City Council OKs $400M Ritz-Carlton project

San Diego’s first Ritz-Carlton Hotel, a Whole Foods grocery, housing for all income groups and offices were approved Tuesday by the City Council in what promises to be the biggest, most expensive and densest mixed-use building in the county.

“This is exactly what we should be doing in downtown San Diego,” said Councilman Todd Gloria in advance of the unanimous vote. “This level of density would not be appropriate to any other district in San Diego.”

Located at Seventh Avenue and Market Street, the $400 million project by Cisterra Development is projected to be completed by October 2021. The 39-story building with a rooftop terrace and four levels of underground parking was designed by Carrier Johnson + Culture architects.

The project includes a 6,000-square-foot public plaza that matches a similar space to the south in the Sempra Energy corporate headquarters, also developed by Cisterra and designed by Carrier Johnson. Another feature is the retention of the historic Clermont Hotel, which will retain its 53 single-room occupancy units.

“With this project we wanted to be Class A, right to the top,” said Cisterra’s Jason Wood.

The project received support from downtown business groups and the San Diego Building Trades Council but was opposed by the Unite Here Local 30 hotel workers union. They were seeking a commitment from Marriott, which owns the Ritz-Carlton brand, for a card-check neutrality agreement, which means Marriott would not oppose unionization. Instead, the hotel has committed to paying a living wage to all non-tip-earning employees, Wood said.

Rick Bates, representing Unite Here, said despite future hotel guests who pay $1,000 or more for a two-night stay, a housekeeper would earn only $6 to clean each room.

“We don’t seem to have a developer interested in that,” he said.

Bates also cited issues regarding potential contaminated soil issues and other environmental concerns, which Unite Here cited in challenges to the limited environmental impact report filed on the project. Wood said Cisterra is waiting to see if the union sues over the environmental concerns.

Under the terms of the disposition and development agreement, Cisterra will pay the city $20 million for the site and a projected $1.5 million in sales, property and hotel room taxes annually.

The city Planning Commission is scheduled to vote Oct. 27 on an appeal to the development permits approved by Civic San Diego, the city’s downtown planning agency. The commission’s action cannot be appealed to the council.

The project is unique in many ways to any other development downtown. It includes luxury condos, market-rate apartments, and affordable rental units in addition to the hotel units, all in one tower. The 156,000-square-foot hotel component in a separate tower shares the ground floor podium that covers the block.

The design includes a portion with hotel room floors that juts out from the higher tower to connect to the lower office tower at the 20th level. Above the hotel floors will be Ritz-Carlton Residences. Those condos are expected to sell starting at around $2 million each.

In an interview prior to the vote, Wood said the project might have been easier to design without the hotel but Cisterra wanted to take advantage of the strategic location between the Gaslamp Quarter and ballpark district.

“It took a lot of time and a lot of brain power between a lot of smart people over months to figure out how to get everything to work, especially at the ground floor,” Wood said.

Asked if the project, referred to as 7th & Market, sets a precedent for other similar developments downtown, Wood said, “This is a special project, a special circumstance and I’m not sure there will be that type of opportunity to mix so many uses on one block.”

He said financing, being lined up by one unnamed lender, is expected to fall into place once all entitlements are secured. The city has set April 2018 as the date for concluding the property sale. If the project ultimately does not go forward after that date, the land would revert back to the city.

7th & Market at a glance

Location: Block bounded by Seventh, Eighth and Island avenues and Market Street

Developer: Cisterra Development

Cost: $400 million with $20 million land sale by the city, the proceeds going into city’s affordable housing trust fund. Financing by one lender is in the works.

Schedule: Land sale by April 2018 and construction completed by October 2021; litigation threatened by Unite Here Local 30 hotel workers union.

Description: 1.16 million square feet in two towers of 39 stories at 500 feet and 19 stories at 227 feet that share a common base; 887 parking spaces in four levels below and three above ground; preservation of adjacent Clermont Hotel that will include exhibits by the Black Historical Society in recognition of African-Americans’ heritage downtown.

Hotel: Ritz-Carlton, 153 rooms in the levels 20-27 of higher tower.

Housing: Below the Ritz-Carlton, 34 affordable apartments in levels 3-5, 125 market-rate apartments in levels 7-19; 59 for-sale Ritz-Carlton condos in levels 28-39;. In adjacent Clermont Hotel, 55 single-room-occupancy units retained.

Office: 156,000 square feet in lower tower.

Retail: 46,000 square feet including Whole Foods market on second level and accessed from Seventh Avenue street entrance.

Other amenities: Roof terrace; pool, fitness center, spa; hotel ballroom; 6,000-square-foot public plaza at Seventh and Market.