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The Los Angeles Community Redevelopment Agency is planning to move its Hollywood offices to a former Arthur Murray Dance Studio, adjacent to the Roosevelt Hotel, and pay six years rent in advance -- money that will then be used as matching funds to secure a CRA "disappearing" loan to renovate the studio building.

The Hollywood Chamber of Commerce also is planning to move into the property from its temporary headquarters inside the hotel at 7000 Hollywood Blvd. The chamber moved to the hotel last year from the First Interstate Bank Building at 6255 Sunset Blvd., where the CRA's Hollywood offices are now.

The Community Redevelopment and Housing subcommittee of the Los Angeles City Council is scheduled to consider the planned move and loan deal at a meeting Feb. 22.

Maruko Inc., owner of the Roosevelt Hotel and the adjacent property, is operating under Chapter 11 bankruptcy protection from creditors. Because of Maruko's Chapter 11 status, the deal also will require approval by the U.S. Bankruptcy Court and Maruko's lender.

"It is unique. We're putting up both parts," said CRA Hollywood project manager Cooke Sunoo. "In order to revitalize that particular building, what we're doing is taking advantage of ourselves as a tenant. Because of the Chapter 11, it's doubtful that a (private) financial lender would lend them the matching funds."

Under the CRA's Commercial Historic Preservation Loan Program, the developer puts up funds to match the loan, which is then "paid back" by the building owner simply maintaining the property. For each year that the property is maintained, the CRA takes 10 percent off the loan balance, until no money is owed.

"It just doesn't seem to me to be the intent of the (loan) program," commented CRA critic Norton Halper. "First of all, it's not an eyesore where they're going. They don't need an office this size. This whole thing is pork."

Sunoo acknowledged that the matching fund requirement in the loan program is designed to ensure that the project getting the redevelopment money "has some stability," but he said the studio property's stability comes from the fact that "they have a rent-paying tenant like the CRA."

Sunoo added that he feels the studio "is clear blight."

"It's ugly and it's detrimental to the neighborhood," said Sunoo. "I think this is a good deal for Hollywood."

Under the loan program, if a building owner fails to maintain the property, the CRA can foreclose on it, although property held by a company operating under bankruptcy court protection cannot be foreclosed upon.

"We can stand in line," said Sunoo. "Maruko may go under, but the lease holds."

Arthur Gimson, managing director of Maruko's hotel division, said the deal is part of the company's reorganization plan for emerging from Chapter 11.

"The building is now unoccupied and is in a CRA restoration district," he said. "We want to fix it up and maintain the area because it's important to the success of the hotel and the community."

Gimson added that the CRA is getting "an extremely good deal."

Real estate attorney Tony Natsis said it is "very unusual" for a tenant to pay six years' rent in advance "unless you've got a big credit problem." However, he called the CRA's deal with Maruko "ingenious."

"I've never heard of anything like that before," said Natsis. "They're really helping out this company though. That's dramatic."

Under the proposed deal, the CRA would move into 3,500 square feet of space adjacent to the hotel. The former studio has been boarded up for years.

The CRA would pay $292,000 rent in advance ($1.16 per square foot a month), and Maruko would qualify for a $250,000 disappearing loan.

Under the proposal, Maruko would then spend $550,000 (the "loan" plus matching funds coming from the pre-paid CRA rent) renovating the former dance studio.

The advance rent money would come from the CRA Hollywood budget for "Response to Development Opportunities."

The rehabilitation is scheduled for completion in June.

Gimson said the former dance studio is a historic Hollywood building. Under the plan, the CRA would take the ground floor of the building and share the space with an as-yet-unspecified retail tenant. The chamber of commerce would be on the upper floor of the building, said Gimson.

He stressed that the proposed arrangement is not an attempt to bail out a bankrupt hotel operator.

"What this is an attempt to improve the area, to make it more attractive. In that case, it is in the best interest of the hotel, but this transaction is for the dance studio," said Gimson. "In the future, we may be doing more with the CRA on building a car museum that would be put in the garage."

The Roosevelt Hotel first opened in 1927 and was renovated in 1986. The hotel complex includes 335 guest rooms, an Olympic-sized swimming pool, a private gym and spa, a show lounge and the Hollywood Memorabilia Gallery.

The CRA would have the right to use the hotel's conference room free of charge, subject to availability, under the lease deal.

Maruko, a real estate company based in Japan, filed for Chapter 11 bankruptcy protection in Tokyo in August 1991 and in Los Angeles two months later. Maruko bought the Roosevelt three years ago and also owns hotels in Palm Springs, San Bernardino and San Diego.