Sunroad makes last-ditch plea to port to save its stalled Harbor Island hotel project

Hoping to salvage plans for its stalled Harbor Island hotel, developer Sunroad Enterprises made a last-ditch plea Wednesday to San Diego port commissioners to extend an approaching deadline on an agreement crucial to keeping the project alive.

The request, though, had not been formally scheduled to be considered at the port’s regular board meeting and as a result, the board of port commissioners was legally prohibited from taking any action Wednesday.

The deadline on Sunroad’s “exclusive negotiating agreement” with the Port of San Diego to develop a 325-room hotel on East Harbor Island is set to expire Sept. 27, and there is no other board meeting scheduled before the end of this month. If no extension is granted between now and the deadline, Sunroad’s hotel project could potentially collapse.

The developer insists that the port staff has the authority to extend the agreement.

Sunroad, in its appeal to commissioners, not only presented new renderings of its proposed waterfront hotel in response to concerns they previously raised, but it also demonstrated it now has the support of organized labor. Representatives of the hotel workers union — Unite Here — and the San Diego Building & Construction Trades Council showed up at the meeting to argue for an extension.

“We’ve worked very hard with the port to get to this point, and we feel that it’s at the 1-yard line in order to get it approved,” Uri Feldman, president of Sunroad Holding Corp., said in an interview following his presentation. “It’s completely in the port’s hands to grant that extension and come up with what the exclusive negotiating agreement requires them to do, which is negotiate in good faith with us.”

At issue is a 325-room hotel Sunroad has proposed for a 7-acre site on East Harbor Island. The developer, a longtime Port of San Diego tenant, has been trying to build a hotel on the peninsula for at least the last decade. Its efforts, though, stalled last month when port commissioners voted down two options for moving the project forward.

Following Wednesday’s meeting, port staff released a statement suggesting there still may be room for a possible extension.

“Before today, Port staff had told Sunroad that it will not extend the ENA (exclusive negotiating agreement), and Sunroad hadn’t submitted a revised project, which is why staff didn’t take the item back before the Board today,” the statement said. “It’s important to note that staff had twice brought the project, as presented before today, to the Board without any indication from the Board that staff should extend the term of the ENA. Staff will review the presentation Sunroad gave today and take it under consideration.”

Although commissioners were advised by the port’s legal counsel it could not have a robust discussion on Sunroad’s request, Commissioner Dan Malcolm urged staff to give Sunroad more time to refine its project proposal.

“I can’t imagine why we wouldn’t be trying to support Sunroad to bring a quality project to the tidelands,” Malcolm said following the meeting.“If we do nothing and let this lapse, I think it will definitely have a chilling effect on future requests for proposals where we invite people to come in to propose a development. This is really kind of a crossroads moment and I’m hopeful that we do extend the agreement.”

Last month, the board considered — and voted down -- two iterations of the Sunroad hotel, both of which staff said would have required it to waive some of the terms established in its original contract with the developer. One of the alternatives proposed a two-phased project that called for a total of 500 rooms.

Commissioners also expressed little enthusiasm for the project design, which they said lacked a “wow factor” for such a prominent waterfront site.

At Wednesday’s meeting, Sunroad’s architect, Gensler, presented new renderings that better capitalized on water and downtown skyline views and offered pops of orange hues inspired by San Diego sunsets.

Attorney Steven Strauss, representing Sunroad, also addressed the board, saying the port was not meeting its obligation to negotiate in good faith.

“Sunroad for a decade has spent millions of dollars on potential development of hotels on Harbor Island,” Strauss told the board. “Following the execution of the ENA, Sunroad has spent hundreds of thousands of dollars on this project in reliance on the port to negotiate in good faith … We urge you to act in good faith and direct staff to grant the 90-day extension.”

Wednesday’s showdown comes on the heels of an appellate court ruling last week that favored the California Coastal Commission in the port’s legal fight over development of hotel rooms on Harbor Island.

The court concluded that the Coastal Commission was within its right last year to reject plans to develop up to 500 hotel rooms on East Harbor Island, including a 175-room hotel Sunroad has been trying for years to develop on its marina leasehold adjacent to the parcel where the developer wants to develop its 325-room hotel.

The commission has argued that the port has failed to satisfy a California Coastal Act mandate that calls for the provision of lower cost lodging.

lori.weisberg@sduniontribune.com

(619) 293-2251

Twitter: @loriweisberg

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