TROUBLES—Long Beach’s Redevelopment Plans Running Into Trouble

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Long Beach’s much-touted downtown development plans have hit rough waters recently, leaving the impression that the city’s economic outlook is much like its maritime icon the Queen Mary: stuck in port.

Several big projects have either floundered or been delayed as one problem after another sprung up. They range from lackluster attendance at the city’s aquarium to a three-year delay in the downtown area’s key commercial development project designed to attract millions of visitors a year.

Signs of stress first materialized when the 2-year-old Long Beach Aquarium of the Pacific reported attendance was only about half the projected number. Original forecasts estimated 2 million visitors would come to the facility per year. Officials now predict 1.25 million visitors will step through the doors this year.

Financial records filed with the city show that the aquarium lost $7.5 million from Oct. 1, 1999 through March 31, 2000, although aquarium officials are quick to point out that this included a $7 million depreciation expense.

The $120 million facility, financed through bonds, has been able to pay its bills and interest expenses by dipping into its reserves. But it has also asked the state for a $2.4 million bailout. Gov. Gray Davis balked at that sum, but dished out $500,000 to the aquarium, which showcases 12,000 marine animals in 47 exhibits.

The aquarium now is working on a comprehensive business plan to increase its visitors and revenues, said Tammie Brailsford, the aquarium’s chief operating officer.

“A plan is being developed to encourage repeat business and look at maximizing all our revenue streams, from special events, group tours, education programs to the retail store and restaurant,” Brailsford said.

The aquarium’s predicament is partially a consequence of delays on a nearby commercial development, called the Queensway Bay project, which was expected to attract 10 million visitors a year. Many of those visitors were expected to walk across the street and visit the aquarium.

Queensway Bay was to have opened last year with a mix of retail stores, a 15-screen cinema, an Imax theater and several restaurants. But the project has been delayed because of environmental concerns, financial uncertainties and a rift between the two developers working on the project.

Now the project isn’t scheduled to break ground until the end of this year and won’t be completed before spring 2002, said Scott Schroeder, corporate marketing director for Ohio-based Developers Diversified Realty, lead developer on the project.

The $100 million project, which is to be the cornerstone of waterfront development in downtown Long Beach, originally was to have been undertaken by San Diego’s OliverMcMillan, as leader developer, and DDR.

But early this year OliverMcMillan dropped out of the project without any public explanation.

Groundbreaking was rescheduled to late February, but environmentalists halted the project claiming the development didn’t conform with laws dictating what can be built on coastal land owned by the state. A public hearing was held last month before the California Lands Commission, which is expected to issue an opinion later this summer.

About 57 percent of the Queensway Bay project, which sits on city-owned land, is already leased, said Robert Paternoster, the city’s manager on the project.

Tenants include several restaurants such as McCormick & Schmick’s, Prego, Bubba Gump, California Pizza Kitchen, Harry’s Bar, and Islands, Paternoster said. So far, there are only two retail tenants, Cost Plus and Barnes and Noble.

Edwards Cinema had signed a lease for a 15-screen multiplex. But a clause in the lease allowed the Newport Beach-based movie company to renegotiate the terms if the project had not broken ground by this summer.

DDR and Edwards currently are renegotiating the lease, Schroeder said, but it is uncertain whether Edwards go through with its plan to anchor the project. Earlier this year, the company opened a 25-screen movie theater at the new Long Beach Towne Center in north Long Beach, and it appears the market is saturated.

“Nothing is final yet with Edwards Cinema,” Schroeder said. “But no matter what, a movie theater will end up there. A theater is a nice fit with the combination of retail and entertainment.”

Developer problems have also led to a delay in the redevelopment of another downtown commercial project. The Long Beach Plaza Mall was shuttered last summer and demolition was expected to begin soon after. But the mall has sat vacant for a year.

Newport Beach’s Hopkins Real Estate Group was to be the lead developer on the $60 million project. But last month it accepted an undisclosed cash settlement from DDR to vacate the project. DDR, now the lead developer, is expected to break ground late this year, Schroeder said. But no list of tenants has been released.

While project delays are costing the city millions of dollars in lost sales tax revenues, city officials say they aren’t worried yet. “We had hoped Queensway Bay and the aquarium would bring in 10 million people and spill over into the adjacent areas,” said Long Beach Finance Director Bob Torrez. “But there continues to be a positive effect on Shoreline Village (near the aquarium) and (merchants along downtown’s) Pine Avenue from the aquarium, despite the fact the aquarium has experienced a drop-off.”

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