Convention Center hotel plan is confronted by indefinite delays.

Convention Center hotel plan is confronted by indefinite delays

In what could be a devasting blow to Los Angeles' ability to attract lucrative convention business, city officials and other sources reported last week that development of a major hotel next to the downtown Convention Center is facing new, indefinite delays.

Construction of the 1,000-plus room hotel, already years behind original schedule and millions of dollars over cost estimates, had been considered a key to booking large groups at the Convention Center, which is currently undergoing a $370 million expansion to double its size and make it more competitive with other convention markets in the Western states. The number of conventions booked by the city has been nosediving for several years.

According to Keith Comrie, the city's chief administrative officer, officials are now considering waiting for better market conditions before going ahead with construction of the hotel, which under current proposals would include between 1,350 and 1,435 rooms. The hotel would be one of the largest in Southern California.

Comrie said officials are also looking at several alternate sites for the property besides the previously announced locations on the corner of Figueroa Street and Pico Boulevard, and on the corner of Figueroa and 11th Street. Comrie would not reveal new locations currently under consideration.

"There's a lot of undeveloped land in the immediate area that could be used as a site," he said.

Officials from the Los Angeles Community Redevelopment Agency, the city department that would have to approve construction plans, were unavailable for comment.

Michael Collins, vice president of public affairs at the Los Angeles Convention & Visitors Bureau, said, "Any kind of delay is not the kind of news we want to hear, but we have not factored the hotel into our sales plans for the Convention Center until 1997. We still have some lead time but it doesn't sound very encouraging."

A source, who asked not to be identified, said that the CRA indicated its uncertainty about the project when it failed to provide a letter of intent to the Convention & Visitors Bureau stating that a Convention Center hotel is being planned.

The bureau had requested the letter of intent to show parties interested in booking conventions several years in advance that an adequate number of hotel rooms would be available near the Convention Center. Most groups, when booking a convention or trade show, require that a major hotel be adjacent to the convention site.

Collins declined to comment on the letter.

Earlier this year, three development companies submitted plans for construction of a hotel on the corner of Pico and Figueroa, which would be across the street from the Convention Center. The Convention Center is bordered by Figueroa, Pico, 11th Street and the Harbor (110) Freeway.

The three proposals had projected costs of $263.1 million, $279 million and $302.9 million. As an inducement for getting the hotel built, the CRA had told the developers that government subsidies may be available. In response, the proposals came in with requests for $57.1 million, $91.6 million and $47.3 million in financial assistance.

Saying the requests for assistance were too high, the CRA board of commissioners early last month directed the agency to go back to the developers for further information about their proposals and also to study an alternate, city-owned site at the corner of 11th Street and Figueroa. The existing north hall of the Convention Center is currently located on the 11th Street and Figueroa site.

The CRA has said that construction of a hotel on the north hall site would preclude future expansion of the Convention Center.

In perhaps another indication of the CRA's uncertainty about the hotel project, two of the three developers who submitted construction bids said the agency has not contacted them since the board action, which delayed a decision on picking one of the proposals for 90 days. Officials from the third development company were unavailable for comment.

The Los Angeles-based companies that have submitted proposals for the hotel are Ohbayashi America Corp., First Capital Decisions and Royce Development.

David Gold, consulting project director for Ohbayashi, has said the company's proposal could be transferred to the north hall site. But Victor Lee, vice president of Royce, said the north hall site is not large enough to accommodate his company's proposal, which includes 54,000 square feet of retail space, in addition to 1,435 hotel rooms.

First Capital's proposal includes 91,000 square feet of retail space, compared to 4,000 square feet in Ohbayashi's plan.

Carlyle Hall, a CRA commissioner, said alternatives are being considered to the three current proposals because of the size of the requested subsidies. "We have a spending cap of $750 million and we are approaching that now. The requests would put us near our limit. I don't think that right now we are in a position to be spending that kind of money on the project."

Prior to the CRA board's action, city officials had expressed a sense of urgency for the project, which in the late 1980s was delayed when subsidiaries of a developer who had planned to tackle the project filed for Chapter 11 bankruptcy protection.

Now, it appears that officials are willing to accept further delays.

Comrie said the city's ability to book major conventions would not necessarily be adversely affected if the hotel project is delayed beyond the mid-1993 completion date of the Convention Center expansion.

"Building a Convention Center hotel is still preferable but there are an additional 4,000 hotel rooms planned for the downtown area in the next few years and it is a flat walk from the center to several convention-sized hotels like the Bonaventure, Sheraton and Hilton," Comrie said.

He said the city's options include continuing to work with the three current proposals, study the north hall site, consider other sites, or delay the entire project until the economy improves. Sources noted that a stronger economy would make it easier to finance such a large project.

Comrie said he could not estimate how long the project might be delayed.

"It could be that we just go to another site, but clearly there's an option just to wait until the market turns around," he said. "It's a complex matter but I think it could be delayed because it's not a project that has to be done tomorrow."

In 1988 the city began negotiations with Calmark Holding Corp., a Los Angeles development company, to build a $480 million, 1,781-room Convention Center hotel on the Pico and Figueroa site. But the negotiations fell apart early this year when Clamark subsidiaries filed Chapter 11.