$48-Million Suit Over Convention Center Delays

Charging that delays in construction of San Diego’s waterfront convention center could cost him at least $48 million, developer Douglas Manchester has sued the San Diego Unified Port District, adding another stormy chapter to the project’s troubled history.

The Superior Court suit alleges that the Port District violated its contract with Manchester, who has built one hotel and plans to build two more adjacent to the proposed convention center, when port officials decided earlier this year to rebid the convention center project in an attempt to cut construction costs.

The resulting delay in the opening of the center, the suit claims, poses a severe economic hardship for Manchester’s 681-room Hotel Inter-Continental, a second 683-room tower under construction and a planned 800-room hotel.

In a second lawsuit filed by Manchester attorney Michael Thorsnes, Manchester sued the Chicago-based Hyatt Corp. for allegedly breaching its contract to operate the planned third bayfront hotel by agreeing to operate a hotel in the Golden Triangle area. The Golden Triangle Hyatt Regency, the suit says, “will interfere directly and adversely” with the planned bayfront hotel.

Hyatt officials could not be reached for comment.

Because of the construction delays and myriad other problems with the convention center project, Port District officials have long anticipated what Port Commissioner Louis Wolfsheimer last spring termed “a legal merry-go-round” involving numerous lawsuits. In recent months, port officials and contractors involved with the project have frequently traded legal threats as excavation problems on the center’s site, adjacent to Seaport Village, and other difficulties pushed the project further and further behind schedule.

Some port officials speculated Wednesday that Manchester’s lawsuit may actually be a bargaining ploy to try to expedite construction of the center--a necessary ingredient in the financial success of his hotels.

“I wish we didn’t have this to contend with, but it’s not entirely unexpected,” said Port Commissioner William Rick. “I’m sure he’d like to see this moving along quicker. So would we. But this problem is not without remedy in the contract.”

Under the port’s contract with Manchester, the convention center was scheduled to open in 1988, a target that Rick conceded Wednesday “seems out of the question” because of the rebidding delay, prompted by a projected $20-million construction cost overrun that could have raised the center’s overall price to nearly $160 million.

Seeking to reduce the project’s cost, the Port District in April rejected six budget-busting construction bids and decided to solicit a second round of bids--an action that, according to Manchester’s lawsuit, the port took “with full knowledge of the loss of revenue” that a delay in the center’s opening would cost the developer and his hotels.

With various cost-saving design changes, the new bid proposals are expected to be ready for submittal to contractors this fall, Rick said. If that timetable holds, construction could begin early next year and the center could be open by mid-1989, Rick said.

The contract between the Port District and Manchester specifies that the developer is entitled to certain rent reductions if the port is unable to meet the 1988 deadline for opening the convention center, Rick said.

“We think the contract covers this situation,” Rick said. “The center was supposed to open in ‘88, but the ‘or else’ isn’t out of this world. There’s something in this for everyone.”

Manchester attorney Thorsnes did not return a reporter’s telephone calls. However, the lawsuit alleges that the convention center delays will cost Manchester’s hotels more than $17.4 million in operating costs, $12.4 million through the loss of favorable financing and $18.2 million in equity dilution.

The suit also claims that the center’s postponed opening date will produce additional financial losses through delays in the use of parking spaces and tennis facilities to be included in the convention center complex, higher construction costs for the second hotel tower now being built and “extended periods of interruption (of) quiet enjoyment” of the Hotel Inter-Continental and the second hotel.

The Inter-Continental stands to lose an estimated $6 million in convention-related business in 1988 because of the delays, according to a letter written by one of the hotel’s executives that was included in the lawsuit.

Another document claims that “if the uncertainty associated with the completion of the convention center was terminated,” Manchester could save an estimated $7 million per year by refinancing the loans for his hotels.

Because of what the suit characterizes as the Port District’s negligence in the center’s design and supervision of the bidding process, Manchester argues that he should be relieved from paying rent to the port and meeting various construction deadlines on the new hotel tower.

“There’s no doubt that the chap held up his end of the deal,” Rick said. “But we’re trying to push ahead, too. This is why we have lawyers.”