Port’s Financial Plans Clouded : Developer Gets More Time to Build 2nd Hotel Tower

The San Diego Unified Port District, hoping to stabilize the quivering financial foundation of the planned waterfront convention center, on Monday granted developer Doug Manchester extra time to build a hotel tower considered crucial to the center’s economic health.

With the ground breaking for the $125-million convention center only two weeks away, the port’s once-promising plans for recouping its investment through rents from neighboring hotels remain clouded by Manchester’s financing troubles.

After a discussion that was devoid of optimism, the commission voted 6-1 to delay the hotel development schedule four months, setting an Oct. 1 deadline for Manchester to break ground and secure a letter committing the construction loan. Even commissioners who favored the plan voiced doubts about Manchester’s prospects for securing the $100-million-plus financing he needs for a companion tower to his existing Hotel Inter-Continental.

Port Commissioner Bill Rick, chairman of the ad hoc committee that oversees the convention center planning, said he thought Manchester’s chances were “not terribly good.”

The commissioners’ bleak outlook has grown out of more than two years of often tense negotiations with Manchester. In early February, it appeared that financing for Manchester’s second tower was virtually certain, but the deal suddenly collapsed with the 11th-hour withdrawal of Beverly Hills Savings & Loan, according to Christopher Neils, attorney for Manchester’s Pacific Landmark hotel partnership.

In April, the savings institution disclosed that it faces a $100-million loss in 1984, and it was subsequently seized by federal regulators who said it was insolvent and operating in “unsafe and unsound condition.” The institution’s dealings with Manchester in the construction of the San Diego Inter-Continental--it holds an equity position in the hotel--are considered one source of its financial troubles.

The Port District has counted on rents from as many as 2,200 hotel rooms on port land near the convention center southwest of Seaport Village to recoup the $125-million construction cost for the center. Manchester, who returned his leasehold property to the port for the center site, has provided 682 rooms with his first tower and was expected to provide the rest by building the second tower, and then a third, a planned Hyatt, on another nearby site. The port hopes to have the second tower open within three months of the opening of the convention center, scheduled for autumn, 1986.

Under his agreement with the port, Manchester would secure the Hyatt option by building the companion tower to the Inter-Continental.

Commissioners on Monday also approved a $4.96-million contract for Huntcor Inc. to do the excavation and road relocation work for the convention center. They stress that the hotel development problems pose no threat to the construction of the convention center.

However, delays in hotel construction mean that the port may have to wait many more years than at first projected to recover its investment. The prospect of a protracted cash flow problem has caused officials to worry over financing for the port’s other major development plans, such as the cruise ship terminal and restaurants proposed for the B Street Pier.

Moreover, a shortage of hotel rooms could seriously damage the marketing of the convention center. That could result in large operating deficits for the City of San Diego, which plans to operate the center.

Neils said efforts to find a new construction loan are under way. He suggested that lenders may be attracted by the imminent ground breaking for the convention center.

Commissioner Louis Wolfsheimer cast the lone vote against the extension, saying the port should move forward with another developer on the Hyatt site and forget, for now, about the possibility of having all three towers with 2,200 rooms built in the next few years.

Rick and Commissioner Ben Cohen, holding out hope for all 2,200 rooms, argued that the port should wait until the Oct. 1 deadline. If Manchester fails to perform by then, they said, the port should consider developing a larger hotel, perhaps up to 1,200 rooms, on the Hyatt site.