Some notable changes to the Lane Field plan are expected to be ratified by the Board of Port Commissioners Tuesday.
The original plans called for a 525-room Inter-Continental hotel that was to be constructed on the southern block of Lane Field and a 275-room hotel that was originally supposed to be a an Aviana Suites on the northern parcel. The hotels were expected to be constructed concurrently.
The new plans call for a 250-room Hilton Garden Inn and a 150-room Hilton Homewood Suites with retail and restaurants to be constructed together in a single tower on the northern parcel, and construction of the larger hotel on the southern block would be placed on indefinite hold.
The Lane Field plan is a joint development of Lankford & Associates, C.W. Clark Inc., and Hardage Suite Hotels. The combined entity, known as Lane Field San Diego Developers LLC (LFSDD) will have a 66-year lease on the property.
Last year, the Port District and the Lane Field partnership commissioned a market and feasibility study. While the study concluded there would be sufficient equity and debt for the Hilton Garden Inn and the Homewood Suites hotels, the proposed 525-room hotel was a different story.
"Based on projected average daily rates, occupancies and gross income, staff believes hotel products such as these have a better chance of finding financing in the current economic climate and providing both LFSDD and the district with the greatest potential return," the Port District writes.
The hotels on the northern parcel are to be set back about 150 feet to allow for a park/plaza expected to be constructed at a cost of about $5 million. This includes remediation costs for any petrochemicals that exist beneath the site.
Under the memorandum of understanding, completion of the park/plaza is required to be completed by the fall of 2013. If for whatever reason, the developers fail to perform, the Port District will have to complete the park/plaza at its own expense.
To build on the northern parcel, the Lane Field developers will also need to incorporate the property at 1220 Pacific Highway that is currently leased and occupied by multiple offices of the Naval Facilities Engineering Command. The district and the Navy are parties to a memorandum of understanding executed in November 2005 for the port to acquire the leasehold. Under the MOU, the Port District is to pay $26.5 million for the site and find a replacement site for the Navy.
Then there is the hotel on hold. The port staff report says when the time does come to develop the hotel on the Lane Field's southern parcel, it should be a 400-room property that like the tower on the northern block, could be dual branded as well. This hotel, which would be equal or superior in quality to an Inter-Continental, would have associated retail, meeting space and a minimum of 442 parking spaces, of which 132 would be set aside for the public.
The port has made some calculations as to the amount of income the two hotels on the northern parcel should be able to generate over time. Assuming the hotels' occupancy is stabilized at about 70 percent occupancy, the projected gross income for the hotels would climb from about $22 million in the third year to $36.37 million in year 12.
The minimum annual rent the port will charge the developer/ leaseholders for rent will vary on a wide range of factors. Whether or not the developers are helped by the district will determine the level of minimal annual rent. Assuming no subsidy, the minimum would be zero for at least the first five years, but the Port District would immediately get a percentage of the gross receipts upon the opening of the hotels. The minimum annual rent ranges from about $1.18 million in year five to $2.94 million in year 12.
The formula for the port's take of the gross receipts is more complicated. The port lists everything from percentages from rooms (7 percent) to lottery ticket sales (0.5 percent). The port plans to assess 7 percent on the rental of conference and banquet rooms, 3 percent on food from hotel restaurants, 5 percent for on-premise alcoholic beverages, a 10 percent take on health club receipts, and 15 percent of parking receipts among numerous other assessments.
The developer/lessees will also be subject to Consumer Price Index adjustments every five years.