Welcome to the Hotel California, you can check it out any time, but you won't be pleased

IT sits next to one of Melbourne's most exclusive schools in one of the city's most exclusive suburbs.

By InvestSMART · 4 Feb 2012

By InvestSMART ·
4 Feb 2012

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IT sits next to one of Melbourne's most exclusive schools in one of the city's most exclusive suburbs.

But the black shadecloth and expensive address cannot hide the bombsite that is the former California Hotel.

No guests have been welcomed at this hotel in Hawthorn for quite some time just vandals, graffitists and the homeless.

Closed in 2008 not long after the Pratt family's investment company Thorney Holdings bought the site at 138 Barkers Road, the hotel site has descended into a rubble reminiscent of an urban war scene. The sign at the entrance says, "California Hotel Hawthorn, great welcome, great value" but there is nothing welcoming about the site.

Guttering and old light fittings dangle from buildings littered with smashed windows and graffiti.

Residents and the Boroondara Council are concerned the site has become a magnet for antisocial behaviour police reportedly made a drug bust in the shadows of the hotel in December.

The building next door, with a different owner, is also derelict and littered with smashed windows, many covered with metal sheets.

Thorney Holdings chief operating officer Alan Miller said the future of the California Hotel site was uncertain. "We are speaking to people at the moment because it has been on the market and other people have approached us with regard to perhaps looking at the site in conjunction with us, so we are just considering our options at the moment," he said.

The company has owned the hotel since 2007 and the site has a planning permit issued in 2010 for redevelopment as a four-level retirement village with 87 apartments.

Mr Miller said security had been an issue at the site and the company was considering clearing the former hotel buildings.

"We have had ongoing police visits there initially we had security surveillance it's a very difficult scenario where you have got a building awaiting demolition for the site redevelopment. It's challenging, we have certainly been in discussions with the council about it," he said.

"We do ongoing clearing of the site of debris and cutting the grass and I guess some of the more superficial things like that, but in terms of removal of the buildings etc, we are currently considering all that as well."

Boroondara Council mayor Heinz Kreutz said the council had received many complaints about the site and held discussions with the owners to clean it up. "Not everyone is as responsive as they should be," he said.

Some Melbourne councils have introduced escalating rates for derelict sites to encourage redevelopment.

Cr Kreutz said punitive rates could be something Boroondara considered.

"It is a good suggestion and the next step," he said.

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Frequently Asked Questions about this Article…

What is the current condition of the former California Hotel in Hawthorn?

The former California Hotel in Hawthorn has been derelict since it closed in 2008. The site is described as a rubble-strewn, vandalised building with smashed windows, graffiti, dangling fittings and black shadecloth. It’s attracted vandals, homeless people and antisocial behaviour, and the neighbouring building (under different ownership) is also in a derelict state.

Who owns the California Hotel site and how long have they held it?

The site is owned by Thorney Holdings, the Pratt family’s investment company. Thorney Holdings bought the property in 2007 and has owned it since then.

Is there a planning permit or approved redevelopment for the Hawthorn hotel site?

Yes. A planning permit issued in 2010 allows redevelopment of the site as a four-level retirement village with 87 apartments.

What redevelopment or disposal options is Thorney Holdings considering for the site?

Thorney Holdings says it is considering its options: it has been speaking with other parties about possible joint approaches to the site, maintaining the grounds (clearing debris and cutting grass), and is considering whether to remove the former hotel buildings. The company has also used security surveillance and had ongoing discussions with the council.

What security and safety problems have been reported at the derelict California Hotel site?

Local residents and Boroondara Council have raised concerns about antisocial behaviour. The site has attracted vandals and graffiti, and police reportedly conducted a drug bust on the property in December. Thorney Holdings has experienced ongoing police visits and initially used security surveillance.

How has Boroondara Council responded to complaints about the derelict site?

Boroondara Council has received many complaints and held discussions with the property owners to clean up the site. Council mayor Heinz Kreutz said not all owners are as responsive as they should be and suggested the council could consider punitive measures such as escalating rates for derelict sites, a strategy used by some other Melbourne councils.

Could the derelict California Hotel site affect the local neighbourhood?

Yes. The derelict appearance, vandalism and reports of antisocial behaviour are a concern for residents and the council. The site is described as an eyesore and a magnet for unwelcome activity, which has prompted calls for cleanup and possible redevelopment.

What practical lessons should everyday investors take from the California Hotel Hawthorn situation?

The story highlights risks of holding derelict property: ongoing security and maintenance costs, reputational and community-relations issues, possible police involvement, and the prospect of council intervention or punitive rates. Even where a planning permit exists (such as the 2010 permit for a retirement village with 87 apartments), redevelopment can be delayed and owners may need to consider partnering, sale or demolition to resolve a problematic site.