Money woes are forcing developers of the high-rise hotel and condo tower planned for the corner of Center Street and Shattuck Avenue to take another look at their project.
One result is a search for ways to cut back on costs, including construction prices and the size of an underground parking lot, and for possible concessions from landowners or the city.
Peter Diana, vice president of Massachusetts hotelier Carpenter & Co., told members of the Downtown Area Plan Advisory Committee Wednesday night that high construction prices were “quite a bit higher than anticipated.”
Diana said the rising prices “require us to figure out how to compensate,” and three alternatives were being considered:
• Reducing costs.
• Increasing income from the property.
• Seeking less expensive sources of capital.
One major cost factor has been the inflationary spiral of the price of structural concrete, sparked in part by the increasing cost of the energy used to make cement from limestone and in part by the rising demand for the material in China.
On the bright side, Diana said, the project would prove a financial windfall for the city, providing $41 million in revenues during its first decade.
Tax benefits would include “about $24 million in transit occupancy taxes” and $10 million as the city’s share of property tax reviews, he said.
The hotel executive said his company would also be seeking to fix some of the costs paid to the city as fees and would be looking for concessions from Bank of America and the university, the owners of the land on which the high-rise hotel, conference center and condo building will rise.
One possible cutback would be reducing the number of underground parking levels from three to two and seeking other locations for the lost spaces.
“Underground parking is enormously expensive,” he said, and the third level would cost even more because it falls below the site’s water table.
“If we take the spaces out of the building, we have to find room for them somewhere else,” he said, in part because the hotel will count on them as revenue generators.
Diana said one factor complicating fund-raising for a project with 50 condos planned for the upper stories of the 19-floor tower is the lack of any comparable units already built in the city.
Lenders like to know what probable sales prices are, but the only costly condos currently planned for downtown have yet to be built, the 149 units planned for the nine-floor-plus Arpeggio, soon to be built across Shattuck and a half block west on Center Street.
Ed Denton, UC Berkeley Vice Chancellor in charge of construction and capital projects, was in the audience for the presentation, as was Donlyn Lyndon, a UC Berkeley architecture professor who is working with Diana’s company on the design.
In addition to the condos, the project includes 210 hotel rooms, 16,000 square feet of meeting space, and 26,000 square feet of retail and restaurant space—including a jazz club.
When DAPAC member Patti Dacey asked if parking lifts would help cut parking costs, Diana said the devices didn’t pencil out for the hotel project.
Member Winston Burton suggested developing parking in cooperation with the Pacific Film Archive/Berkeley Art Museum the university plans for the eastern end of the block, something Diana said was already being discussed.
When member Jesse Arreguin asked if the company was considering reducing the number of on-site parking units reserved for condo owners, Diana replied, “We’re looking at everything.”
When Wendy Alfsen said that concrete was the biggest polluter of all building materials during the fabrication process, Diana responded with, “We have a rash of green consultants.”
While DAPAC members may have been left with more questions than answers, Diana left things on a sweet note, in the form of two cakes from the Rubicon Bakery, which he had visited shortly before Wednesday night’s DAPAC meeting.