For half a century, Anthony’s Fish Grotto has been a familiar presence on the downtown waterfront, long before the arrival of today’s behemoth cruise ships and the Midway Museum. But the restaurant’s popular clam chowder and fish and chips could soon become a fond memory as its landlord — the Port of San Diego — scours the marketplace for a possible replacement.

While the family-run seafood staple has teamed with one of the port’s biggest moneymaking restaurants, the Fish Market, on a $9.5 million overhaul of Anthony’s, the belated effort to revive the aging icon was not enough to stave off the port’s interest in soliciting proposals from other restaurateurs.

Rendering of planned makeover of the Anthony's complex of restaurants on the bayfront. — Courtesy of Robinson Brown Design

San Diego Port Commissioners this week agreed to formally initiate the process Wednesday, while recognizing that Anthony’s might have an edge in the bidding, given its long history and partnership with a proven restaurant operation. Its dramatic re-imagining of the property as a contemporary amalgam of three eateries with floor-to-ceiling windows, glass floors over the bay, an outside video wall and panoramic vistas from a rooftop deck didn’t fail to impress, but port officials believe there’s a chance of landing an even better restaurant option with a stronger financial return.

Despite its widely known reputation as a dining destination for tourists, Anthony’s biggest downfall in recent years was its tardiness in reviving the tired venue and boosting its lagging revenues compared to other, much more financially robust restaurants on port tidelands like the Fish Market and Island Prime.

Anthony's Fish Grotto

In the past five years it has been rarely able to generate enough revenues to exceed its minimum required rent of $373,050 a year. And unlike other port tenants, such as Tom Ham’s Lighthouse on Harbor Island that invested millions in revamping its business a decade before its lease renewal, Anthony’s did not submit its final proposal until earlier this year, just a couple of years before its 52-year lease was due to expire.

Even with a significant investment in the proposed makeover, an outside consultant predicted that the increased rent would not be able to rival that of some other dining destinations on port tidelands.

Port commissioners seemed to struggle with the decision, conflicted between their fealty to a waterfront mainstay and a duty to deliver the best economic deal possible.

“This is a really tough one. What Anthony’s has come in with is a very good proposal and an exciting proposal,” Port Commission Chairman Dan Malcolm said during a public hearing Tuesday. “But on the other hand I’m struggling with the concept of getting the best dollar or best project we can. Right now, we can’t be sure of that.”

Anthony’s, which actually consists of three different dining venues, plans to participate in the competition but was disheartened by the commission’s decision to consider replacing it with another restaurateur. Operators of the family of Brigantine and Miguel’s Cocina restaurants have already shown a strong interest in competing for the bayfront site.

“If we have to to leave, it makes me sad because we still have a great reputation,” said Anthony’s co-owner Craig Ghio, whose grandmother opened the family’s first restaurant on the waterfront nearly 70 years ago. “It’s sad that the attitude of what have you done for me lately negates all the good. We’re still San Diego’s most well known restaurant. Sure, a heavyweight can come in and do five good years, but the hot place of today can become the tombstone of tomorrow.”

The family, which operates its 75-seat quick-serve Fishette and 336-seat Fish Grotto, spent $1.3 million in 2006 renovating its Star of the Sea Room but the fine dining venue became a casualty of the recession. In 2008 it closed and was instead used as a 105-seat event center, leading to a gradual drop in rent to the port.

It didn’t help Anthony’s position that the port characterized it as a tenant not in good standing, saying it failed to keep its property in good condition and maximize its revenues.

“Anthony’s is a legacy, it’s the fabric of San Diego. When you think of the waterfront, you think of Anthony’s,” said Port Commissioner Robert “Dukie” Valderrama, the lone vote opposing opening up the Anthony’s site to other operators. “Yeah, you probably could get more money but do you want to squeeze every penny you can out of every project, and there’s no guarantee that we’ll be able to get that kind of revenue?”

In analyzing the site’s revenue potential, it hired the Jones Lang LaSalle firm to analyze other fine dining restaurants and compare the old and new Anthony’s to other tidelands eateries.

The current Anthony’s generates $23 a square foot in rent to the port, but that would rise to $32 under the new proposal, which envisions growing the restaurant complex from 516 seats to 623. That projection, though, falls short of an estimated $40 a square foot that such a prime site could command, the study concluded.

“We would anticipate that we would receive a great deal of interest (from other restaurateurs) because this is an iconic waterfront restaurant location and one of only a few in Southern California,” said Penny Maus, a senior asset manager with the port. “And they’re very rarely available.”

The port has set a July 1 deadline for new restaurant proposals, with a port commission decision possible as early as August. Ghio said he remains confident that the Anthony’s-Fish Market alliance will prevail, although a little prayer may be needed.

“We’re a good old Italian Catholic family,” he said, “and when you get into a situation like this you squeeze the rosary beads and leave it to God.”