Developer says Sierra Suites project 'killed'

December 9, 2009

LONG BEACH - Despite securing approvals from the California Coastal Commission, a Lodgeworks developer said Wednesday that he cannot move forward with the development of a second hotel at the Pike at Rainbow Harbor.

Chris Gebert, Lodgeworks senior vice president of development, said he cannot build a Sierra Suites hotel downtown because of pending litigation and a condition by the commission to pay about $937,000 in fees.

The fees feed into a program that helps public agencies and nonprofit groups provide affordable overnight accommodations near the coastal zone.

"Between those two (issues), it effectively killed the project," said Gebert, who was in San Francisco to address the commission.

The commission voted 11-1 to allow Lodgeworks to build a $33 million, five-story, 125-room, boutique-inspired hotel with 14,725 square feet of ground-floor retail space on a vacant lot near Bay Street and Cedar Avenue downtown, across from the AVIA, also a Lodgeworks hotel.

But the commission approved the project with the condition that the developer would have to pay the in-lieu fee.

Representatives from Lodgeworks and DDR, which operates the Pike, requested waiving that fee, citing tough economic times.

"We felt that there's plenty of low- to moderate-cost hotel accommodations already in Long Beach," Gebert said.

But several people, including members of Coalition for Good Jobs and a Healthy Community, spoke in support of staff's recommendation of having the fee paid, stressing that the coast should be accessible to all.

City Councilwoman Suja Lowenthal, whose 2nd District encompasses the project site, said she is not discouraged by the demise of the hotel project.

"We have the entitlement in hand ... to have a hotel there as a use," she said. "And if the opportunity presents itself, whether it's with Lodgeworks or any other hotel developer, we are able to market that site as a boutique hotel site."

Sierra Suites was to generate $600,000 to $700,000 a year in taxes to the city, and add 25 permanent employees and a multitude of construction jobs.

But even with the approval, Lodgeworks still had to contend with a lawsuit filed in August by the Coalition for Good Jobs and a Healthy Community.

The coalition of labor, community, religious and student leaders and groups claims the city violated the California Environmental Quality Act. The group says the report - done several years ago - did not account for the impacts of a second hotel and wants a new report. City officials have said the original report was done for the entire Pike project and that a second hotel would not exceed the full build-out number of 900 hotel rooms. The matter was to return to court on Feb. 3.

"The in-lieu fee adds a million in costs to the project and kills it by itself, and then the union issue, which obviously we believe is a frivolous lawsuit but our bank's not going to finance us with pending litigation," he said, adding that Dec. 16 is Lodgeworks' financing deadline to start project construction.

However, none of it matters, Gebert said.

"The deal was really thin to begin with and got worse over time because the market deteriorated," he said. "Then you add a million dollars to it, and it became an easy answer not to do it."

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