Council May Decide Whether Bayfront Hotel Gets Off Ground

One of downtown San Diego’s largest private landowners and the government agency responsible for guiding downtown development are on a collision course over a proposed bayfront hotel, and nothing that transpired between them Friday hinted that either side is ready to blink.

Unless a compromise is reached by March 4, it will be up to the San Diego City Council to settle the dispute between Santa Fe Pacific Realty Corp. and Centre City Development Corp.

The issue is complex and has several appendages, but it probably will come down to who can marshal the most political clout and get the City Council to decide in its favor.

“They’ve (Santa Fe) always said they wanted to be cooperative,” said Jan Anton, a CCDC board member, after Friday’s board meeting. “But now they are trying to end-run us . . . with the council. I’ll be talking to council members to reiterate our position.”

Ed Levine, Santa Fe’s San Diego project manager, countered: “We intend to proceed with our arguments before the City Council.”

At the center of the dispute is Santa Fe’s proposal to build a $37-million, 335-room Embassy Suites hotel on a block across the street from the police station at Pacific Highway and Market Street, near Seaport Village.

The site is in the Marina Redevelopment Project area, where Santa Fe owns two other blocks. Santa Fe is negotiating with the San Diego Unified Port District for another and has plans to consolidate part of its railroad right-of-way to squeeze out an additional four to five blocks.

With its spectacular waterfront views, burgeoning tourist trade and the advent of the convention center off Harbor Drive, the Marina territory is one of the most attractive and potentially lucrative in all downtown.

The problem for Santa Fe is that, since 1976, the area has been designated--by CCDC and, ironically, the City Council--primarily for housing and not hotels, making the company’s current Embassy Suites proposal incompatible. This is a matter of substance because one of redevelopment’s goals is “a 24-hour downtown,” the foundation of which is a permanent downtown residential population, and 5,000 to 6,000 of these people are slated to live in the Marina area.

Compounding the dispute is a 1983 development agreement between Santa Fe and the city, which is supposed to regulate the company’s ambitious, 25-year, $1-billion waterfront building plan. CCDC says that agreement commits Santa Fe to building 600 housing units on its proposed hotel location. But Santa Fe sees it differently.

Paul Peterson, an attorney for Santa Fe, says Santa Fe never committed to building that housing but merely to study its feasibility, a point echoed by Levine.

“We’ve never committed to housing,” Levine said after Friday’s meeting. “We, as a corporation . . . have a problem with developing housing.”

The way Santa Fe interprets the 1983 development agreement, it agreed to go along with a blanket residential rezoning of the Marina--which is now proposed--as long as it could still build a hotel across from the police station.

But CCDC says the only way Santa Fe should be allowed to build a hotel is if it commits to constructing 600 housing units, either in conjunction with the hotel or on one of its adjacent blocks.

The issue surfaced publicly at Tuesday’s City Council meeting, when CCDC presented an interim ordinance imposing strict housing-only development guidelines in the Marina for up to a year, while a permanent rezoning and urban design plan is drafted. Santa Fe said it wanted an exception so its hotel project could proceed unfettered. CCDC said any such exception would severely undermine the goal of housing in the Marina. The City Council put off a decision until March 4.

On Friday, the CCDC board reaffirmed its position, while Levine said he had no intention of changing his.

“I don’t want to hold them hostage,” said Gerry Trimble, CCDC’s executive vice president. “But housing is a high priority. I think a hotel designation is OK . . . if it’s with residential.”

Trimble said the permanent Marina rezoning plan would probably include two major hotel sites, including Santa Fe’s and another at Harbor Drive and 4th Avenue. But these hotels, he said, would most likely be tied to housing in some way.

Other CCDC board members were more adamant. “Santa Fe went to them (City Council) and said, ‘Please let us have our hotel right now,’ ” said board chairman Peter Davis. If Santa Fe is granted an exception, then “it’s open season,” he added.

“Before this (interim ordinance) is passed,” Davis said, more hotel developers will put the “squeeze on the City Council together.” At the very least, said Davis, the spirit of the 1983 development agreement committed Santa Fe to build 600 units of housing. “Now you’ve tried to end run us . . . without that housing,” he said.

After the meeting, Davis, president of the Bank of Commerce, said the stakes involved in the dispute involve no less than the future character of the Marina. “If you don’t draw the line at Santa Fe, we’ll lose the opportunity for quality residential we want in Marina. . . . If we don’t hold them to housing, then others will expect the same treatment.”

Levine said the Embassy Suites proposal is beyond the point of negotiations. “We’re there . . . and we want to get going now,” he said. Santa Fe’s goal, he said, is to avoid any delays, which could happen with an interim ordinance, and that’s why Santa Fe went directly to the City Council.

“Housing is not an issue at this time,” Levine said after the meeting. He noted that Santa Fe’s attention is focused only on the hotel site, and that the company has no objections to the rest of its property in the Marina being designated as the location for future housing.

But as for whether Santa Fe would be willing to build that housing--either in a joint venture with another company or by selling its property outright to a housing developer--Levine said:

“We haven’t taken a position on that.”