Seaport Village: Speed wins day

by | Jul 15, 2016 | The San Diego Union-Tribune

San Diego port commissioners shocked the development community this week when they swiftly narrowed the field of bidders to redevelop Seaport Village and its surrounding acreage.

In 6-1 vote Wednesday, the San Diego Unified Port District board decided to focus on Protea Waterfront Development’s proposal to convert 70 acres of prime waterfront property into a proposed $1.2 billion mix of hotels, shops and restaurants, a beach, aquarium and 480-foot observation tower called “The Spire.”

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“To me, it’s a watershed moment for the port,” said Yehudi “Gaf” Gaffen, one of Protea’s principals. He said the port had previously nurtured a reputation of soliciting development proposals and then spending years trying to decide what to build and who should build it.

Port Chairman Marshall Merrifield, the sole opponent, cautioned his colleagues and dozens of people at a special meeting at the Bayfront Hilton. “We’re maybe at the top of the second inning” of a years-long process, he said.

The board reserved the option of talking to other three other finalists if talks break down.

Commissioner Dan Malcolm, the first board member to back Protea at the meeting, said he saw no reason to shortlist the bidders or delay action to get more information.

“It was so detailed and had so much backup that I felt it was at that level that it should be passed through,” Malcolm said.

The board didn’t fully approve Protea’s project. It asked the port’s staff to conduct further “discussions” with the company to verify financial projections, clarify parking and mobility plans and explain how $150 million in planned public improvements would no longer need a port subsidy but could be covered by the project itself.

The port district is in the midst of what one person called a “third renaissance” of its 54-year-old life, the first being a start-up period, the second in which it redeveloped much of the waterfront while running Lindbergh Field, and the third in a post-airport period when its leaders aspire to creating a “world-class waterfront.”

Called Seaport San Diego, the Protea project covers 70 acres of land and water of the Central Embarcadero, bounded by the USS Midway Museum on the north, and hotels and the San Diego Convention Center to the south.

Seaport Village, a fixture at the foot of Pacific Highway since 1980 when it replaced the old San Diego-Coronado ferry landing, would be replaced after its lease expires in 2018 by much more retail, hotels and park space, built on top of underground parking.

If all goes well, construction would start in 2020 and be completed in late-2023. However, the developers and port still have to reach a business agreement, process an environmental impact report and get it approved along with a new port-wide master plan.

But port critic Diane Coombs said the project should be rethought, especially the tower, an aquarium and a charter school. She and other opponents warned of litigation ahead.

“I frankly think there’s a lot of work that can be done to make that better,” she said.

So who is Protea Waterfront Development?

Gaffen heads Gafcon Inc., a 29-year-old local planning, design and construction consulting firm with 130 employees.

High-profile projects have include Orange County’s Great Park at the former El Toro Marine Corps Air Station, San Diego’s Hall of Justice and the San Diego Community College District’s $1.5 billion construction bond program. The Great Park’s delayed implementation led to a political fight in Irvine and Orange County. Gaffen sent the port a letter defending his company against various charges cited in a controversial audit that the state is investigating.

Business partners Jeff Jacobs, son of Qualcomm cofounder Irwin Jacobs, and Jeff Essakow, who like Gaffen immigrated from South Africa, are owners of Rancho Valencia Resort and Spa in Rancho Santa Fe. The younger Jacobs was Qualcomm’s chief marketing officer, and Essakow has developed $300 million in various projects, including 350,000 square feet of mixed-use development in the center of La Jolla.

Protea will act as the managing partner for another entity, 1Hwy1, with four other members that will have equity stakes in the development.

They include RCI Group, a Miami-based waterfront development company; US ThrillRides of Orlando, responsible for The Spire; OdySea, based in Scottsdale, Ariz., builder and operator of a 178,500-square-foot aquarium; and AECOM, the giant engineering and design firm.

This arrangement could yield more income to the port than a traditional master-developer arrangement, Gaffen said. At completion, Gaffen estimates the port’s annual revenue at $22.5 million, more than five times the $4.1 million collected in fiscal 2015 from Central Embarcadero tenants, including Seaport Village.

Protea also has formed an “advisory committee” that includes Irwin Jacobs, Cisterra Partners Chairman Steven Black, Sudberry Properties Chairman Tod Sudberry, Bartell Hotels CEO Richard Bartell and Stath Karras, executive director of the Burnham-Moores Center for Real Estates at the University of San Diego.

Protea was the only team that garnered public support during testimony at the port meeting.

Chris Glenn, who with his wife Annie own four shops at Seaport Village, created a “Save Seaport” page on Facebook. But after meeting with Gaffen in January, he rallied other tenants in support on the promise that they could find new homes in the development.

“They looked like the best developer for us and seemed to honestly care about us the most,” Glenn said.

Each of the six bidders got 20 minutes to present their projects, but most had already met privately with port commissioners one at a time.

Perry Dealy, who represented developer Doug Manchester’s rival “Celebration Place” plan, said he was disappointed and dismayed that the port did not engage in another round of staff review and presentations. He said speed is no sign that approval will come easily and quickly when the ultimate plan reaches the California Coastal Commission.

“Caution is the better part of valor when it comes to these very complex, multi-agency approval processes,” he said.

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