Port leads the way for Sunroad’s $ 160 million hotel on Harbor Island

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A multi-year effort to build a large hotel on Harbor Island removed one of the final hurdles on Tuesday when San Diego Port Commissioners granted a required development permit that will allow construction of the $ 160 million project to start in two years.

However, a question remains whether the development will include housing designed for lower-cost stays, which the California Coastal Commission has long asked the Port of San Diego to require. Developer Sunroad Enterprises has the option of paying instead $ 11.3 million in fees that would be allocated to a future undefined affordable accommodation project in the port’s jurisdiction.

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“Our hope would be to find a way to make (low cost accommodation) inclusive,” Sunroad chairman Uri Feldman said in an interview following the port hearing. “I’d rather be able to use that money on a project than pay the fees, but the question is, does this still give you a great project?” Otherwise, I have the right to build it elsewhere on the coasts of the port, and the question is whether there is another place to do it. But its construction precedes the payment of a royalty.

The fee – $ 100,000 per room applied to 25 percent of total hotel rooms – is still significantly higher than the $ 35,000 per room “in-lieu” tax that Sunroad had offered to pay earlier this year. .

Yielding to concerns raised by Coastal Commission staff, port commissioners accepted a revised license provision stating that actual development of low-cost housing should take priority over the payment of a fee and should be located within the coastal area of ​​San Diego Bay, preferably on the Harbor Island Marshes. If an affordable accommodation project were built, it would have to have, at a minimum, 112 rooms, or 25 percent of the 450 rooms at the Sunroad Hotel.

Although harbor commissioners in April approved an option for Sunroad to lease a 7.5-acre bay-side site, the developer will need to meet a number of key conditions over the next two years before entering into a lease. 66-year-old to operate a hotel adjacent to its existing marina on the east side of Harbor Island.

Requirements include working drawings, proof of financing, and franchise and hotel management agreements. Sunroad’s plans call for what is essentially two hotels in one – a 198-room extended-stay hotel and a 252-room limited-service property ranging in height from 12 to 15 stories. The developer has not yet concluded an agreement with a hotel brand. The port has already asked the operator to be upscale, like a Marriott, Hyatt, Hilton or Swissotel. Feldman said he has attracted interest from all major hotel brands.

The project, which is expected to begin construction in late 2023, requires a number of amenities, including a walk-in restaurant and bar, swimming pool, jacuzzi spa, fitness center, fitness area, retail, conference space and a 15 foot wide space. public promenade at the water’s edge. In addition, “mini destination zones” for the public will be set up, three of which will be located on the promenade. Features can include benches and artwork, places to exercise and play, and outdoor retail carts selling specialty items and / or food.

Sunroad’s efforts to build a hotel on eastern Harbor Island have come a long, winding path over the past six years, repeatedly dwelling on concerns about the hotel’s design and the unwavering insistence of the Coast Commission for the Unified Port District of San Diego to commit to providing low-cost accommodation over the state’s tides.

“The port occupies a unique position as the public steward of these public coastal areas, and there is currently no low cost accommodation within the jurisdiction of the port,” said Kanani Leslie, Coastal Program Manager, “we So we encouraged them to pursue a real project rather than paying a fee.

Harbor commissioners acknowledged the particularly long time it took to get project approval, amid sometimes tense debates and divided council. Their vote on Tuesday was unanimous, with Commissioner Rafael Castellanos recusing himself and Jennifer LeSar absent.

“When I was appointed in mid-2017, there was already a lot of water under the bridges at that time, but it has been a long and winding road and I think we end up with a very high product. quality, ”said Michael Zucchet. , who chairs the council of port commissioners. “I appreciate your patience and diligence in never giving up.”

Port Commissioner Dan Malcom thanked the Coastal Commission, whose contribution, he said, produced an even better hotel project.

“I think it’s a Class A hotel, I think it’s an elegant hotel,” said Malcolm. “I think, more importantly, that it is in line with the original amendment to the harbor master plan, which calls for a high quality hotel with up to 500 rooms, one hotel as opposed to many different buildings.”

Coastal planners and port staff have long disagreed on the need to address an amendment to the port district master plan before allowing the Sunroad project to proceed. In an email sent to port staff this week, Leslie reiterated the Coast Commission’s position on obtaining Coastal Commissioners’ approval.

“We continue to believe that a PMPA (Port Master Plan Amendment) would be the most appropriate process to address lower cost accommodations as well as to incorporate updated project details and public access provisions / measures. associated mitigation in the (master plan) ”Leslie wrote.

Harbor staff disagree, arguing that the existing master plan specifically calls for the development of a “high-quality hotel of approximately 500 rooms” on the Harbor Island site, “responsive to bay views. from San Diego, the airport and downtown San Diego. Diego’s horizon.

Leslie said no decision has yet been made on whether Coastal Commission staff will recommend appealing the approval of the port’s coastal development permit. After Tuesday’s hearing, she said she hoped the port and Sunroad would work together to find a way to build low-cost housing rather than paying a fee “so that night tours on the coast are more accessible to people. members of the public with low or moderate incomes in the future.

Statewide, millions of dollars in in lieu fees have been collected over the years from developers looking to build along the coast, but so far California has little to show. in terms of affordable housing built using these revenues. There is no set room rate set for affordable overnight accommodation in California, but a recent report for a Southern California project cited a figure of $ 130 per night, as of 2019.

Locally, port commissioners in 2019 approved plans for a micro-hotel on Pacific Highway that would contain dozens of sleeping cabins for rent for $ 35 a night. The funding includes a $ 6.3 million grant, most of which will come from fees previously paid by the developer of two Lane Field hotels instead of providing low-cost accommodation as part of their projects built near Bay Field. San Diego. Construction of this project has not yet started.

Under the lease option that was negotiated between the port and Sunroad, the developer will have to invest $ 153 million in the project, and the port will provide $ 15 million in rent concessions over the first seven years. In those early years, Sunroad would initially pay only $ 250,000 per year, a sum that would gradually increase to $ 1.5 million by the seventh year.

As happy as he is to see his project move forward, Feldman says it’s too early to say whether the long years of planning have been worth the time and expense. He expects the new hotel to open by the end of 2025.

“It just gets us to the starting gate,” Feldman said. “The real success of the project will be once it is operational. So is it worth it? It’s years in the future.


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