Stung by the prospect of lingering weakness in the hotel market, Maefield Development has floated the prospect of shelving plans for a 370-room, five-star hotel at its $341 million Sunset Millennium project in West Hollywood.
Maefield President Mark Siffin acknowledged that he is considering replacing the hotel with market-rate apartments on the middle parcel of the site.
“You don’t make decisions in the midst of climactic events,” Siffin said. “Only a fool, though, doesn’t acknowledge changed circumstances.”
The possibility of a new configuration at the project, which sits on three parcels on the south side of Sunset Boulevard on either side of Alta Loma Road and La Cienega Boulevard, has raised the hackles of at least one city official.
West Hollywood City Councilman Steve Martin said the city’s relationship with Siffin has become “strained” in recent weeks as a result of the possibility of losing the hotel, which would bring in significantly more revenue in the form of bed taxes than would multifamily housing units.
The entire project would generate between $5 million and $7 million in taxes and fees annually with a hotel, Martin said. That would be reduced by $1.5 million with housing, he said. On top of that revenue loss, Martin said, is the issue that residential units create demand for municipal services such as water and sewer and public safety.
“The revenue was very much in the forefront of our mind when we negotiated the development agreement,” Martin said, who tempered his disappointment with the recognition that the city needs housing.
“No one wants to let go of the hotel,” Martin said, adding, “The project still is a good project for West Hollywood; it just isn’t as sweet.”
Still, the possible alteration of the project has not gone beyond the realm of discussion.
Mark Persico, West Hollywood’s director of community development, said nothing has been filed to amend the development agreement for Sunset Millennium, but the city and Siffin have talked about swapping hotel for housing. At least five years remain on the development agreement, which covers the property that is the site of the Tiffany Theatre and Western International Media building.
“He’s got some time to sit back and wait to see whether he can finance a hotel,” Persico said.
The hotel project would cost $110 million, Siffin said. He declined to talk specifically about any costs or scope of a housing project in the hotel’s stead.
If Maefield proceeds with the hotel plan, his construction lender said it would stay in the mix. Nancy Sulse, vice president and regional manager for Fremont Investment & Loan’s Los Angeles office, said the Anaheim Hills lender never threatened to yank financing for a hotel.
Sulse, who said Fremont has invested $75 million in the project already, said the lender is impressed with Siffin’s progress on the first phase of the project, a 103,000-square-foot retail development scheduled to be completed in January.
Siffin and partner Apollo Real Estate Advisors bought the three project sites and the 60,000-square-foot former Petersen Publishing Cos. office building near La Cienega Boulevard in 2000 from Western International Media Chairman Dennis Holt and Petersen Publishing Cos. for a reported price in the mid-$50 million range. Siffin has set up his offices on the sixth floor of the Petersen Publishing office building that he will completely refurbish and expand with a 100,000-square-foot office building next door.
Whatever he decides, Siffin promised to do nothing to stir resentment among city officials or his neighbors.
“I’ll have no discussions with the city about changing the project until there is concurrence within the community,” he said.
If Siffin ultimately decides to build residential units at the project, he might choose to forego a city requirement to make 20 percent of the units affordable housing. Martin said Siffin would be required to provide that housing elsewhere and would also have to pay a fee in lieu of building them on site.
