Rachel Reeves

Third hotel for Marine Ave. site in Redondo Beach

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If all goes according to plan, a city lot that has lain fallow for decades will accommodate three major hotels within the next year or so.

A two-hotel project that broke ground last April has been expanded to accommodate a third hotel, bringing the number of new rooms on the site to 500 and the value of the private investment in the project to $90 million.

“This third hotel… we believe will be a very strong addition to this campus and actually create the synergies we’ve been looking for to really make this a destination location,” Brad Wagstaff, a managing partner of the project’s developer TRCF Redondo LLC, told the Redondo Beach City Council last month.

Council members Matt Kilroy, Steve Diels, and Pat Aust join a development partner in “breaking ground” for two new hotels that will fill the void left behind by the Malibu Castle mini-golf course. Photo by Rachel Reeves

Council members Matt Kilroy, Steve Diels, and Pat Aust join a development partner in “breaking ground” on the Marine Ave. site last April. Photo by Rachel Reeves

The first two hotels – a 172-room Residence Inn Marriott extended stay hotel and 147-room Hilton Garden Inn – are expected to be operational by the beginning of April. Starting Feb. 1, movers will be installing furniture inside the recently constructed buildings.

The third hotel, a 180-room Homewood Suites by Hilton extended-stay facility, was just two weeks ago authorized to be part of the project. Provided there are no hiccups during the entitlement process, the Homewood Suites will break ground this summer.

The project site, tucked away near the intersection of Inglewood Avenue and Marine Avenue, has in rotation accommodated a hazardous waste collection facility, a canine training facility, and miniature golf course. But for years, it has accommodated little else than graffiti and garbage.

The forthcoming project transforms the site and represents “another feather in the city’s economic development hat,” said Assistant City Manager Pete Grant.

The mayor and council are confident these hotels will be a boon for the city’s economy.

“I have no doubt these places will be busy,” Mayor Steve Aspel has said.

In 2010, the City Council signed an agreement that gave developer TRCF Redondo LLC license to construct the Marriott and Garden Inn. Remaining lot space was earmarked for a storage facility.

But in September, the developer proposed the inclusion of the Homewood Suites by Hilton. The clock was ticking: under state law, its deadline for gaining project approval was the end of 2013.

Eager to expand the project, the Redondo Beach City Council convened for a special meeting the day after Christmas. The only item on its agenda was the hotel project at 2420 Marine Ave.

“The reason we’re here is this is very time-sensitive,” Aspel said of the meeting, which uncharacteristically fell on a Thursday evening.

By the meeting’s end, the council had unanimously approved a lease for the third hotel, setting its ground rent at three percent of gross receipts.

The entire project is expected to generate more than $11.5 million in transient occupancy tax (TOT) within the first decade of its operation, or about $1 million annually.

The council has agreed to create a reserve (AFR, or authority funded reserve) using some of the tax revenues derived from the three hotels.

The reserve, which has an annual cap of $2.5 million, purposes to cover

operating expenses in the unlikely event that the hotels under-perform. The city’s reserve is expected to reach capacity – $8.5 million – within four years. After it has been satiated, all tax monies generated onsite will flow to the city’s general fund.

The developer has also agreed to set aside its own reserve fund of up to $3 million, upon which it will draw before dipping into the AFR.

Wagstaff said at the Dec. 26 City Council meeting that the reserve is merely a precaution, as a market study conducted by appraisal company HVS indicated a “very strong demand, especially in the extended stay [hotel market],” he said. Most of this potential client base, he pointed out, is from within the defense and aerospace industries.

Dallas-based firm Orix Municipal Finance will finance all three hotels in the short-term, but Wagstaff said he intends to seek a cheaper, longer-term financing arrangement once the hotels have opened and stabilized.

A report prepared by city staff notes that in addition to tax revenues, the city will extract benefit from the signs going up on the freeway, discounted room and conference room rates for Redondo Beach residents, the use of the conference room for city functions, emergency sheltering and housing vouchers, and 50 parking spaces for commuters using the Metro Green Line located nearby the project.