Marinapark lease hits new debating ground

Deirdre Newman

No matter how people feel about the proposed Marinapark hotel

proposal, they agree on one thing: Information about the lease must

come out before the November election.

Their need for information will be partially satisfied tonight

when the City Council considers approving an agreement to guide

negotiations for a ground lease of the luxury hotel resort, set to be

built on the Balboa Peninsula if voters approve Measure L in

November. Measure L will ask voters if they want to change the city’s

general plan to allow a hotel on the harbor-side property.

Stephen Sutherland has designed a 110-room hotel -- 98 rooms for

nightly rental and 12 for sale -- for the site where mobile homes now

sit. He also offered a host of amenities for neighboring properties,

including renovating the Girl Scout house and a community center.

The main points of the “memorandum of understanding” are offering

Sutherland a five-year option to build his project if he gets all

approvals, funding and a contract with a hotel operator; a ground

lease of 50 years; and a base rent payment to the city of $1.1

million per year when construction is complete or two years after

Sutherland exercises his option to build the project -- whichever

comes first.

The agreement also mentions some unresolved issues, such as how

much Sutherland will have to pony up to show his commitment to build

the hotel if the project earns voter approval.

Opponents of the project had mixed reactions to the terms detailed

in the agreement. Tom Billings of Protect our Parks -- a group

advocating a park with amenities for the Marinapark site -- said his

group is examining the memorandum “so we can ask intelligent

questions” tonight.

Phil Arst, spokesman for the slow-growth Greenlight group, was

more outspoken, calling the terms audacious.

“I’m shocked at the brazenness of the whole thing -- giving away

taxpayer dollars and giving them such a favorable set of terms,” Arst

said. “Some of the real sticking points haven’t been solved yet, like

the city’s obligation if the hotel defaults on the timeshare units.

That’s a huge potential liability on the taxpayers.”

In 2004, the City Council appointed Mayor Tod Ridgeway and

Councilman John Heffernan to meet with representatives of

Sutherland’s company and discuss basic terms and conditions of the

Marinapark deal.

Ridgeway favors the hotel development, and Heffernan opposes it.

Heffernan, well-versed in ground leases from his work as a real

estate lawyer, helped craft the agreement but didn’t let his feelings

about the project affect his work, he said.

“My position was, ‘This is what I do for a living, and these are

the best terms I can get,’” Heffernan said. “My main concern was --

who’s our tenant? What’s their experience? What are their terms, and

how definite can we be? I think the memorandum of understanding we

have is pretty skimpy.”

That said, he doesn’t plan to pick it apart tonight because

Sutherland has spent four to five years and “bazillions” on the

project, Heffernan said.

In addition to the base rent the hotel would generate for the

city, it would also pay a percentage rent based on resort revenue

comprising 7% of room revenue, 5% of beverage revenue, 3% of food

revenue and 10% of miscellaneous revenue. The 7% of room revenue

would be in addition to the 10% tax applied to all hotels in the

city.

One of the unresolved issues is how to ensure the city is not

obligated to provide services or amenities to the for-sale units if

the hotel owner defaults on the project. The characterization of

these units is a source of debate itself. Sutherland calls them

“fractional units” because he envisions them being sold in increments

of three months. Opponents, concerned they will be sold for much

shorter periods of time, refer to them as timeshares.

The release of all this information tonight shows the city’s

commitment to keeping voters informed, Ridgeway said. It also enables

voters to have some solid financial information about the project

before they venture into the voting booth.

And the financial contrast between a hotel and a park is obvious,

Ridgeway said.

“It’s really a simple analysis in that regard,” Ridgeway said. “A

park has no economic return.”

* DEIRDRE NEWMAN covers government. She may be reached at (949)

574-4221 or by e-mail at deirdre.newman@latimes.com.