CRA BACKS HOTEL FINANCING CRITICS SAY PUBLIC WOULD PAY JUST TO WORSEN ROOM SURPLUS.

Byline: Beth Barrett Staff Writer

The Community Redevelopment Agency on Thursday unanimously recommended approval of a $16 million loan for a planned 56-story hotel adjacent to the city's struggling Convention Center, despite concerns that the project could hurt existing downtown hotels.

In supporting the loan, commissioners said they believe the private sector is taking most of the financial risk in the hotel and a massive entertainment complex that they said is expected to help revitalize downtown and turn around the Convention Center.

But opponents immediately said they will go to court to fight the loan as well as a preliminary package of $66 million in breaks on paying the city's hotel-room tax for 25 years and on some fee waivers.

``There is already a surplus,'' lawyer Christopher Sutton said about downtown hotel rooms.

Sutton, the lawyer representing the Westin Bonaventure in its litigation against the proposed public package, said in an interview that a challenge will be mounted on the basis that it's ``fundamentally unfair'' to provide a single hotel owner with a loan of public funds. Blocks of rooms to be reserved at the new hotel during conventions also would give it an unfair edge, he said.

He also questioned the legality of using funds dedicated for Bunker Hill redevelopment for the loan when the hotel is not in that area.

But CRA officials said the Convention Center and Bunker Hill, which includes the city-backed $1 billion Grand Avenue streetscape project, are interrelated.

And the CRA board vice chairman, Shu Kwan Woo, called the $16 million loan - with payments deferred for five years, though interest would accrue - straightforward, adding that most of the money would pay for infrastructure in the area.

``I can see why other hotel operators might be concerned,'' Woo said. ``But, this is not just a hotel; it's a complete package. ... You weigh the risk to the benefits, and there's relatively little risk and great benefit.''

Officials said the CRA's action - which now goes to the City Council - was key for AEG, the company owned by billionaire Philip Anschutz and the owner of the Staples Center, to move ahead with a Sept. 15 groundbreaking on the first $500 million piece of LA Live, a planned surrounding entertainment and sports complex.

``The hotel always was the focal point of the whole master plan,'' said Ted Tanner, AEG's executive vice president for real estate. ``This was an important city action that was taken and gives comfort our investment is being supported.''

Lew Wolff, chairman and CEO of Wolff Urban Partners, the co-developer with Apollo Real Estate of the hotel, said he was pleased with the decision and looking ``forward to working with the mayor and City Council on finalizing this important project.'' AEG is selling the land to the developers for the hotel.

Included in the first phase of LA Live will be a 7,100-seat Nokia Theatre for live performances, as well as a smaller Club Nokia, a 15-screen movie complex, possibly a Grammy museum, 400,000 square feet for restaurants and other retail business and a major sports broadcasting outlet, along with underground parking.

Michael Collins, executive vice president of LA Inc., the private corporation that markets the Convention Center, said the hotel is vital to the center.

``Without the hotel, (Los Angeles) can't be effective in the convention business,'' Collins said.

The center costs more than $30 million a year in debt service and racks up nearly $1 million in additional net losses.

Faced with the financial drain, Mayor Antonio Villaraigosa said earlier this week that he would look at all options - from the details of the proposed public backing to whether the city should get out of the convention business by selling or leasing the center or hiring a private operator.

Tanner said that while AEG isn't in the convention center business, the company might be interested in talking about options with the city.

Beth Barrett, [phone]

beth.barrett(at)dailynews.com