Developers say they have no intention of postponing plans for a proposed 277-room Embassy Suites Hotel or two other major long-awaited projects in Glendale despite sharp declines in hotel occupancy rates since the Sept. 11 terrorist attacks and a downturn in the Southern California economy. Los Angeles-based Reliance Development Group and Arcadia-based Kam Sang Co. intend to construct the 41,588-square-foot hotel. The franchise of the Beverly Hills-based Hilton Hotel Corp. will have 4,000 square feet of meeting space, 2,910 square feet for food and beverage service and four levels of underground parking. The Reliance/Kam Sang development team was initially selected by Glendale officials in 1997 to build an office project on the city-owned property. But problems finding investors forced the city to consider other uses for the land, said Jeanne Armstrong, director of the city’s Department of Development Services. The Sept. 11 attacks pushed hotel occupancy rates down into the 20- and 30-percent range nationwide, forcing companies like Hilton to lay off workers, slash room rates and offer heavy promotions to weather the storm. The impact of the attacks on consumers, state budget woes resulting from the energy crisis and an economic slowdown are now expected to cut a deep swath across California’s tourist markets over the next year, threatening to further undermine the hotel industry. Ronnie Lamb, president of Kam Sang Co., said potential investors have delayed discussions on funding the Glendale project for 60 to 90 days while they see what form a market rebound will take. If entitlements are completed by Dec. 31, the project could break ground by next fall. Lamb conceded the industry has been affected by the attacks, but he pointed out that his project is an extended-stay facility and not linked to a convention center or a major tourist attraction. Consequently, he believes, funding will be obtainable and plans for the project remain on track. “What happened on Sept. 11 is hurting the tourism industry, but our statistics show us that the market for executive stay or extended stay hotels remains healthy,” said Lamb. Lamb said the price tag for the Glendale hotel is about $45 million and he expects it to be completed sometime in early 2004. Hilton spokesman Eric Jacobs said current market conditions are not expected to last long and the company has no intention of pulling out of agreements made prior to the attacks. “The developer has given us no indication of anything negative,” said Jacobs. “Nobody can tell what the future holds. But based on what you can see, we think this is a 20-week cycle. We are bullish and see this as a short-term lull.” Hilton has also just recently broken ground on two other Valley projects: Hilton Garden Inn in Calabasas and a 94-room Hampton Inn & Suites in Agoura Hills. The $7.5 million Agoura Hills project is being developed by Aberdeen, S.D.-based West Coast Developers and is expected to be completed by May 2002. According to Bruce Baltin, senior vice president with Los Angeles-based PKF Consulting, which tracks the hotel industry, the Glendale project is likely on solid ground because it is still in the land entitlement stages and because the hotel industry slump is not expected to last long. “Obviously, the events on Sept. 11 had a negative impact on the tourism industry and that hurts hotels, but all the expectations are that the market will return to normal. It always does,” said Baltin. He said Hilton’s stock price may have taken a beating in the weeks since the attacks, but its proposed projects that cater to the mid-level business traveler remain right on target. “The executive- and business-class customers haven’t stopped traveling,” said Baltin. “And they are not dependent on the tourism industry, so I wouldn’t expect Hilton’s Glendale project to be affected too much at this point in the game.” The Glendale City Council has also approved a plan by Santa Monica-based Caruso Affiliated Holdings and Foster City-based Legacy Partners for the long-awaited Glendale Town Center, a $100-million shopping center and apartment complex that would adjoin the southeastern side of the Glendale Galleria. The 15.8-acre project has been on and off the table for 15 years. Caruso’s proposal, touted as an “urban oasis,” includes 300,000 square feet of retail space, up to 500 apartments and a 1.7-acre public park, complete with fountains and communal gathering space. Previous proposals for the city-owned property included a luxury or business class hotel. Caruso’s does not. Principal Rick Caruso said he’s not concerned about current market conditions and is already getting interest from potential investors. “I’m comfortable with our plans,” said Caruso. “I think our timing is going to work out fine. We are a long-term holder and I’m not trying to time the market per se. I think if we were under construction now we might be concerned, but we’ve already had banks call us and express interest.” Los Angeles-based Roxbury Development has also been given city approval to construct the Glendale Millennium Office Tower at California Avenue and Central Boulevard. The 150,000-square-foot complex will include retail, office space and 412 parking spaces.
