The developer of two hotels planned at the Dana Point Harbor said Wednesday the project will not move forward after the O.C. Board of Supervisors this week pushed the vote on a new 66-year ground lease until next month at the earliest.
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The county tapped Dana Point Harbor Partners in 2018 for a massive overhaul of the county-owned harbor, now costing the developers about $600 million, that promises a new marina, which is 70% complete, a new commercial area, which is under construction, and hotel space. The two proposed hotels have been approved by the city of Dana Point and the California Coastal Commission.
On Tuesday, the developers went to the county to get new ground leases approved, which they said are key to getting the financing for the hotels and their construction underway in time to open for the 2028 Olympics, with the surfing competition planned in nearby Lower Trestles.
The request also spun off a separate ground lease for the hotels and added 10 years to both leases.
Fifth District Supervisor Katrina Foley asked her colleagues at Tuesday’s meeting to add requirements related to the workers at the Marina Inn who would be out of work when it is replaced by the new hotels and controls on future rate increases for the marina slips. Some of the supervisors were receptive, but said they needed more time to consider the implications and the decision on the requested ground leases was put off to the next meeting.
“As it stands today, the hotels will not get built,” Bob Olson, the partner who has been designing and planning the luxury hotel and the surf lodge, said Wednesday. “The demands that were brought to the board kill any hope of going forward. We have stopped all work: architects, engineers and designers.”
The separate ground lease for the hotels would provide the necessary structure for Olson to secure financing, enabling the hotels to recover from pandemic- and permitting-related delays, and advance the county’s long-planned renovation of the popular South Orange County harbor, O.C. Chief Real Estate Officer Thomas Miller said in a supplemental agenda report that was released late Friday, June 19, explaining what the supervisors would be considering on Tuesday.
Key to the requests from Olson and his partners was a plan to have the renovation project completed in time for the Los Angeles Olympics. Approval by the board would also allow the partners to “preserve the agreements” with Pacific Life, their current lender and “move forward with the hotels,” said Joe Ueberroth, who is spearheading the marina portion.
Olson said the delay in the supervisors’ approval is preventing him from obtaining a loan for the hotels because the current financing for the harbor project does not include them.
He said he was surprised by Foley’s requests.
“From my perspective,” Foley said Wednesday, “it’s to make sure the deal that gets done is in the best interest for the next 66 years for the community benefit. That is our role.”
Foley suggested that county staff work with the current hotelier to support employees affected by the pending closure of the Marina Inn and develop a transition and education plan.
Her proposed changes also included a requirement for a labor peace agreement for future hotel operators at the harbor. The agreement between a hotel operator and a labor organization protects hotel operators from labor disruptions by prohibiting strikes, picketing, and boycotts. It does not require a hotel to be unionized, she said.
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“There is no lender that would touch the hotels with these kinds of restrictions,” Olson said, adding that he is already facing headwinds to finance the affordable surf lodge.
The requirement for the labor peace agreement would be essentially agreeing to a union-run hotel, he said. And, he said retraining the current Marina Inn employees is “ridiculous” because there are “so many hospitality jobs in the area that our people will be hired immediately.”
But, Foley said, that Olson is being “overly dramatic,” that he has a “contractual obligation” to build the two hotels.
She also said that Olson and his team can continue to negotiate with county staff to get things dialed in before the supervisors meet and make their decision.
“He can’t just walk away,” she said.
It was not only her recommendations that fueled the board’s decision to take longer to study the agreements, her colleagues also had their own considerations, Foley said.
“I didn’t ask for anything from the dais that would cause any cost to the hotel,” she said. “My request was because we didn’t really have a plan in place for the people who were going to lose their jobs at the Marina Inn. The request was to direct our staff to work with the hotelier to ensure we connected people to transition for employment through our workforce development services. And, to make sure people weren’t one day showing up to a job with no livelihood.”
Olson said the developers would be “forced to remodel the Marina Inn so that we are in compliance with our lease.”
Foley argued efforts were made to get Olson to close the deal with the county’s real estate division and put it on the agenda two weeks before the meeting, knowing how loaded the meeting agendas are. That way, she said, her colleagues “who aren’t knee-deep on the topic” could take time to consider such a significant item.
Instead, she said she got a 600-page lease agreement that was filed on Friday because “they were haggling on terms.” And more changes came the night before the supervisors’ meeting, which she and her colleagues on the dais didn’t have time to review thoroughly ahead of an already packed agenda.
“It’s not just me; there were three, even four people who expressed some concerns,” she said. “It’s not the end of the world. We have time over the summer. Let’s get together and work it out. Let’s make sure the deal is to the benefit of the community. They’re getting all the terms they requested.”
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