Staff Report, Recommendations for Old City Hall Site Released

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The old city hall site. — Photo by Christopher Trela
The old city hall site. — Photo by Christopher Trela

A staff report released Tuesday is recommending the city council select RD Olson Development and their proposal for a boutique hotel on the old city hall site.

The council is scheduled to review the three proposals for the 3300 Newport Blvd. location and choose one during Tuesday’s meeting.

Olson’s plan is for a 130-room boutique hotel and spa. Sonnenblick Development proposed a 148-room boutique hotel with a spa and fitness center, and Shopoff Group suggested a mixed-use idea of 99 luxury apartment homes and 15,000 square feet of upscale retail space.

The 170-page report reviewed compliance with RFP submittal requirements, development concepts, fiscal and economic impacts, and land use amendments.

Staff came to the conclusion that “if successfully developed and operated, any of the three proposals would help foster the community’s goal to revitalize the area.”

Although, economic activity would be significantly higher with the hotels, staff added.

RD Olson was chosen because its architecture and design compliment the area, it will economically benefit the community and the city, and its proposed daily rates are similar to the costs and rates identified in a previous analysis, thus reducing the risk for financial under-performance.

The daily room rate for the RD Olson project approximately $279, while Sonnenblick estimated theirs at $371. Shopoff’s monthly rent was anticipated around $5,028.

“Sonnenblick’s projected room rates are significantly higher than the 2012 PKF (Consulting) analysis. Of the two hotel proposals, the RD Olson proposal is more consistent with the market range identified in the 2012 PFK analysis,” the staff report reads.

This leads to some concerns by city staff and Keyser Marston Associates, who consulted alongside Economic Planning Systems for the city, reviewing and reporting on each proposal’s finances.

KMA reported concerns that the high room rates will have to be achieved in order to support the construction costs.

“If the room rates do not meet the projections, the ground rent payment being offered may not be financially viable. Additionally, the economic benefits actually generated by the hotel would be commensurately lower than the current projections,” the report continues.

Economic Planning Systems reported that the townhouses provide for the higher room rate projections and would be more appealing to the group market, like weddings, as well as increase occupancy of other rooms.

The EPS reported that “the potential success of the Sonnenblick concept may also be enhanced by the national branding provided by the proposed operator – Auberge Resorts,” according to the staff report.

Based on those numbers, the Sonnenblick property also projected the highest amount of economic impact to the community and city revenue. For a 10-year period, Sonnenblick estimated $682 million into the community and Olson estimated $402.3 million. City revenue for 10 years is predicted at $19.63 million for Sonnenblick (not including ground rent) and $17.25 million for Olson. The figures could not be estimated for either of these categories for the Shopoff proposal.

And although the Olson hotel is not projected to generate the highest revenue to the city or the largest economic impact to the community, “the construction costs and stabilized average daily rates proposed by RD Olson are more similar to the costs and rates identified in the 2012 PKF analysis and would appear to reduce the risk of the project’s financial under-performance,” the report explains.

Staff also believes the RD Olson concept better reflects an understanding of the Lido Village/Balboa Peninsula area.

They also found that the Sonnenblick site layout is not as “engaging or inviting to the public,” when compared to the other proposals.

“For these reasons, staff believes that the RD Olson team and concept would result in a development that best balances the city’s economic and land use priorities for the former city hall site,” staff concludes in their report.

The public will be able to comment on the matter prior to the council’s decision.

 

To view the staff report, visit the agendas & minutes section at newportbeachca.gov.

The meeting will take place at 7 p.m. on July 9 in council chambers, at 100 Civic Center Drive.

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