Negotiations to Continue : Tiff Delays Ratification of Lease for Hotel Tower

An internal squabble over financing for the second tower at the Hotel Inter-Continental has again postponed ratification of a lease between developer Doug Manchester and the San Diego Unified Port District.

Port District commissioners Thursday canceled an adjourned meeting at which they hoped to approve the financing for the second tower. Port Director Don Nay said officials with Beverly Hills Savings & Loan and Manchester’s Torrey Enterprises informed him that they would not have a financing proposal prepared in time for the meeting.

On Tuesday, Beverly Hills Savings & Loan had threatened to terminate its participation in the financing of the second tower, which is scheduled to have more than 700 hotel rooms, if the lease was not ratified by Thursday. But Nay said negotiations will continue.

“This does not mean the deal is dead,” Nay said. “They said they would get back to us with a proposal as soon as possible. But there are problems that have to be worked out before any agreement can be reached.”

The second hotel is scheduled to open in concert with the convention center at Navy Field in December, 1988, and is considered critical to its financial success. Lease revenue from the two hotels, plus a third hotel to be built near Seaport Village by the Hyatt Corp., is to help defray the port’s $125-million cost of building the convention center.

If the current financial proposal falls though, it could delay--or preclude--construction of the second tower.

At Tuesday’s meeting of the commissioners, Christopher Nils, Manchester’s attorney, said Beverly Hills Savings & Loan wanted authority--without coming back to the port commission for permission--to assume the role of managing general partner of the twin hotel towers should Manchester default on his financial responsibilities.

Port commissioners balked at that proposal, which Nils said was “critical to their (Beverly Hills Savings & Loan) participation in the deal.” Negotiations among Manchester, the lending institution and the port have continued through the week, but Nay said he was “unable to predict when we might be able to come to the commissioners with an agreement.”

Beverly Hills Savings & Loan has agreed to provide as much as $20 million in cash to cover financial losses incurred by the first tower so construction of the second tower can begin--as long as the disagreements over the lease arrangement can be worked out.

Security Pacific Bank has conceptually approved an $85-million loan to Manchester for the remainder of the construction cost, but is reluctant to participate in the deal until ground on the second tower has been broken.

A month ago, Manchester confidently told the Port District commissioners that only minor details in the financial arrangement remained to be ironed out. But, by Nils’ count, the savings and loan has since proposed 34 changes in the lease terms, most of which Nils said were rejected by Manchester because the developer knew they would be unacceptable to the port.