Lack of Financing Kills $25-Million Hotel Project in Oceanside
An ambitious, $25-million plan to build a first-class hotel complex along Oceanside’s Municipal Harbor collapsed Tuesday, as lack of financing forced developers to withdraw from the project that was intended to bolster a fragile tourism industry.
Developer Joe Langlois, vice president of City Equities-Oceanside Ltd., told the City Council, acting as the Community Development Commission, that, after two years, he is giving up efforts to gain financing for the project.
“There’s just not a lender around who wants to makes this loan,” Langlois said. “I can’t get a hotel loan for this size project in Oceanside.”
The setback comes at a time when Oceanside, heady over its July 4 centennial celebration and recent successes in rehabilitating the beachfront, has been claiming a redevelopment comeback.
Once considered a summertime haven, Oceanside has had difficulty in recent decades in shedding its image as a honky-tonk town catering to Marines from nearby Camp Pendleton. City officials viewed the 264-room hotel as a major step toward respectability, a catalyst to lure tourists.
‘Greatly Disappointed’
“We’re greatly disappointed,” said Mayor Larry Bagley. But city officials, still hungry for Oceanside’s first major hotel, said they will soon court other developers to accomplish the task.
In the latest of a series of setbacks in efforts to obtain money for construction, City Equities was informed Monday that it would not receive a loan from Chrysler Capital Realty, based in Danbury, Conn. The rejection prompted City Equities’ withdrawal, Langlois said.
“We’ve invested $1 million into this project,” he said. “We’re as disappointed as anybody else that this did not come to fruition.”
Langlois and city officials said they have not received a statement from Chrysler Capital explaining the loan’s rejection. Sam Eubank, a vice president at Chrysler Capital, did not return calls Tuesday.
Boom Saturated Market
But the recent boom in hotel building that has saturated the market and lenders’ hesitancy to finance “trailblazing projects” probably contributed to the collapse of the Oceanside venture, said Karen Johnson, a manager at Pannell Kerr Forster, a public accounting firm specializing in the hotel industry.
According to the now-doomed proposal, City Equities was contracted to build a Radisson hotel that included conference facilities, restaurants, pools and tennis courts. The complex, the first of its kind in Oceanside, would have crowned a 10-acre parcel overlooking the San Luis Rey River and the Pacific Ocean. It was to be joined to a satellite facility with 32 suites, a restaurant and bar, a swimming pool and an upgraded boat dock on a separate parcel nearby.
The city’s redevelopment agency was planning to lend the developer $8 million to help purchase and grade the hotel site and for off-site improvements. In exchange, the city was expected to garner more than $9.5 million in property taxes and more than $500,000 a year in hotel bed taxes, according to redevelopment officials.
“It’s getting harder and harder to convince lenders that good opportunities are still out there,” Johnson said. “Obtaining loans (for hotels) is harder now than it has been in the last six or eight years.
‘Bridging Credibility Gap’
“Lenders are even more unwilling when you’re proposing a pioneer project. When you don’t have an existing similar project to prove that yours can be successful too, you have a tough time bridging the credibility gap,” Johnson said.
Alluding to the city’s tainted reputation, Johnson said: “I think there are still some lenders out there who say the words Oceanside, Camp Pendleton and the Vietnam War all in one breath.”
Redevelopment and city officials agreed with most, but not all, of the industry experts’ speculations. Although disappointed, they maintained their upbeat attitude and argued that Oceanside has no image problem.
The City Equities announcement will place the developer in technical default of the contract, said redevelopment director Patricia Hightman. According to the contract, if a developer cannot arrange a suitable financing package within 30 days, the agreement will be terminated. At the end of that period, Hightman said, the city will seek other developers to build a similar hotel project.
“In the overall scheme of things, I don’t think this is a major setback,” said Hightman, who cited attractive condominium projects sprouting along the beachfront and a newly reconstructed pier. “I think we’re still moving ahead.”
Industry experts, like city officials, remained optimistic that an Oceanside hotel complex is in the not-too-distant future.
“On the national scene, things may not look so great, but San Diego County is still doing well,” Johnson said. “Oceanside has water, it has sun. . . . I would say it’s just a matter of time.”
