Port Delays Hotel-Option Ruling; Builder’s $15-Million Windfall at Risk

The San Diego Unified Port District on Tuesday delayed for at least three weeks a decision on developer Doug Manchester’s $15-million plan to sell his option to build a third waterfront hotel.

By a unanimous vote, the port commissioners, at Manchester’s request, postponed until Feb. 10 a decision on whether to approve the sale, in which Manchester would transfer the right to build a third hotel next to the proposed convention center to Seaport Manfred Co. Inc.

After the port’s action, Manchester and his attorneys expressed confidence that the three-week delay will enable them to clear up what lawyer Chris Neils characterized as “misconceptions and misimpressions” about the deal, thereby enhancing its chances of approval by public officials who have been sharply critical of the proposal.

If anything, however, the fate of the proposed sale appeared even more in doubt after Tuesday’s meeting than it had been earlier as several other uncertainties--beyond that surrounding the port’s ultimate action--surfaced.

Seaport’s attorney, for example, explained that in light of the delay, the company plans to reevaluate its plan to buy the option from Manchester. The earlier tentative agreement between Seaport and Manchester had been contingent on the port’s approval of the deal on Tuesday, meaning that, at the very least, a new sale contract would have to be drawn up, assuming that the port ultimately approved it.

And Donald McGrath, an attorney for the Hyatt Corp., which is to manage the third hotel and must approve the sale, firmly stated that the hotel chain “absolutely will not” authorize the deal unless Manchester settles a lawsuit that he filed last year aimed at nullifying Hyatt’s pact to run the hotel. The prospect of a settlement before Feb. 10, attorneys on both sides agreed, is problematical.

Opponents of the proposed sale, including San Diego Mayor Maureen O’Connor, have accused Manchester of speculating on public property and trying to parlay an option that he received from the port in 1983 for $100 into a $15-million windfall profit.

In response, Manchester emphasizes that in order to obtain the option on the 4.75-acre parcel, his company, Torrey Enterprises Inc., agreed to build the twin-tower Hotel Inter-Continental on the waterfront site, gave the port 12 adjacent acres to build the convention center and spent more than $1 million in planning on the proposed third hotel--adding up to a $250-million investment. Partly because of delays in construction of the convention center, the Inter-Continental has an operating deficit to date of more than $27 million, attorney Neils said Tuesday.

Critics of the proposed deal, Neils told the commissioners, “ought to understand that it’s not all roses . . . that there are risks involved” in investing on the tidelands.

Over the next three weeks, Manchester said, he hopes to convince skeptics that the proposed sale is a “win-win situation” in which, at no additional public cost, the third hotel will be built, but by Seaport, rather than by Torrey Enterprises.

In a related action, because of the uncertainty over the option sale, the port agreed Tuesday to extend Manchester’s deadline for presenting preliminary plans for the third hotel from Feb. 27 to April 2.