Key Project in Works for Oceanside : Building: The $325-million deal would be the most important redevelopment project in the city’s history.

Oceanside is nearing an agreement with developers to build a $325-million commercial-hotel-residential project on 10 empty acres by the Oceanside Pier, the most important project in city redevelopment history.

When the project on vacant land that once held sex arcades, adult theaters and bars is finished in 1992, it is expected to rejuvenate Oceanside’s lackluster downtown with attractions for both tourists and local residents--sort of a North County Seaport Village.

“This project is what we’ve been working for over the last 17 years,” city Redevelopment Director Patricia Hightman said Thursday. “This is the heart of our downtown.”

City officials are negotiating with Keenan Associates, owner of three blocks on Pacific Street directly across from the pier, and the Santa Fe Railroad’s real estate division, Catellus Corp., which has five blocks just east of the Keenan property. The city owns two blocks in the project area.

Landowner James Keenan and developer James Watkins propose a $250-million project consisting of a 250-room hotel, 150 condominiums, 350 time-share units, 150,000 square feet of retail space and a 70,000-square-foot office building.

The office building would be on a city-owned block at Hill Street and Mission Avenue that is separated from most of the project area.

In a $75-million companion development, Catellus wants to build 15,000 square feet of restaurants, 64,000 square feet of shops, a 20,000-square-foot office building and 318 condominiums.

Although Keenan and Catellus have had differences--and one significant issue remains in dispute--Hightman said she is confident the two coordinated projects are “extremely compatible.”

“We are very optimistic that, with one or two more meetings, we will bring the projects into complete compatibility and it will be a unified project,” she said.

According to the developers, the project will yield $4 million a year for the city through property, sales and bed taxes.

Although city officials hope an agreement will be announced within two weeks, Mike Ogden, project manager for Keenan, predicted the deal probably will take until mid October.

Ogden said a key outstanding issue is the height and density of the adjacent railroad project. Also, the amount and longevity of a city redevelopment subsidy to provide streets and other infrastructure for the development must be worked out, he said.

“We’re real close” to a deal, said Ogden, adding, “We think this project will have a profound effect on the downtown of Oceanside.”

A representative of Catellus Corp. could not be reached for comment Thursday.

The project is a milestone in Oceanside’s often frustrating struggle to return its coastal downtown to a safe, scenic and economically thriving area.

During the ‘60s and ‘70s, much of the area slid into blight, worsened by social problems as drug dealers, gambling interests and prostitutes catered to young Marines during the Vietnam War era.

Especially in the ‘80s, the redevelopment program has cleaned up the beachfront, called The Strand, enticed attractive seaside condominiums, and encouraged some housing and commercial building rehabilitation.

The city pier was rebuilt a few years ago, and, in a bold commitment to reviving the downtown, the city invested $30 million in a new Spanish-style Civic Center that opened in June. It is three blocks away from the pier area project.

The city’s strategy in erecting the Civic Center downtown was to generate confidence by private developers and local residents, many of whom long ago stopped shopping downtown.

“This is a pioneering area,” said Ogden. “Nobody has done any sizable commercial projects in the area.”

He believes the Keenan job, which “is going to be a Seaport Village type of project” will have a “domino effect” by encouraging others to invest in downtown.

Stebbins Dean, chief administrative officer of the Oceanside Chamber of Commerce, said he believes the pier-area project has taken the redevelopment effort “near its peak.”

“There’s no doubt it is the most significant redevelopment project you can expect,” he said.

But he cautioned that, despite the project, “it’s not like you take a deep breath and say Oceanside is complete now.” He said the city still sorely needs more downtown retail, more businesses to serve tourists, building renovation and street beautification.