Developers vying for shot at old City Hall land

Newport City Council expected to vote on one of three proposals — two hotel projects and a mixed-use residential development.

Sonnenblick Development proposed a 148-room high-end luxury hotel, with 15 townhouse suites and 12 free-standing villas. The hotel would also include underground parking, along with other amenities. (Courtesy Sonnenblick Development / Daily Pilot / July 5, 2013)

Sonnenblick Development proposed a 148-room high-end luxury hotel, with 15 townhouse suites and 12 free-standing villas. The hotel would also include underground parking, along with other amenities. (Courtesy Sonnenblick Development / Daily Pilot / July 5, 2013)

By Jill Cowan,0,7623946.story
July 5, 2013 | 8:08 p.m.

The morning was chilly, the marine layer still firmly blanketing the Balboa Peninsula.

“This is Ground Zero for what people think about as Newport Beach,” said longtime resident and developer Bob Olson.

The grounds of Newport Beach’s now-vacant former City Hall didn’t look like much. A remote religious shrine tucked in the wilds of Thailand might have had more visitors at that moment.

But Olson, looking at what for decades had served as the city’s civic core, along Newport Boulevard, saw a unique 130-room hotel, complete with a spa, rooftop bar and upscale dining options, built in a style that would pay tribute to the community’s nautical history.

On Tuesday, from the still glitteringly new confines of a much different City Hall near Newport Center, the Newport Beach City Council will consider whether to accept a staff recommendation and move forward with Olson’s vision or choose one of two other proposals for the 4.3-acre site. At the 7 p.m. meeting, the public will also have one more chance to weigh in on the matter.

The Shopoff Group, which is also working with the city on the planned Uptown Newport development near John Wayne Airport, proposed a mixed-use residential development, with 99 units renting for an average of about $5,058 per month. The proposal also includes underground parking, along with a public plaza and 15,000 square feet of commercial space.

Sonnenblick Development proposed a luxury hotel, but at a higher price point than the one proposed by Olson’s firm, RD Olson Development. Sonnenblick’s proposed 148 rooms would go for an average daily rate of $371, versus Olson’s $279. The proposed Sonnenblick hotel, which would include about a dozen each of townhouse suites and free-standing villas, would also have a spa and rooftop bar, as well as underground parking.

According to the report, the RD Olson proposal fit best with the city’s vision of the surrounding Lido Village, architecturally and in terms of public access. Furthermore, while both hotels were projected to better stimulate activity in the area than homes, concerns about the viability of the Sonnenblick hotel because of its high price point meant the RD Olson proposal won out with staff on an economic level.

Residents and officials hope that whichever project is chosen, it will revitalize Lido Village, which has languished with vacant storefronts and little tourist traffic.

Olson said that if the Lido House Hotel — the name his firm proposed — were built, guests would spend money eating out at nearby restaurants before biking to the Balboa Fun Zone, and Newport residents would grab coffee at the hotel’s coffee shop or enjoy a night out at the hotel’s bar.

He pointed out a row of sleepy storefronts along 32nd Street.

“Guests will be coming here to experience Newport Beach, and we encourage our guests to come out and explore this area,” he said. “Let’s say your family owns this building, so they say, ‘Let’s fix it up, now that we’ve got some economic activity.'”

Although the vast majority of community members who’ve spoken on the matter have echoed that logic, pushing for a hotel over residential units, Bill Shopoff, principal of the Shopoff Group, said he saw unanswered questions in the hotel proposals, particularly with regard to bed tax projections.

According to the city’s staff report, which culled information from the companies’ respective proposals, the RD Olson hotel would generate about $1.13 million per year in tax revenue for the city and pay about $420,000 per year to the city in rent, for a total approaching $1.55 million.

All three proposals involve a 99-year lease. Other details would be negotiated with the chosen company.

The Sonnenblick hotel, similarly, was projected to generate for the city significantly more in tax revenue in a typical year, $1.59 million, than it would from its lease, which would generate about $600,000 in a year, for a total of $2.19 million.

The Shopoff complex, on the other hand, is projected to generate $230,000 in taxes during a year, while its lease is projected to generate $1.01 million in a year.

But Shopoff cautioned that the transient occupancy tax projections might be optimistic, given the many economic factors that could affect a hotel — not to mention the long planning and development process, which will require Coastal Commission input.

“I think our economics are comparable to or superior to the economics of a hotel,” Shopoff said. “If the hotel were going to be built today, I’d be more certain, but that market changes more rapidly. I don’t think the project will begin construction for several more years.”

At various public meetings about the site’s redevelopment, including an April study session on the proposals, questions about parking have arisen.

Both Shopoff and Sonnenblick proposed underground parking, though according to the staff report, building the garages would require extensive excavation, shoring and, probably, “dewatering,” because the site is so close to the ocean.

Nevertheless, Sonnenblick questioned whether the estimated 145 surface parking spots proposed by RD Olson would be enough.

“The largest difference in the proposals is that our project includes underground parking,” said Bob Sonnenblick, the firm’s principal. “And theirs, Olson’s, assumes no on-site parking at all.”

He added, “The other difference is that we’re really proposing a five-star luxury hotel … and previously the Olson group has built Courtyard by Marriott-type projects.

“The difference between those two levels of hotel quality will lead to a fairly substantial difference in hotel taxes received by the city over the course of the next 30 years.”

But Neil MacFarlane, longtime Lido Isle resident and former president of the Lido Isle Community Assn., and others have said they trust RD Olson to build a hotel and run it at viable rates.

“We think [Olson] will actually build a hotel,” he said. “He’s here to stay and he’ll operate it successfully.”

In any case, the development could be the city’s best — and last — shot at reviving Lido Village, said Hugh Helm, who spoke on behalf of the association over coffee at the Woody’s Diner just across Finley Avenue from the site.

“We’ve got our chance to do this right,” he said. “If not, we’re gonna have to live with it for a long time.”

Twitter: @jillcowan


RD Olson Development

Development type: Boutique hotel

Rooms: 130

Projected cost: $46.6 million

Operator: Destination Hotels & Resorts

Room rates: $279 per night on average

Public plaza and pedestrian paths: 0.68 acres

Parking: 145 spaces, surface only

Building height: Four stories and a tower at 58 feet, 5 inches

Sonnenblick Development

Development type: Boutique hotel

Rooms: 148

Projected cost: $81.8 million

Operator: Auberge Resorts

Room rates: $379 per night on average

Public plaza and pedestrian paths: 1.3 acres

Parking: 210 spaces, underground garage

Building height: Four stories at 55 feet, with a tower at 65 feet.

Shopoff Group

Units: 99

Projected cost: $61.3 million

Operator: Riverstone Property Management

Rent: $5,058 per month on average

Public plaza and pedestrian paths: 1.2 acres

Parking: 325 spaces, underground garage

Building Height: Four stories at 55 feet.