MONTEREY PARK — Despite a soft U.S. retail market and low hotel occupancy rates in the San Gabriel Valley, two developers are vying for city approval to build a hotel-shopping center complex designed to attract Pacific Rim clientele.
The competing developers say they would be somewhat insulated from the U.S. recession because they will look to Hong Kong and Taiwan for money. One of the developers, Eagle International Investment Group in San Gabriel, is in a partnership with investors in Hong Kong, while Los Angeles-based BCTC Development Corp. is linked to companies in Taiwan.
But their proposals have come before the City Council at a time when some experts are warning that the West San Gabriel Valley already has enough hotels. Adding another one will dilute already-weak occupancy rates, and may spark a "blood bath" that could drive other hotels out of business, an industry consultant said.
Nevertheless, Monterey Park officials are enthusiastic about the project, proposed for 6.9 acres of land south of Hellman Avenue on North Atlantic Boulevard zoned for redevelopment in 1987.
And with good reason: The city is not being asked to spend a dime.
The developers have promised to pay for everything: land acquisition, legal fees if necessary, environmental studies, demolition and construction. Such an arrangement would be unusual in today's redevelopment climate, in which city redevelopment agencies often lure developers by agreeing to pay substantial project costs, sometimes going millions of dollars into debt.
BCTC already has purchased almost half of the site with $10 million in cash. The other contender, Eagle, has promised to guarantee its commitment to the deal by depositing a non-refundable $3-million letter of credit with the city.
The City Council is expected to select the developer Jan. 28. Council members indicated they are leaning toward choosing BCTC because it already owns almost half the site and could start construction in 1994. Eagle's team manager for the North Atlantic project, Shermen Chiang, could not give officials a projected starting date, saying that it would depend on how long it would take his company to buy the property.
BCTC wants to build a $75-a-night, 196-room hotel, possibly to be operated by Hilton Hotel Corp., a 60,000-square-foot branch of a Taiwan-based department store, a six-screen movie theater, an ice skating rink and a bank. The project's estimated cost is $80 million.
Eagle is proposing a $100-million development, including a 250-room hotel charging $85-$100 a night, a 70,000-square-foot department store, a "world trade center" with foreign-business offices, a two-screen movie theater, a bank and a 30-lane bowling alley.
Scott Paschall, senior manager of Pannell Kerr Forster's Management Advisory Services, an accounting firm that has studied the hotel industry, said hotels in the so-called "I-5 corridor"--a geographical area encompassing Monterey Park, Montebello, Rosemead, Commerce, Whittier and Downey--already are running at a low 65% occupancy rate. He said 70% is considered a satisfactory rate.
A new hotel on North Atlantic, as well as a Monterey Park Sheraton approved by the Redevelopment Agency to be built on Corporate Center Drive, would drive occupancy down to 55-60%, Paschall said. "You're looking at a blood bath on the market," he said. "In the worst-case scenario, you're going to put somebody else out of business."
The 145-room Lincoln Plaza Hotel, Monterey Park's most prominent hotel, has seen occupancy decline slightly over the last several years, from about 85% to 75%, front office supervisor Jeffrey Wan said. But the hotel, which caters to business executives from Hong Kong, Taiwan and other Asian countries, still is going strong, mainly because of its overseas clientele, Wan said.
Paschall said, however, that a North Atlantic hotel could cut deeply into Lincoln Plaza's business.
Meanwhile, some new hotels in nearby cities have fared poorly. The 196-room Baldwin Park Hilton Hotel has been half vacant since it opened in 1989. The city's Redevelopment Agency had promised to cover 100% of the hotel's losses during its first 10 years but recently backed out of the deal, which was costing Baldwin Park $120,000 to $125,000 a month.
A real estate consultant hired by BCTC said its project won't be touched by a downturn in the economy.
"The recession should be over by the time this is up and running," said Maurice Robinson, of the accounting firm Peat Marwick Main & Co. Robinson told City Council members Monday that a 200-room hotel that is 70% filled can bring a city $425,000 in bed taxes each year.
He said the enclosed shopping facilities proposed as part of BCTC's project could earn $305,000 a year in sales taxes for Monterey Park.
Meanwhile, Chiang, Eagle's team manager for the North Atlantic project, acknowledged that the hotel business will be slow at first, but said the company expects to break even after the second year.
Council members could barely contain their glee at being in the position of choosing between two apparently well-financed developers.
"We feel very fortunate at this time with the soft economy," Councilman Samuel Kiang said during City Council discussions Monday. "We have two groups that are so enthusiastic. Without the overseas connections I don't think this project would have come to fruition."
Councilwoman Marie T. Purvis was more blunt: "You guys have it all," she told an Eagle representative as he addressed the council. "You have all the money you need."