A years-long effort to build a major hotel on Harbor Island cleared one of the last remaining hurdles Tuesday when San Diego port commissioners granted a required development permit that will allow construction of the $160 million project to begin in two years.
Still a question, however, is whether the development will include any accommodations designed for lower cost stays, something that the California Coastal Commission has long pressed the Port of San Diego to require. The developer, Sunroad Enterprises, has the option to instead pay $11.3 million in fees that would be earmarked for an undefined, future affordable lodging project within the port’s jurisdiction.
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“Our hope would be to figure out a way to make (the low-cost lodging) inclusionary,” Sunroad President 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 fee but the question is, does that still give you a great project? If not, I have the right to build it somewhere else on port tidelands, and the question is whether there is another location to get it done. But building it comes ahead of paying a fee.”
The fee — $100,000 per room applied to 25 percent of the total hotel rooms — is still substantially higher than the $35,000 per room “in-lieu” levy Sunroad had proposed paying earlier this year.
Bowing to concerns raised by Coastal Commission staff, the port commissioners agreed to a revised permit provision stating that the actual development of low-cost accommodations should take priority over paying a fee and should be located within the San Diego Bay coastal zone, preferably on Harbor Island tidelands. If an affordable lodging project were built, it would have to have, at minimum, 112 rooms, which is 25 percent of the Sunroad hotel’s 450 rooms.
Although port commissioners in April approved an option for Sunroad to lease a 7.5-acre bayfront site, the developer will over the next couple of years need to meet a number of key conditions before consummating a 66-year lease to operate a hotel next to its existing marina on east Harbor Island.
Among the requirements are working drawings, proof of financing, and hotel franchise and 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 varying in height from 12 to 15 stories. The developer has yet to work out an agreement with a hotel brand. The port has previously asked that the operator be upscale, akin to a Marriott, Hyatt, Hilton or Swissotel. Feldman said he has had interest from all the major hotel brands.
The project, expected to start construction in late 2023, calls for a number of amenities, including a walk-up restaurant and bar area, swimming pool, jacuzzi spa, fitness center, retail space, conference space, and a 15-foot-wide waterside public promenade. In addition, “mini destination areas” for the public will be developed, three of which will be located on the promenade. Features may include benches and artwork, spots for exercising and games, and outdoor retail carts selling specialty items and/or food.
Sunroad’s efforts to build a hotel on east Harbor Island have traversed a long, circuitous path over the last six years, stalling at various times over concerns about the hotel’s design and the Coastal Commission’s unwavering insistence that the San Diego Unified Port District commit to providing low-cost lodging on state tidelands.
“The port is in a unique position as a public steward of these public tidelands, and there currently is no low-cost accommodations within the port’s jurisdiction,” said Coastal Program Manager Kanani Leslie, “so we’ve have been encouraging them to pursue an actual project as opposed to paying a fee.”
Port commissioners acknowledged the especially long time it has taken to reach project approval, amid sometimes tense debate and a divided board. Their vote on Tuesday was unanimous, with Commissioner Rafael Castellanos recusing himself and Jennifer LeSar absent.
“When I was appointed in the middle of 2017, there was already a lot of water under the bridge then, but it’s been a long and winding road and I do believe we are ending with a very high-quality product,” said Michael Zucchet, who chairs the board of port commissioners. “I appreciate your patience and diligence of never giving up.”
Port Commissioner Dan Malcom offered thanks to the Coastal Commission, whose input, he said, produced an even better hotel project.
“I think this is a Class A hotel, I think it’s a classy-looking hotel,” Malcolm said. “I think, more importantly, it complies with the original port master plan amendment, which calls for a high-quality hotel of up to 500 rooms, one hotel as opposed to many different buildings.”
Coastal planners and port staff have long been at odds over the need to process an amendment to the port district’s master plan before allowing the Sunroad project to go forward. In an email sent to port staff this week, Leslie reiterated the Coastal Commission’s stance on securing the approval of coastal commissioners.
“We continue to believe a PMPA (port master plan amendment) would be the most appropriate process to address lower-cost overnight accommodations as well as incorporate the updated project details and associated public access provisions/mitigation measures into the (master plan),” Leslie wrote.
Port staff disagrees, 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 that is “responsive to views of San Diego Bay, the airport, and the downtown San Diego skyline.”
Leslie said that no determination has been made yet on whether the Coastal Commission staff will recommend pursuing an appeal of the port’s coastal development permit approval. She did say following Tuesday’s hearing that she hopes the port and Sunroad will collaborate on finding a way to construct low-cost lodging as opposed to paying a fee “so that overnight visits to the coast will be more accessible to members of the public with low or moderate incomes in the future.”
Up and down the state, millions of dollars in-lieu fees have been collected over the years from developers seeking to build along the coast, but so far California has little to show in the way of affordable lodging constructed with the help of those revenues. There is no set room rate established for affordable overnight lodging in California, but a recent report for a Southern California project cited a figure of $130 a night, as of 2019.
Locally, port commissioners approved in 2019 plans for a micro hotel on Pacific Highway that would contain dozens of sleeping pods renting for $35 a night. Financing includes a $6.3 million subsidy, most of which will come from fees previously paid by the developer of two Lane Field hotels in lieu of providing low-cost lodging as a part of their projects built near San Diego Bay. Construction on that project has not yet started.
Under the lease option that was negotiated between the port and Sunroad, the developer will be required to invest $153 million in the project, and the port would provide $15 million in rent concessions over the first seven years. During those early years, Sunroad would initially pay as little as $250,000 annually, a sum that would gradually rise 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 late 2025.
“This is just getting us up to the starting gate,” Feldman said. “The real success of the project will be once it is up and operating. So is it worth it? That’s years in the future.”
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