Nov. 20, 2005--Negotiations for a 56-story downtown hotel designed to boost the ailing Los Angeles Convention Center have broken down despite a quarter-billion-dollar public financing package, the Daily News has learned.

Apollo Real Estate Advisors of Century City was expected to provide about $60 million for the 1,100-room Hilton hotel but has pulled out of the talks, according to City Councilwoman Jan Perry and sources close to the negotiations.

The hotel -- which generated controversy over the massive city financing it was granted -- has been touted as a linchpin in ensuring the success of the $4.2 billion l.a. live sports-and-entertainment complex that recently broke ground next to the Staples Center.

But the deal involving Apollo and co-developer Wolff Urban Development, which wasn't providing equity, has appeared strained for several months as hotel construction costs soared from roughly $450 million to more than $500 million, and the city offered no further concessions.

Perry, who represents the district where the hotel would be built, said Denver billionaire Philip Anschutz -- owner of AEG, which owns the Staples Center and is investing $1 billion in the complex under development -- and company president Timothy Leiweke now are looking for new equity partners.

"I'm not worried about the future of the hotel," Perry said. "(AEG) was being very active to recruit new equity partners. I know they were talking to a number of different entities."

AEG officials declined comment Friday.

Chief Legislative Analyst Gerry Miller, who has been working on the deal for the city, said Friday that he hadn't been told Apollo Real Estate Advisors was no longer involved.

Richard Ackerman, principal of Apollo Real Estate Advisors, could not be reached for comment Friday.

Co-developer Lew Wolff, owner of the Oakland A's baseball team, said Saturday that he didn't have any details.

Sources, however, confirmed talks had broken off, though they said it was unclear whether the high-power firms were engaged in brinkmanship.

Apollo Real Estate Advisors, for example, had been floating significant changes to the hotel's design in an effort to bring down costs. Some speculated that AEG may have resisted and the breach in negotiations may be an attempt by one, or both, parties to force more favorable terms.

AEG was to sell the land for the new hotel at cost, but was not providing equity in the original deal.

AEG and other supporters, including downtown civic groups, have said the lack of a large nearby hotel is the Convention Center's Achilles' heel, and that -- combined with L.A. live -- the area should become a tourism and convention magnet.

In addition to agreeing to forgo as much as $270 million in room-tax revenues from the hotel over 25 years, the Community Redevelopment Agency has agreed to a $16 million, below-market loan, and the city has authorized $4 million in fee waivers.

Critics, however, question whether such a public investment in a hotel is warranted, and whether a hotel will be enough to make downtown Los Angeles attract large conventions.

Samir Jain, lodging analyst for Jefferies & Co. in New York, said AEG shouldn't have trouble finding equity for the hotel amid a relatively strong market.

"I don't think it will be hard at all -- I think they'll find it," Jain said. "They can get very, very cheap money now ... if you can borrow very cheaply, your required rate of return is not extremely high. They don't have to be as discerning with their investment."

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