WHITTIER — After more than a year of searching for a developer willing to transform a key downtown area across the street from the Whittier Hilton, the city's Redevelopment Agency has rejected the only offer it received.
City Manager Tom Mauk said the plan now is to "brainstorm and start over with the process." The City Council, acting as the Redevelopment Agency, directed the staff to re-examine possible uses for the area.
"You can study the thing to death, but the proof is in what developers actually want," Mauk said.
However, in the case of a proposal from Relco Industries and Larry Sade, what developers wanted was not enough.
Relco, a Los Angeles development company, proposed building a one-story, 42,000-square-foot shopping strip anchored by a gourmet food market. The developers wanted the city to subsidize the project for $1.3 million--about 20% of its cost.
City officials said they didn't want to pay that much, especially when they have expressed a preference for a larger project that includes both office and retail space. But Peter Novak, Relco's executive vice president for development, said he doubts that the city can get what it wants.
"Having done quite a bit of market study, we have concluded that at the moment, to do an office building in that particular area would be extraordinarily speculative," Novak said. "Until and unless we are able to secure a tenant for a good part of an office building like that, I would not want to undertake such a venture in that location."
Whittier Mayor Gene Chandler said the Redevelopment Agency voted this month to reject Relco's proposal because it was "not dynamic enough."
"When it's done, we want to do it right, because it's such a focal spot being across the street from the Hilton. We want to proceed, but we don't want to put just anything in there to fill up the space," Chandler said.
Novak said city officials seem determined to make office space a part of the project, but Chandler said the Redevelopment Agency isn't locked into that idea. Chandler, though, said he would like to see a multistory development including offices, retail space and a "white tablecloth restaurant." Such a project, he said, would generate tax revenue and bring people to the area.
There is an excess of available office space in Whittier, but Mauk said he hopes that a regional business, such as an insurance company, would occupy any offices built across from the Hilton and draw people from outside the area.
Mauk said developers have not been attracted to the block because it is miles from a freeway, is separated from Uptown Whittier and is relatively expensive at $25 to $30 per square foot for the land. Because of those factors, the city would be willing to subsidize the project, with the amount depending on the size and type of the development.
Novak said, in addition to the subsidy, "The city would have to discount the land significantly more if they wanted it to be developed for office (space) . . . . In real estate, it is very much a function of time. If one waits long enough, he will probably get his price, ultimately. The question is whether one can wait that long."
Contrast in Land-Uses
The area is a priority for the council because of the contrast between the elegant eight-story Hilton at the corner of Penn Street and Greenleaf Avenue and the mismatched collection of businesses across Greenleaf.
The council's expectations for the area were heightened by construction of the hotel, which opened last spring. City officials hoped that the redevelopment would increase land values in the surrounding area and help sustain an envisioned upscale shopping and dining area. Last year, the city mailed more than 100 requests for proposals to develop the block, but Relco's was the only one submitted.
Despite not being close to a freeway and heavily traveled Whittier Boulevard, the 206-room Hilton has maintained an occupancy rate of at least 60% to 70% since a few months after opening last spring, said Melinda Johnson, sales manager for the hotel. About 85% of the hotel's business comes from corporate travelers, although the Hilton is trying to build its tourist trade, she said.
Novak said a lack of tourism is a factor in developing the area, because guests traveling on business typically stay weeknights and are more likely to spend their time in meetings rather than shopping.
"It's not a traditional business hotel and therefore its effect upon the immediate vicinity is somewhat different," Novak said. "Blocks of rooms are taken out of circulation and they may be vacant for a while" because some businesses maintain several rooms continually to take advantage of a corporate hotel rate, he said. "It doesn't provide the traffic to benefit the neighborhood."
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