Nov. 16, 2012--GARDEN GROVE -- In a continued bid to attract tourists visiting Disney and other theme parks, the City Council this week gave its nod of approval to a three-hotel project estimated to cost between $150 million and $180 million.

The development would have up to 769 hotel rooms within one full-service hotel and two limited-service hotels on the northeast corner of Harbor Boulevard and Twintree Lane. Combined, they would include four or five restaurants, approximately 39,000 square feet of conference or meeting banquet space and two parking structures, according to a city staff report.

The council gave unanimous approval Tuesday night, but the project has a ways to go.

First, the state must agree to release redevelopment money that had been earmarked for the project. Then, the developer must secure financing.

The state, after abolishing city redevelopment agencies, approved three other Garden Grove projects as enforceable obligations in September, but denied the three-hotel project. Officials appealed and await word from the state's Department of Finance before Dec. 15, according to City Manager Matt Fertal.

"One of the deciding factors the state will look at is: 'Is this project ready to go.' By getting the zone approved, it will help us with the argument that this is not just some pie in the sky project," Fertal said.

David Rose, a partner of E-Ticket Hospitality LLC, said he is confident his firm and Land & Design Inc., a real estate development company, will be able to secure finance and break ground on the 5.8 acres of land in 12 to 18 months.

"The economy is better than when we first started," Rose said this week. "We signed an exclusive negotiating agreement in 2010. Back then, you couldn't finance a lemonade stand, much less a $150 million project."

"We're looking to create something unique that has a resort feel. We're looking for a full service hotel that would be appropriate for families and could also function as a convention hotel with unique amenities, like a sushi restaurant or theater sitting," Rose said.

On Tuesday, the council rezoned some low-density residential areas to be included in the Garden Grove "International West" mixed-use zoning. Officials have been using that zoning to encourage the development of hotels, resorts, high-density residential and tourist-based entertainment uses.

In June 2011, the council and the former Redevelopment Agency approved an agreement with Land & Design to have the city provide financial help to develop the property.

Since then, the city has bought four homes on Choisser Road and other property on Harbor that it plans to give to the developers for the project. There are three properties left to acquire, Fertal said, and city officials are awaiting the redevelopment funds to buy them, including the site of a popular ice cream shop, Joe's Italian Ice.

Some residents have criticized the city for its assistance to the developers.

"Nobody in the community asked for these hotels to come. Nobody had any say," said resident and council watcher Josh McIntosh. "But the city has its own agenda and they don't care whose toes they step on."

In Anaheim, city officials have come under fire for giving $158 million in tax subsidies over 15 years to developers of two luxury hotels at GardenWalk, near the Disneyland resort.

Fertal, the Garden Grove city manager, said: "You cannot build a full-service, high-quality hotel without financial assistance.

"Any hotel being built today in that area costs more money than an investor would normally invest in and expect a return," he said.

In addition to conveying the land, the proposal calls for an annual $3 million contribution of redevelopment money to the developers for 15 years, Fertal said.

In return, the city expects to net as much as $3 million in property, sales and hotel visitors' taxes, he said.

"That will go a long way in solving the city's fiscal problems," Fertal said.

The city has been tightening its financial belt for the last couple of years, with the early retirement or buyouts of some 70 employees, or 11 percent of the full-time workforce, Fertal said. With reserves now depleted, the city doesn't have that much more where it can cut, he said.

City officials are guardedly optimistic following the state's approval of the three major developments funded by redevelopment money, he said. The three are a water park hotel project on Harbor, a second hotel development adjacent to the Sheraton Hotel and a mixed-use development project known as the Brookhurst Triangle. The city, he said, is hoping for approval of the fourth large-scale project: the three hotels the city approved this week.

Contact the writer: 714-796-7829 or [email protected]

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