Talks on Plan for 2nd Hotel Tower Hit Snag

The San Diego Unified Port District and financiers backing Doug Manchester’s proposed development of a second Hotel Inter-Continental tower adjacent to the proposed waterfront convention center are caught in a critical snag in lease negotiations, it was revealed Tuesday.

Commissioners of the Port District were informed Tuesday by Manchester’s attorney that Beverly Hills Savings & Loan, which has agreed to refinance a loan to Manchester on the first tower so it can provide up to $20 million for initial construction on the second tower, will pull out of the deal this week if the disagreement is not settled.

The controversy could delay or preclude construction of the second tower, which was scheduled to open in concert with the convention center in late 1988. The second tower, with its more than 700 rooms, is considered critical to the financial success of the $125-million convention center.

Commissioners balked Tuesday at Beverly Hills Savings & Loan’s demand that it be allowed--without coming back to the Port District for permission--to declare itself, or a wholly owned corporation of the firm, the managing general partner of the hotels should Manchester default on his financial responsibilities in the deal.

The Port District wants to reserve the right to review the agreement or seek mediation in the courts before such a takeover could occur.

An ad hoc committee of the Port District will meet with representatives of Manchester and the savings and loan today, and the commissioners will meet Thursday in hopes of reaching an agreement before the end of the week.

“We have been informed that it is critical that they have this right (to assume control of the hotels) as part of their participation in the deal,” Christopher Nils, Manchester’s attorney, told the port commissioners.

Manchester and Port Commission Chairman William Rick had predicted ratification of the financing arrangement and lease three weeks ago, saying that agreement was lacking only a few insignificant details.

Nils said, however, that Beverly Hills Savings & Loan this week alone had sought 34 changes in the proposed lease. “We convinced them that those would not be to the port’s liking, and they withdrew them,” Nils said. “This remaining point seems to be of some significance, however.”

The savings and loan has imposed a Thursday deadline on reaching the agreement, Nils said, because an investor group putting up $12 million in capital for the second hotel wants the papers recorded by that day--the deadline for receiving tax shelter benefits on their investments for the month of February.

Commissioners complained that the savings and loan was placing undue pressure on the port. “This syndication is nothing but a tax gimmick,” said Louis Wolfsheimer. “I don’t think we have to move this agreement through in such a hurry just so a doctor in Grosse Pointe, Mich., can get the best tax shelter possible. After all, this is public land we’re talking about here.”

Wolfsheimer said Beverly Hills Savings & Loan “never would have been allowed to lease this property, and it’s not fair to thrust us into this position now of having to accept the injection of (the savings and loan) as a possible general partner at this late date.”