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Financing Hang-Ups Delay Two Long-Term Downtown Projects

Two big development projects in downtown San Diego planned years ago are stalled, lacking the financing to move ahead and with little prospects in finding the money anytime soon.

Last week, developers for the first phase of Lane Field and an expansion of Seaport Village obtained lease amendments to their exclusive development agreements with the Port of San Diego.

The Lane Field project is the more ambitious, planned to accommodate two high-rise hotels and retail, and estimated a year ago to cost $465 million.

In January, when the project was approved by the state Coastal Commission, the developers had lined up InterContinental Hotels to operate a 525-room hotel on the south side of the site.

The developer team consists of three local firms: Clark Construction, Hardage Hotels and Lankford & Associates.

The Lane Field project was granted a series of options that could extend its lease on the 5.7 acres of prime downtown land on the north side of Broadway, between North Harbor Drive and Pacific Highway to 2012.


Expanding Seaport Village

The other project at Seaport Village entails redeveloping the site that once housed the city’s police headquarters and would double the downtown retail center’s size.

Carlsbad-based Terramar Retail Centers, formerly called GMS Realty, is the developer and the managing entity of Seaport Village, with 14 acres along Harbor Drive. A call to Terramar for comment was not returned. Its lease was extended to the end of 2009.

Jerry Trammer, project executive for Lane Field San Diego Developers, said his team had arranged a term sheet from a private equity fund for the entire cost but the unnamed group “went away.”

“There is no commercial financing available for a $450 million hotel project in this economic environment,” Trammer said.

Recently, the Lane Field team has been talking about putting together an “unconventional financing approach” with another private equity purveyor, but Trammer declined to reveal details for fear the same entity would be inundated with similar financing requests.

Gary London, president of The London Group Realty Advisors, said it’s no surprise that hotel projects are unable to secure the financing they need to start building.

“The hotel industry is in a particular period of weakness right now and there will be few sources to embrace a new project unless it’s very compelling,” London said. “Something like (Lane Field) is clearly going to be on the back burner for a few years.”


Complements Embarcadero Plans

Lane Field, now used as a parking lot, has been on the city’s drawing boards for 17 years, according to Trammer, and would complement what promises to be a major retrofitting of the city’s Embarcadero and includes a new cruise ship terminal, and a widening of the sidewalk along Harbor Drive.

At least the cruise ship terminal at Broadway Pier is going ahead. Last week, the Port Commission approved a $17.4 million contract with San Diego-based construction company Jaynes Corp. to complete that project. The work drew 14 bids.

The improvements to the Embarcadero, called the North Embarcadero Visionary Plan, have been planned for a decade. The project is to be co-developed by the port district and the Centre City Development Corp., part of the city of San Diego’s Redevelopment Agency.

Originally, the port planned to obtain the funds for its half of the estimated $28.5 million first phase of the project from revenue it was anticipating from the Lane Field hotel project.

However, because Lane Field is not moving ahead, the port is working on borrowing the funds from CCDC on terms that are now being negotiated with the city agency, according to a port district spokeswoman.

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