The Newport Beach City Council is expected to begin gauging developer interest in turning its current City Hall site in Lido Village into a boutique hotel or apartment project in the next couple of weeks.
The city is exploring new uses for the 4.3-acre site, located near the entrance of Balboa Peninsula at the intersection of Newport Boulevard and 32nd Street.
Buildings on the tract total about 54,000 square feet and include a fire station that would also make way for any new redevelopment.
A civic center is being built just off MacArthur Boulevard in Newport Center that will include a new City Hall. City officials are eager to ensure that redevelopment of the existing City Hall site moves ahead soon after they depart.
The estimated $128 million civic center project, which also includes a park and an expansion of the Newport Beach Central Library, is expected to be completed around the end of the year.
“This project is not going to wait for us,” Councilman Rush Hill said. “We’re moving out of here, and we need to do something to prevent this site from becoming [a] nuisance.”
The city held a study session on reuse plans for the site last week and is expected to give the go-ahead for soliciting qualified developers following a Sept. 25 council meeting.
Two Uses
Plans now are focused on two potential uses for the land: an apartment project running as large as 99 units, or a boutique hotel running between 78 and 150 rooms. A request for qualifications from interested developers is expected to be sought for both types of projects.
An apartment project is expected to cost about $54 million to develop, while the hotel project is expected to run as much as $40.9 million, assuming a 120-room project.
City officials said earlier this year they’d like to select a developer for the Lido Village site by the end of the year.
Both the hotel and apartment uses are economically viable and will have a positive impact on the community, Kim Brandt, community development director for the city of Newport Beach, said at last week’s hearing.
Managing the proposed projects’ effects to the city’s bottom line—along with the perceived benefits to the region at large—looks likely to require a delicate balancing act for the council.
The city is expected to maintain ownership of the property and require any developer to sign a long-term ground lease for the site.
Scenarios
The land, under an apartment scenario, would likely have a value of about $13.6 million and would bring in more ground rent-related revenue to the city than the hotel project.
Building a hotel would result in the land having a residual value topping out closer to $5.5 million.
“Clearly, residential (development) on a direct basis has the highest residual land value and would provide us the highest direct revenue,” councilman Edward Selich said.
A boutique hotel, on the other hand, would provide area businesses a much larger economic impact―$20.6 million versus $2.1 million for apartments, on an annual basis―according to city figures.
Those figures are “eye-popping,” councilman Steve Rosansky said.
A key question will be whether the city wants to effectively subsidize the hotel’s construction for the benefits of surrounding business, Selich said at last week’s study session.
Residents and business officials speaking at last week’s hearing favored the hotel scenario, which city planning officials noted could require ballot approval if a project running as large as 120 rooms is selected.
Pros and Cons
Gary Sherwin, chief executive of trade group Visit Newport Beach, said that when he “is selling Newport Beach to the world, there’s a lot of ‘pros’ and very few ‘cons,’ but the one ‘con’ we do face is that we have very few hotel rooms that are really on or near the beach.”
“We do lose some business because of that,” Sherwin said.
City projections for the proposed boutique hotel estimate rooms would average rates of around $200 per night, and expect a stabilized occupancy of about 75%. City council members, noting the lack of other nearby, larger hotels along or near Balboa Peninsula, suggested both those projections might be low.
Market Study
Newport Beach’s hospitality market runs a little less than 3,000 rooms, with 17 hotels.
The Los Angeles office of PKF Consulting, a hotel research and consulting company that helped the city with its initial market study for the land, believes there’s enough demand in the Lido Village area to support two new hotels.
PKF recommends a 120-room boutique hotel for the City Hall site—similar in design and feel to Shutters on the Beach in Santa Monica, or Canary Hotel in Santa Barbara.
There’s no guarantee a hotel developer will find the city’s proposal economically viable, one reason city officials said they’re still exploring apartment development uses for the site for the time being.
“We need a back-up plan,” Selich said.
