CERRITOS : City Puzzled by Hotel’s Failure to Turn a Profit

The 203-room Sheraton Cerritos, which opened in April, 1990, was conceived as a cornerstone of the upscale Towne Center redevelopment project at 183rd Street and Bloomfield Avenue. The hotel was considered so crucial to the office-commercial development that the city agreed to chip in $750,000 a year until the hotel turned a profit.

But the hotel’s continued losses and the developer’s failure to pay property taxes have raised eyebrows at City Hall.

City officials say they are concerned that the $25-million hotel continues to lose money even though its occupancy rate last year reportedly approached 80%, well above the regional average. Officials also say they’re perplexed by the failure of the hotel developer, Transpacific Development Co. of Torrance, to pay $900,000 in property taxes on the site for the past four years.

“That seems absurd,” Mayor John F. Crawley said last week. “I can’t believe they’re strapped for money.”

The delinquent taxes have prompted city officials to withhold $1.5 million in subsidy payments to the hotel the past two years.

Thomas Irish, chief operating officer of Transpacific, acknowledged that the hotel has enjoyed a higher occupancy rate than most of its competitors, but said the hotel’s overall performance “has not been such that it’s allowed us to make our property tax payments.” He declined to elaborate.

Sheraton officials completed an audit of the hotel late last year, and last month hired a new general manager, Hans Altenhoff, a food service specialist who is expected to enhance the hotel’s banquet and catering operations.

“Food services was an area they needed to work on,” City Manager Art Gallucci said. He would not elaborate.

After the management change, city officials last week agreed to use some of the frozen subsidy payments to cover the hotel’s $900,000 tax bill.

In turn, Transpacific, which holds the right to develop 60 acres in Towne Center, agreed to relinquish control of six acres of vacant land the city can now add to an adjacent retail development already under construction.