By Christy Scannell
SDUN Editor

A $4 million refurbishment of the historic Lafayette Hotel in North Park began last week and is expected to conclude by the end of the year.

The El Cajon Boulevard icon – built in 1946 and a former haunt of celebrities such as Bob Hope, Lana Turner, Ava Gardner and Betty Grable – will receive a top-to-bottom remodel, including a return to its original pale blue exterior with a red roof. Funding for the project is coming from a $2.45 million forgivable loan from the City of San Diego Redevelopment Agency with the remaining $1.65 million from JCG Development, the property’s owner.

“We will not just be offering a stay, but an experience,” said Jay Wentz, principal of JCG Development and Hampstead Lafayette, which bought the hotel in 2004 for $11 million. “We will remember it as a community treasure and treat it accordingly.”

Although the Lafayette is valued at more than $12 million, Hampstead Lafayette’s mortgage is more than $13 million. Occupancy at the 131-room property recently fell to an all-time average low of 57 percent with a typical room rate of $68, compared to an 80 percent average occupancy rate and $180 average room rate for San Diego hotels overall.

Wentz said the overhaul will increase both the hotel’s occupancy rate and its ability to charge higher room rates.

“We’re in the valley; we’re slowly going to climb out,” he said, estimating the Lafayette’s rooms will go for $125 nightly once the renovations are complete. “This is not going to be a luxury hotel but a very well run, very welcoming place for both guests and the community.”

In its heyday a luxury playground for Hollywood’s glamorous set, the Lafayette gradually fell into disuse and disrepair as hotels cropped up in Mission Valley, downtown and the beaches. By the mid-’90s, Father Joe Carroll was proposing the Lafayette as a new homeless shelter but the transition never materialized due to lack of community support.

When Wentz, an affordable-housing developer, acquired the property six years ago, his plan was not to produce a remodeled hotel. Instead, he sought to build 271 condominiums on the site with 20 percent as affordable-housing units. When that project met with community resistance due to its proposed height, he suggested a 110-unit development that found backing in the community – and then the economy took a downturn, prohibiting construction due to cost.

“So we were left with a hotel with wonderful bones but in deep need of an extreme makeover, yet we had to spend more and more money to keep it alive. So we decided to go to Redevelopment because we knew a better hotel would feed a lot of businesses in the area and increase TOT (transient occupancy tax) revenues to the city. It just made sense,” Wentz said.

Michael Lengyel, project manager for the Redevelopment Agency, said the Lafayette first sought a Mills Act reduction – a city historical designation that reduces property taxes.

“But if we halved their value we also would have halved their property taxes, which ends up hurting revenues,” Lengyel said.

Instead, the agency recommended Wentz apply for a forgivable loan.

“If the hotel does better and increases rates, it generates more TOT taxes,” Lengyel said. “Plus the community gets to maintain this historic asset.”

North Park’s Project Area Committee (PAC) – a volunteer group that advises the city on neighborhood redevelopment projects – approved a $3.25 million loan for the Lafayette. The total was reduced to $2.45 million last year when the state dipped into city redevelopment funds to help alleviate the budget deficit.

“They don’t get the money until they finish the project,” Lengyl said, acknowledging the hotel’s debt ratio was a concern in granting the funds. “So they will be motivated to get the project done.”

Toni Atkins, the District 3 councilmember when Wentz bought the property and a vocal opponent to his original condominium plan due to its height, said the city’s investment is sound because North Park and University Heights residents will allow nothing less.

“The history of this hotel with the community is long and deep. The community sort of owns it, if not on paper,” she said. “It’s an emotional attachment. So I trust the community totally on this one – I have no doubt the people will assure that this gets done and gets done right.”

Wentz, who lives in North County, said he intends to honor that community spirit by creating an “entertainment hub and lifestyle destination” for residents as well as hotel guests. The Red Fox Room will remain as-is, but a second restaurant will be added, plus an Internet coffee café and an outside grill. Wentz said he anticipates offering jazz in the Mississippi ballroom, summer poolside movies, weekend brunches and other activities locals can enjoy, all arranged by the hotel’s new “entertainment/vibe” manager. About 30 more jobs will also result from the restoration, he said.

“This project satisfies a number of needs,” said District 3 Councilmember Todd Gloria. “Not only does it preserve a valuable historic resource, it invigorates an area where we haven’t done a great deal of redevelopment along El Cajon Boulevard. New businesses will be attracted to that, and a new demographic that isn’t currently occupying the hotel. What you have is an incredible return on investment.”

Infrastructure improvements will eat much of the $4 million – Wentz admitted he will need to “stretch dollars as far as [he] can” – such as a new roof, new windows, an improved HVAC system and repair of the terrazzo tile pool designed by Johnny Weissmuller of “Tarzan” fame. But individual rooms will also be upgraded with wall-mounted plasma TVs, Wi-Fi, high-quality bedding and “urban chic” furniture.

“We want to preserve the charm – this hotel already has such character in its rooms and common areas,” he said. “Even outside – where do you see anything that looks like this in San Diego anywhere but here? This place is gorgeous. We are very, very excited about its wow factor.”