Merv Griffin nearing sale of Beverly Hilton Hotel to owners of Peninsula. (Up Front).

Merv Griffin is close to a deal to sell his 581-room Beverly Hilton Hotel for as much as $110 million to Probity International Corp, the managing partner of the Peninsula Beverly Hills.

Sources familiar with the pending transaction pegged the deal at between $100 million and $110 million.

Griffin Group representatives declined comment. Neither Robert Zarnegin, a principal at Probity, nor Ali Kasikci, general manager of Peninsula Beverly Hills returned calls.

With the purchase, Probity, which developed the Peninsula in 1991 and owns 80 percent of the luxury hotel, would control nearly 800 hotel rooms within a two-block radius. Last April, the firm opened the $20 million, 101-room Graciela Burbank, that city's first luxury boutique hotel.

The company had also expressed interest in the former Global Crossing Ltd. headquarters as a potential hotel redevelopment last year before billionaire Tom Gores bought the 124,000-square-foot Beverly Hills property for more than $50 million earlier this year.

Griffin bought the Beverly Hilton, which sits on 8.9 acres at Beverly Hills' western border, from a partnership of Hilton Hotels Corp. and Prudential Insurance Co. of America for $100.2 million in late 1987.

The hotel has been the site of countless awards shows, including the Golden Globes, and other celebrity-studded events. It also is the home of the venerable Polynesian restaurant Trader Vic's, which in recent years has become more of a tourist destination than a Hollywood hangout.

Earlier this year, Griffin settled a two-year-old age discrimination suit brought by the U.S. Equal Employment Opportunity Commission involving the hotel's now-closed Coconut Club by paying 15 former job applicants a total of $220,000.

The prospective sale of the would mark the second Southern California hotel disposition in less than a year for Griffin, ranked No. 45 on the Business Journal's list of richest Angelenos with an estimated net worth of $460 million.

Griffin, who resides at the Beverly Hilton when in Los Angeles, sold the 14-acre Givenchy Resort and Spa, formerly the Gene Autry Hotel, in September for an undisclosed price.

Griffin, who made his early fortune as a singer and television host, created the game shows "Wheel of Fortune" and "Jeopardy." He sold his Merv Griffin Productions to Columbia Pictures in 1986 for $250 million.

In addition to the hotel, his real estate holdings include a 240-acre ranch in La Quinta and a Carmel Valley vineyard. He owns the 185room Scottsdale Hilton Resort & Villas in Arizona, as well as the St. Clerans Manor House, a former castle, in Ireland.

If the deal closes in the middle of the range suggested by those familiar with the transaction, the nearly 50-year-old hotel would trade for about $181,000 a room. By comparison, Trizec Properties Inc. has valued the recently renovated 637-room Renaissance Hollywood Hotel at $82.2 million, or about $129,000 a room, according to a filing with the Securities and Exchange Commission.

Meanwhile the 436room Sheraton Universal Hotel is close to being sold for about $45 million, or about $103,000 a room.

The Beverly Hilton price tag is largely a reflection of the address - as well as the hotel's longtime stature as a premier attraction for banquets and entertainment-related events.

"It's got the best banquet facility in the area, and (Griffin) gets the top entertainment parties in the city," said Jordan Richman, senior vice president of Grubb & Ellis Co.'s hospitality group. "Usually, food and beverage is not a money-making proposition (for a hotel) but it's certainly a high profit center there."

The average room rate in Beverly Hills was $259 from January through April, more than double the county's average, according to PKF Consulting.

Still, the hotel would need significant updating for it to approach the nearby Peninsula, where room rates start at $300 a night, almost double the Beverly Hilton's.

"It needs a lot of work," said Alan Reay, president at Costa Mesa-based Atlas Hospitality Group, who estimated that the hotel would need between $30 million and $50 million in upgrades. "It's a dated hotel."

Recent arrival

In 1991, nearly three decades after the last luxury hotel had been developed in Beverly Hills, Probity built the Peninsula, managed by minority owner and Peninsula Group parent Hongkong and Shanghai Hotels Ltd., for about $100 million.

Probity also developed the 45,000-squarefoot Los Angeles Fine Arts & Wine Storage Co. in West Los Angeles in 1990.

One hurdle the parties must overcome is Hilton Hotels Corp.'s long-term management contract. Still, with the Griffin Group exercising a substantial amount of management control, there would be an opportunity for a new owner like Probity to bring in a management team, according to a source familiar with the deal.

"Merv has more than usual controls over the operation," said the source. "Some could regard it as a de-facto franchise (with Hilton)."

Kathy Sheppard, a spokeswoman for Beverly Hills-based Hilton Hotels, declined comment.