For years now, the city of Atascadero has retained a strong resemblance to the mudhole for which it was named. Dominated by construction zones, detours and piles of dirt, the core of the city is usually one storm away from being a muddy mess.

But one development — the Colony Square Project — could provide better times for the downtown district by next year.

Plans for the project would eventually add more than 100,000 square feet of retail, dining and residential space to the northeast corner of Highway 41 and El Camino Real, including a $12 million state-of-the-art movie theater.

With a proposed Wal-Mart development up in the air and the fate of the ritzy Carlton Hotel tied to owner David Weyrich’s financial issues, Colony Square is now the key to Atascadero’s downtown revitalization.

“Everything’s coming together,” Assistant City Manager Jim Lewis told the Business Times. “We know what we’re doing and we have everything laid out to make this a reality for Atascadero.”

The city pledged $1.5 million in redevelopment money to Colony Square — a hefty sum, considering that there are a handful of other projects currently under way, including the Highway 41 and 101 interchange.

“It took a while to get everything right, but we’re firing on all cylinders now,” Lewis said.

The bulk of the project’s financial burden was shouldered by developers Jim Harrison and Peter Hilf, who secured an $8 million construction loan for the theater project.

San Luis Obispo-based Mission Community Bank, Santa Lucia Bank in Atascadero and Community West Bank in Goleta teamed up to provide the loan for the project’s first phase, a 10-screen movie theater and 14,000 square feet of retail space.

The project is the best hope for this city of 28,000, where people have had to drive to Morro Bay, Paso Robles or San Luis Obispo to catch a movie.

Previously, hopes for revitalization had been pinned to The Rottman Group’s controversial and recently downsized Wal-Mart on the north end of town, the subject of a citywide vote a year ago.

The 52-room Carlton Hotel, which reopened in 2005 and still features amenities such as valet parking, has gone through a series of managers and is coping with a general downturn in the tourism business and the woes of owner Weyrich.

When it comes to Colony Square, Dan Cavanaugh of Mission Community Bank is intimately familiar with the funding process for the development.

He worked on it for three years at Community West before seeing it come to fruition as a Mission employee. Finding the money wasn’t easy, he said.

“In this economic time, with regulators hovering, a lot of banks were not interested in doing commercial construction,” Cavanaugh explained. “It got to the point where we were running out of banks to go to. None of the big boys wanted anything to do with it. The thing is, it does have a lot of very positive ramifications on the community.”

One obvious benefit to the community, Lewis said, is job creation. With 70 housing units, the new theater complex and 14,000 square feet of retail space in a high-traffic area of town, the project guarantees an influx of workers and residents.
“We’d love to have some local restaurants in this space,” Lewis said. “There are a few bigger chains that are interested in our community, like Olive Garden, so we’re looking at a mixture of local, regional and national. Hopefully we get some specialty coffee and juice shops, some sports bars, maybe wine bars.”

Even though the promise of big-name retailers and job creation made Colony Square an attractive development, Cavanaugh said that wasn’t enough to keep everyone on board.

“We were pretty much all set to go when the proposed operator of the theater backed out at the eleventh hour,” Cavanaugh said. The original operator was slated to be John Roush, owner of the Park Cinemas in Paso Robles.

The 36,000 square feet of theater space has been leased by Sherman Oaks-based Galaxy Theatres, which is expected to invest between $2 million and $3 million in Colony Square.

“The developers had been in contact with Galaxy and a couple other suitors for a while, so Galaxy was more than happy to step up and take part.”

Ground has broken on the first phase of the project, which includes the 10-screen cinema complex — sure to be a big draw for residents who have to drive 20 minutes to get to the nearest theater.

Atascadero has been without a theater since the Century Cinemas, owned by Roush, was demolished in 2006.

Roush isn’t out of the picture just yet, though. He submitted plans for his own mixed-use project in the downtown area, almost across the street from Colony Square. Roush’s proposed project, La Plaza Cinemas, has 40,000 square feet of retail and dining space and a 10-screen movie theater.

Lewis thinks the competition is a sign that things are looking up for the city, whose name is taken from the Spanish for “mire,” “bog” or “mudhole.”

“All this development just means that the time is hot for people to come to North County,” he said.

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