By Gus Herrera
On Monday, the controversial Kimpton YWCA “Boutique Hotel” Project came to a screeching halt.
A 5-2 vote adopted Council Member Victor Gordo’s substitute motion to pause the project and re-evaluate the situation. Mayor Terry Tornek and Council Member Gene Masuda comprised the opposing votes (Council Member Steve Madison was absent).
The original item on the table would have approved a subsidy agreement between the city and the developer, KHP III Pasadena LLC (KHP).
The historic Julia Morgan-designed YWCA building (built in 1922) has been vacant for 20 years and was acquired by the city in 2012 for approximately $8.3 million, according to David Klug, senior project manager.
Unable to fund the costly restoration of the deteriorating structure, the city sent out a request for proposal (RFP) and ultimately entered into an exclusive negotiation agreement with KHP in 2013.
Since then, the project slowly struggled to gain traction, facing significant public resistance along the way. As a result, KHP claimed that in the four years since originally submitting their proposal several factors have yielded higher costs than previously expected.
According to city staff’s report, construction costs have risen significantly, “causing a domino effect on other budget line items.” KHP cites an increase of nearly 64 percent in the total cost per room, since 2013.
Furthermore, the original proposal sought to pay market wages for construction, but legislative changes, enacted in 2014, now require the developer to pay the higher “prevailing wage,” established by the state.
Thus, in order to continue with the project, KHP requested two subsidies: no ground rent for the first 50 years of 99-year lease and that the city provide the peak demand of 136 parking spaces for duration of the lease within a city-controlled garage.
Aside from the hesitancy to capitulate to the developer’s request for subsidies, there are several other factors that motivated the decision to halt the project.
The first and most obvious concern was that of physical compatibility. The project would have merged a rehabilitated YWCA building with a newly-built two-to-six-story, 87,342-square foot building – creating a massive 127,912-square foot, 181-room Kimpton Hotel.
The site would have spanned a total of 1.93 acres across from city hall, essentially compromising one of Pasadena’s few large spaces for public gatherings, in addition to threatening the integrity of the revered Robinson Memorial busts and views of city hall. Many residents, including Council Member Tyron Hampton, struggled to comprehend just how the planned behemoth could be characterized as a “boutique hotel.”
Council Member John Kennedy questioned whether a hotel would provide the best opportunity for the space. Kennedy suggested using the site for municipal purposes, potentially housing several city departments and allowing the city to become its own landlord. According to Klug, the city currently pays as much as $1.2 to $1.3 million per year to lease office space.
City Manager Steve Mermell revealed that the building’s footprint did not necessarily accommodate office space well and a decision to use the building for civic purposes would deny the city from a variety of tax revenue – revenue which he argues is the best way to recuperate the city’s investment on the building “many times over.”
That said, certain council members and residents were optimistic that putting out a new RFP, which includes city subsidies, could potentially draw in a fresh batch of alternative proposals.
Another concern cited the fact that the developer is no longer the Kimpton Hotel brand with which the city originally entered into an agreement with – in 2015, a private equity firm, KHP Capital Partners, was formed to take over operations, following the sale of Kimpton’s hotel management company to InterContinental Hotel Group.
There is also a CEQA lawsuit currently underway – legal action that would have delayed construction on the project until 2019.
The final straw came when the developer was unable to assure council that they would not request additional subsidies in the future. Nor did council receive a definitive answer that the developer would not flip the hotel further down the line, a practice which Eric Duyshart, economic development manager, said was “not uncommon.”
Gordo’s adopted motion will not only pause the project, it will also seek a third party to evaluate the reported 64 percent cost per room increase, re-assess other potential uses for the building, and will examine the developer’s proposal related to local hires.