Lack of Funds Has Hobbled Pointe Anaheim

A proposal to build a $500-million shopping, entertainment and lodging zone on a rundown site across from Disneyland has stalled for lack of funds.

Developers say they are still aggressively seeking financing for Pointe Anaheim, an L-shaped entertainment mall with 1,050 hotel rooms and Las Vegas- and Broadway-style shows along Harbor Boulevard and Katella Avenue.

But they also acknowledge that many potential investors have turned down the project or refused to commit funds until they can gauge the success of a new Walt Disney Co. theme park that opens next year beside Disneyland.

“They almost want to see how the race runs before they place their bet,” Pointe Anaheim project manager Robert Shelton said Friday, adding that he remains “optimistic long term.”

Shelton and outside sources said the biggest problem is financing the entire project--which includes three hotels--all at once, as required by a development deal worked out with the city.

“One hotel at a time would have been a lot easier,” said a financial source familiar with the proposal.

Tourism and city officials and private backers all had high hopes for Pointe Anaheim. It had been projected to generate $400 million in tax revenue to the city over 30 years and help Anaheim emerge from Disney’s formidable shadow. It also is an important part of the tourist industry’s efforts to market Orange County as a vacation spot with multiple attractions.

City brochures and presentations spotlighted the project as an example of what’s to come at the Anaheim Resort Area, now a mishmash of motels, T-shirt shops and fast-food restaurants around Disneyland.

Anaheim has spent heavily to create a zone of leafy walkways, where city leaders hope new attractions, hotels, restaurants and shops will spring up to complement Disneyland and the Anaheim Convention Center.

Having Pointe Anaheim in the brochures was “a little premature,” Mayor Tom Daly said this week, noting that no one from the project has applied for a $30-million loan promised by the city.

“That tells me it’s not real yet,” Daly said. “It was a real ambitious project.”

Pointe Anaheim’s backers, who initially had hoped to open the complex this year, say it will take two or three years to build after they arrange financing. Under any circumstances, Pointe Anaheim would be completed after Disney opens its new complex and Anaheim completes a major renovation of its Convention Center and the streets, landscaping and utilities in the area. Those projects, costing about $2 billion in all, will be complete by early next year.

Funding could well be easier to find if the area’s hotel rooms overflow when Disney’s new California Adventure theme park and the improved Convention Center open, a scenario some experts predict and city officials and developers hope will transpire.

“Our thinking is that the fundamentals are here--this is the right location with the right project,” Shelton said.

As a vote of confidence, the backers, who include Anaheim Hilton co-owner Stan Castleton, plan to exercise their options to buy the property for the entertainment mall next year whether or not financing for the buildings has been obtained, Shelton added.

The biggest parcel is where Melodyland, a former concert hall that became a Christian center, had operated. The total property cost has been estimated at $75 million.

Three hotels are envisioned for the project: one business-oriented, one with a toy theme for families and a third with a music theme to complement three live theatrical venues seating 4,600. About 100 shops, restaurants and nightclubs round out the project.

Backers last year won city approval for Pointe Anaheim over the objections of Disney, which complained that it constituted a gaudy, traffic-snarling mess. Anaheim leaders were especially pleased with the prospect of receiving $400 million in new tax revenue.

Since that revenue would come mainly from Anaheim’s 15% surcharge on hotel room rates, the city extracted a pledge from the developers to complete 51% of Pointe Anaheim’s hotel rooms by opening day and finish the rest within 18 months.

But the ambitious timetable scared off potential investors.

Shelton said another factor keeping lenders from ponying up funds was the uncertainty created by the Federal Reserve’s recent series of increases in interest rates.

Pointe Anaheim’s inability so far to strike a deal to buy a final portion of the land needed for the project--the site of the Anaheim Plaza Hotel directly across Harbor Boulevard from Disneyland and the new Disney park--created another financing hurdle, he said.

Shelton once had talked about building a smaller project if the Anaheim Plaza purchase could not be completed.

But when Pointe Anaheim came up for final approval, the city and Disney officials noted that the Planning Commission had approved the full 29-acre project, not a scaled-down version.

Times correspondent Judy Silber contributed to this report.

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Project Stalled

The proposed Pointe Anaheim development is stalled by lack of funding as potential investors wait to see how Disney’s new theme park fares.