy rates of 75% or so. At Post Ranch, the occupancy rate has been more than 95%, and Crystal Cove will be well above the norm as well, he predicts.

By operating a nearly full hotel all the time, he said, he can afford to lower rates or throw in services free of charge. At Crystal Cove, for instance, breakfasts, mini-bars in the rooms, educational events and other amenities will be complimentary--at least to those paying the higher room rates.

“We don’t just provide hotel rooms,” he likes to say, “we provide an entire guest experience.”

To help keep it full at slow times, he plans to offer discounts to Orange County residents, much as he says he does in Big Sur for Monterey-area residents.

Even so, the Crystal Cove partners face other obstacles:

* The partnership won’t own the land and can’t lease it. They’ll have a 55-year concession, the longest in the state, but that might not be good enough to provide collateral for bank loans. It could even make investors leery.

* A series of public hearings will analyze, dissect and reconfigure any plan, driving up legal and other professional costs. Legislators also are weighing in with their concerns over the propriety of such involved public-private deals.

* The Irvine Co. has the right, under its deed restrictions in the sale to the state, to review any concession proposal for 60 days and approve it or take over the project itself.

* The partnership not only has to come up with the financing but also has to pay for any cost overruns. And the termite-infested units likely need more work than meets the eye.

“One of the difficulties with this kind of development is that you have a lot of infrastructure to deal with, and you have to work around a lot of environmental and other issues,” said architect and preservationist Michael A. Garavaglia of San Francisco.

Those kinds of problems drive up costs quickly, he said.

But on the other hand, Crystal Cove is a “unique product” and “a great thing to put together,” he said. “There are simply not many projects like this.”

Times staff writer Deborah Schoch and correspondent Melinda Fulmer contributed to this report.

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Renovation Partners

Renovating the historic district of Crystal Cove State Park will be the job of the Crystal Cove Preservation Partners, a consortium of companies specializing in environmentally sensitive projects. Roles aren’t fully defined but will evolve as the companies try to win remaining approvals and complete the project by 2000. Here’s a look at the companies:

* Resort Design Group, San Francisco: Will lead the project, handling development, architecture and management. Managing partner Michael Freed also is the general partner in Post Ranch LP, a limited partnership that owns Post Ranch Inn in Big Sur. Resort Design also developed the Jean-Michel Cousteau Fiji Islands Resort and the Lodge at Skylonda in Woodside, Calif.

* Post Ranch LP, Big Sur: Owner of the boutique resort in Big Sur. Along with Freed, Myles Williams, a former member of the New Christy Minstrels singing group, is a general partner. Resort Design is a limited partner.

* Investec Management Co., Santa Barbara: Major builder, developer and management company for residential properties; headed by Kenneth P. Slaught. It was the 35th largest home builder in Southern California last year; isn’t expected to be a contractor for Crystal Cove.

* Ekotek, Laguna Niguel: An engineering firm started by Roy Roberson, a civil engineer who came up with the plans for renovating Crystal Cove and persuaded Resort Design to join him. He was engineering director on the widening and realignment of Coast Highway at Crystal Cove and Newport Coast Drive, and worked at Keith Cos. in Costa Mesa and Worrell & Associates in Dallas.

Source: Resort Design Group, Times reports; Researched by JAMES GRANELLI / Los Angeles Times