DEAL STRUCK OVER LUXURY HOTEL PLAN CITY AVERTS COURT OR BALLOT CHALLENGE TO DEVELOPMENT.

Byline: Rick Orlov Staff Writer

A threat to challenge in court or on the ballot plans for a massive public subsidy for a luxury hotel at the Los Angeles Convention Center was averted when Mayor Antonio Villaraigosa announced a deal Monday to placate the owner of the rival Westin Bonaventure to allow conversion of one-third of the facility to condominiums.

Villaraigosa said a week of intense negotiations led to an agreement with Bonaventure Hotel owner Peter Zen, backers of the l.a. live development near Staples Center and the union representing the city's hotel workers.

The city can now proceed with the $270 million financing package for AEG Entertainment, which plans to build a 56-story hotel and entertainment complex near the Convention Center - a project expected to result in more than $5 billion in new construction and jobs for the city.

In return, the Westin Bonaventure will be given permission to convert 400 of its 1,200 rooms into condominiums at some future date while providing three years of job protection for hotel workers.

``This is a win-win situation,'' Villaraigosa declared at a City Hall news conference. ``We were able to bring together people who had legitimate differences and come to a common solution.''

The plan, approved by the City Council on Sept. 30, gives Wolff Development and Apollo Real Estate Advisors a $16 million, below-market loan from the Community Redevelopment Agency and $4 million in city fee waivers.

The city also has agreed to forgo room-tax revenues from the hotel for 25 years. Zen had vowed to fight the plan in court or at the polls because he said it would have given the new hotel an advantage over his hotel and others in downtown. The newly announced condominium-conversion plan will allow the Bonaventure to remain competitive, he said.

Villaraigosa said the conversion would bring in an estimated $2 million in new property tax revenue, which would more than make up for the loss of any hotel bed tax from the Bonaventure.

More importantly, the mayor said, is Zen's agreement to drop his opposition to the new hotel, which is seen as key in reviving activity at the Convention Center, which costs taxpayers more than $30 million a year in operating losses and other subsidies.

``Everyone knows the Convention Center is a white elephant,'' Villaraigosa said. ``Angelenos all remember the downtown of the 1940s and '50s and there has been a vision for a number of years to recapture that.

``A Convention Center hotel is absolutely necessary if we are going to have a vibrant downtown, a downtown that people want to visit. A Convention Center hotel is the key.''

Mark Lieberman, president of L.A. Inc, the group charged with bringing conventions to the city, said meeting planners all cite a need for newer, better accommodations near the Convention Center.

``What they tell us is, If you will build it, we will come,'' Lieberman said. ``The hotel is absolutely essential.''

Tim Leiweke, head of AEG Entertainment, said the success of the l.a. live complex rests with the hotel's construction.

``It is the key feature,'' Leiweke said. ``This is a defining moment in Los Angeles history. I think people, 10 to 15 years from now, will look back at this day as the moment of monumental accomplishment.''

Leiweke said he hopes to break ground this month on some of the projects, with a goal of completing the hotel by 2009. And, he said, l.a. live is only the beginning of the revitalization of downtown Los Angeles.

He estimated that the Bonaventure condominium conversions would mean an additional $50 million in work, and that other downtown hotels would be making major renovations to compete for convention visitors.

However, some have questioned whether the deal is in the best interest of taxpayers, and whether enough new convention business can be generated to justify the expense.

``It's one of those things that drives me crazy,'' said Joel Kotkin, senior fellow at the New American Foundation. ``I keep asking, Why are we building this hotel? If we have a white elephant of a Convention Center, which everyone agrees to, then why are we building this hotel?

``The convention business is basically cyclical. They keep moving around from city to city. And, how many large conventions are we going to get to justify this?

``We already get a lot of the smaller groups that don't need a convention center. And, if it is going to be so profitable, then why should the public pay for it?''

But Leiweke said the public-financing package is critical to showing investors the city is committed to the hotel's success and to the future of l.a. live.

Villaraigosa said he is confident of the project's success, with estimates that at least 10 million people a year will come to the l.a. live venue.

Leiweke said his goal is to compete with Times Square in New York City, which draws 37 million visitors a year.

Maria-Elena Durazo, business manager of UNITE NOW, which represents hotel workers, said the agreement is important to her members because of the guarantees of job security.

``We had a situation in Beverly Hills where 500 workers lost their jobs when a hotel converted to condos,'' Durazo said. ``Under this agreement, we know what will be coming and our workers will have some protections.''

Leiweke said AEG also would be working with new hotels being planned for the area and others to see that they hire union workers.

Rick Orlov, [phone]

rick.orlov(at)dailynews.com