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City Approves Lease for Expansion of Sheraton Carlsbad Resort

The Carlsbad City Council has approved a ground lease agreement clearing the way for a 150-room expansion of the 250-room Sheraton Carlsbad Resort & Spa on city-owned property adjacent to the municipal golf course.

City officials said hotel owner Grand Pacific Resorts will pay the city $159,965 a year to lease the 3.15-acre property, with payments to total more than $15 million through the first 55 years of a 65-year lease. The lease agreement also includes two 10-year extension options.

Grand Pacific Resorts plans to build 71 hotel rooms on the western portion of the property, combining them with 129 existing rooms at the Sheraton. Those 200 rooms, along with an existing conference center, restaurant and lobby area, will be rebranded as a Westin hotel.

The remaining 121 existing rooms at the Sheraton will be augmented by construction of a new building consisting of 79 hotel rooms, a new lobby and related amenities, which will continue to be branded and operated as a 200-room Sheraton hotel.

Under lease terms, Grand Pacific has up to 36 months to complete environmental reviews and obtain building permits, and will then have 18 month to complete the Westin hotel. The lease allows for a potential future second phase in which Grand Pacific could develop either a minimum of 32 timeshare units or 32 additional Westin hotel rooms.

The city in May 2013 put out requests for proposals and received two proposals to develop the property – from Grand Pacific Resorts and Legoland California Resort. Legoland had proposed building a new 90-room hotel on the site.

City Council subsequently voted to enter into negotiations with Grand Pacific Resorts, setting aside a city selection committee’s recommendation that favored the Legoland proposal.

The property being leased was originally part of the city-owned golf course development known as The Crossings at Carlsbad, completed in 2007, and prior plans called for selling the excess parcel.

“When we crunched the numbers, we found that a long-term lease had the potential to generate a steady stream of new revenue to the city that would be far greater than what we could get from a one-time sale,” said Carlsbad Assistant City Manager Gary Barberio.

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