Renovation Plan Founders for Queen Mary Hotel

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The company that operates the Queen Mary has fallen behind on investments it was required to make on the ship under its contract with the city of Long Beach, which owns the docked ocean liner.

And while it’s trying to catch up, Save the Queen is offering no hint about its plans for the tourist attraction and a dockside theme park.

The Long Beach City Council received an audit last week that revealed Save the Queen, the company that operates the ship as a hotel, had failed to upgrade the property as required by contract. Save the Queen had agreed to invest $2.8 million in 2008 to improve the guest experience on the ship. The audit prepared by the city showed the company only invested $2 million.

Meanwhile, the company changed ownership. Save the Queen was originally formed by Newport Beach developer Jeff Klein, who ran into financial difficulties as the credit crisis swept the real estate sector.

Klein relinquished control of the company in January, and it passed to New York-based Garrison Investment Group, his main lender on the project.

“Garrison has taken on the obligation to make capital investments and they have been catching up,” said Victor Grgas, property service bureau manager for Long Beach. “By the end of the year, it’s quite likely that Garrison will exceed their obligations because they are committed to improving the guest experience.”

Upgrades at the property include new mattresses and renovated guestrooms, kitchens, bathrooms and meeting salons, according to the audit.

Andy Kwon, vice president at Garrison, said that occupancy at the hotel remains stable, but offered no insight into company plans for the Queen Mary.

“We continue to try to maintain the integrity of the asset,” Kwon said. “We continue to explore our options for the property.”

When Klein was in charge, Save the Queen planned to turn the ship and an adjacent 45-acre parcel into a theme park and marina. The previous operator of the ship, Queen’s Seaport Development Inc., hoped to develop the property around large historical attractions such as the Spruce Goose airplane and a Russian submarine. But Queen’s Seaport went bankrupt in 2005.

In November 2007, Save the Queen signed a contract with Long Beach requiring it to invest $5.3 million in the ship through the end of 2010. In exchange, the city reduced rent.

Grgas said the company will continue its investments in the hotel.

It’s unclear whether Garrison will continue Save the Queen’s ambitious plans for redevelopment of the area around the ship’s berth.

In July 2008, Save the Queen submitted plans to the city for an amusement park with rides, movie theaters, restaurants and maritime-themed retail stores. A marina would include 200 slips, and office buildings would have 200,000 square feet for maritime or port-related tenants.

The construction timeline called for breaking ground in early 2011. Kwon said he wouldn’t comment on long-terms plans for the site.

“We have not heard or seen anything formal from Save the Queen,” Grgas said. “Their focus right now is on the ship, where improvements will benefit everybody.”

By a unanimous vote, the City Council accepted the audit and recommended that Long Beach officials monitor progress on the ship for the next report in six months.

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