Newport Dunes for Sale

Stymied by opposition to their plan to build a large hotel and convention center, the longtime owners of the Newport Dunes resort project on Newport Beach’s Back Bay have put the 100-acre recreation property up for sale.

Evans Hotels, the family-owned company that owns and manages Newport Dunes, told the Newport Beach City Council in a letter this week that it is seeking potential buyers for the property, which includes a recreational vehicle park, a cafe, a small marina and a large beach.

The company had proposed a high-end hotel and time-share complex that ignited complaints from neighbors worried about increased traffic.

Last year, the proposal added fuel to the battle over local Measure S, the Greenlight Initiative, which voters approved, requiring a citywide election on projects like the Newport Dunes proposal.

“The recent Newport Beach election clearly indicated the community’s support for a different hotel on the Newport Dunes property than the one we proposed,” resort manager Tim Quinn said in a letter this week to the City Council.

A low-key operation since opening in 1958, Newport Dunes encompasses 75 acres of land and 25 acres of saltwater on Upper Newport Bay. The facilities were modernized a decade ago when the owners replaced cracked and peeling aquamarine buildings with a tiled-roofed complex, including a grocery store, clubhouse, pool and spa.

But San Diego-based Evans had greater aspirations, envisioning a complex that would elevate the property to “world-class destination resort status.”

The owners decided to pull back after voters approved the Greenlight Initiative, which requires an election on projects that involve a “major amendment” to the city’s General Plan. On the Newport Dunes site, the plan authorizes 275 hotel rooms. Evans wanted to build a 600-room hotel and extensive conference facilities.

Evans provided no details about prospects or a price for the property. Quinn, an Evans family member, said that it’s not a distress sale--that Evans won’t sell the unusual property if it doesn’t get an offer it likes.

Steven L. McKenzie, the Eastdil Realty managing director listing the resort for sale, said it already generates millions of dollars from a fully leased marina and “what may be the most upscale RV park in California.” But the potential to develop a hotel will add to the sales price, McKenzie said.

Real estate experts said any sale will be complicated by the fact that Newport Dunes sits on state tidelands leased from Orange County. The lease, which runs out in 2039, requires 6% of any hotel revenue to be paid to the county.

Financing any project on leased land is difficult, “and hotel financing isn’t ever easy,” said Michael D. Ray of Sanderson-J. Ray Development in Irvine. “That just adds another layer of difficulty.”

Hotel development also is complicated by the weak economy and competing new beach resorts that already are under construction or have been green-lighted in Dana Point, Laguna Beach and Newport Coast to the south and in Huntington Beach to the north.

However, hotel specialist Vache Darakdjian of Atlas Hospitality, a Costa Mesa brokerage, said a resort hotel at Newport Dunes could still make sense.

ke Evans Hotels, whose holdings include the Catamaran and Bahia resorts on San Diego’s Mission Bay, also is renovating the Lodge at Torrey Pines, along the Torrey Pines golf course in La Jolla.

Quinn said the company strategy is to focus on San Diego projects.