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No Reservations About Carlsbad

After nearly 30 years spent developing hotels, Bill Canepa says he’s learned to take nothing for granted — even after hearing earlier this year that his company had received a $60 million construction loan to build a new oceanfront resort in Carlsbad, a rarity in this economy.

“Our lenders even told us that they hadn’t gotten up that morning expecting to make a hotel construction loan,” said Canepa, president of Encinitas-based Wave Crest Oceanfront LLC. “But we made our case; we showed them the designs, and we brought them down to see the property.”

The 215-room Hilton Carlsbad Oceanfront Resort & Spa is now under construction in the Ponto region of southern Carlsbad, with an expected opening of June 2012. Developers and city officials say the $75 million luxury project should bring complementary housing, retail and restaurants to further boost the local economy, as well as public park and related beachfront amenities.

Other resort projects are coming to life around the city, the result of improving hospitality and financing fundamentals, among other factors.

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West of the municipal golf course, work continues at The Crossings, where Carlsbad-based Grand Pacific Resorts Inc. is developing what will eventually be a total of 700 hotel rooms and time-share units. That includes an additional 100 rooms planned at the company’s 250-room Sheraton Carlsbad Resort & Spa, which is already operating at the site.

Park and Stay

At nearby Legoland California, General Manager Peter Ronchetti said the theme park is in the “final stages of pre-construction planning” for what will be a three-story hotel with up to 250 rooms. That project was approved by the city in 2009 and is expected to be completed in 2013.

In Carlsbad’s main village district, the city has approved plans for a 104-room SpringHill Suites by Marriott, though no construction start date has been announced.

Alan Reay, president of hotel consulting and brokerage firm Atlas Hospitality Group in Irvine, said Carlsbad has long been home to several high-profile luxury hotels, stemming from land availability and close proximity to the ocean, tourism draws such as Legoland, a high concentration of active office parks and the regional Palomar airport.

Well-capitalized developers have recently been able to attract financing, despite a still dismal climate for construction lending, and Reay said upscale hotels have the perceived advantage of a higher and faster return on investment thanks to higher room rates.

Also, Canepa noted that because of the competitive nature of the construction industry amid scarce work, construction bids for the new resort came in at nearly 85 percent of what developers had anticipated.

Buying Instead of Building

But Reay said the improving hotel climate still favors the buying of existing properties over new construction, with major national real estate investment trusts recently making big buys of San Diego trophy properties.

“The REITs generally are not allowed to buy hotels under construction, though they are able to enter into agreements to buy properties upon completion,” Reay said.

The speed of Carlsbad’s commercial growth in recent years has caused concerns among longtime residents about maintaining the quality of life. As a result, government officials and developers have had to tread carefully when developing beachfront land in places like Ponto, where resistance among nearby homeowners has been intense.

Canepa, whose company also owns the Hilton Garden Inn in Carlsbad, said the new oceanfront resort was planned and designed over the course of several years, to take its undeveloped surroundings into account.

The city’s community and economic development director, Gary Barberio, said the resort is meant to be a “catalyst project,” expected to boost business for stores and restaurants already in the vicinity, as well as bring in new businesses if they are compatible.

Christer Westman, a senior planner with the city, said officials have not received applications for specific projects to follow the resort. While the Ponto district is zoned for specific tourism-related uses, Westman noted that the city’s long-term vision plan for Ponto has not yet been cleared with the California Coastal Commission, which is looking to ensure elements such as continued public access to the beach regardless of what is developed on privately owned land there.

Ted Owen, chief executive officer of the Carlsbad Chamber of Commerce, said he’s optimistic that infrastructure enhancements planned to coincide with future beachfront development, including parks and road reconfigurations, will garner support from residents at Ponto and elsewhere.

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