More than 20 years in the making, a billion-dollar Chula Vista hotel and convention center is finally poised to take shape on the city’s waterfront.

The San Diego Unified Port District board and Chula Vista City Council will meet Tuesday in a rare joint meeting to approve an agreement with a Houston developer to build a 1,450-room hotel and 275,000-square-foot convention center where aircraft manufacturing and a power plant once existed at the foot of H Street.

If all goes according to plan, construction could begin by the end of 2019 with opening targeted for 2022, officials said. They project an annual economic impact of nearly $400 million with two-thirds going to Chula Vista, plus 3,690 permanent jobs.

That benefit, though, comes with a cost. The port and city could be on the hook for roughly one-third of the project’s pricetag. It is anticipated that roughly $300 million in subsidies would be required, not including interest costs on bonds that would be issued to finance the convention center and infrastructure.


Port Commissioner Ann Moore, who represents Chula Vista on the seven-member board, said the subsidies are necessary to spur development in the remainder of the 550-acre Chula Vista bayfront area and western Chula Vista.

Under the plan, the already existing Bayside Park would be expanded to 24 acres and new bikeways and promenades are planned.

“It will be a game changer for the entire region,” she said.

City Manager Gary Halbert said that the subsidies will be drawn from tax revenues generated by the development.


“From an economic standpoint, it’s a clear catalyst project and we expect we’ll see on the bayfront itself some very near-term investment,” he said.

The port chose Houston-based RIDA Development in 2014 to carry out the project, and RIDA is in discussions with Gaylord Hotels, a large convention hotel brand of Marriott International, to manage the hotel and convention center. Gaylord had previously applied to tackle the project in 2005 but backed off during the recession and several years later was acquired by Marriott.

The port and city are being asked to authorize a non-binding letter of intent with RIDA and follow that up later this year with a development agreement. RIDA would then refine the architectural designs and other details over the next 18 months and the port would approve a coastal development permit that could be appealed to the California Coastal Commission, which Ok’d the bayfront master plan in 2012.

Under the financing agreement analyzed by Keyser Marston Associates, RIDA and its financial partner, ARES Management, would spend $688 million on the project. The port and Chula Vista would contribute an additional $225 million toward the convention center, $56.3 million on infrastructure and an unstated amount for a 1,500-space public parking garage.


The Chula Vista project comes at a time when San Diego is still pressing for an expansion of its much larger, 28-year-old San Diego Convention Center on the downtown waterfront, although that project remains stalled. Mayor Kevin Faulconer had hoped to ask voters this November to approve a hike in the city’s hotel room tax to finance a more than $600 million convention center enlargement, but the City Council has rejected his request to hold a special election this year.

The Gaylord project, say local tourism leaders, is not likely to have much of an effect on the meetings business in San Diego, whether it’s at the convention center itself or in large downtown hotels that cater to corporate groups and associations.

For one thing, the conventions that could be accommodated in Chula Vista – most likely attracting no more than 1,000 to 2,000 attendees – would not normally gravitate to a large convention center like San Diego’s, said Joe Terzi, CEO of the San Diego Tourism Authority. Even the enticement of lower hotel rates than those typical of the city’s downtown hotels is not likely to cut into their convention business, Terzi believes.

“If I’m a group that can afford San Diego, I’m not going to be in Chula Vista,” said Terzi, who oversees the booking of larger conventions at the San Diego center. “The majority of customers we’re soliciting in San Diego are premium customers who can spend the money in San Diego. I don’t see them saying now I can go to Chula Vista and save $50 a night (for a hotel stay).”


The size of the project being planned for the Chula Vista bayfront is actually smaller than other Gaylord hotel-convention center complexes it currently operates in Florida, Texas, Tennessee and the Washington, D.C. area. It is partnering with RIDA on a fifth such complex outside of Denver. Those projects offer meeting space that ranges between 400,000 and 600,000 square feet.

The Colorado project, like the one proposed for Chula Vista, received a public subsidy that angered area hoteliers who felt the financial aid helped give the development a competitive advantage in attracting conventions. Their legal challenges to the project funding ultimately failed last year.

Meetings planner executive Deborah Sexton pointed out that the Gaylord hotel and convention center developments have been successful in catering to a fast-growing niche of smaller group meetings and in the process have developed a loyal cadre of return business.

“They have a corner on that market and build facilities to fit that 1,000- to 3,000-attendee conference,” said Sexton, CEO of Professional Convention Management Association, which represents meeting planners across the country. “There are a lot of national sales meetings that fall into this category, smaller medical associations, technology user conferences. And they manage to spin from one destination to another because the projects are all about the same size.”


Chula Vista and the port are pledging the project’s hotel, sales and property taxes and development fees to cover more than $30 million in anticipated annual bond debt payments. But officials believe the income will exceed those payments after seven years. The city will cover roughly two-thirds of the debt payment. RIDA would not pay ground rent for the tidelands site for the first 18 years but could start sharing profits with the port and the city by the 12th year, according to the port.

Although the port would build and operate the parking garage, RIDA would receive 90 percent of the gross revenues, according to the port staff report.

Keyser Marston said without the subsidy, RIDA would earn only 7.6 percent return on investment, when 10 to 11 percent is the industry standard for developers of large-scale, new resort hotel and convention center projects.

Adam Meyer, the port’s director of redevelopment, said a subsidy was always anticipated to get the Chula Vista Bayfront master plan off the ground.


“The project can only support a certain amount of equity and debt,” added Shaun Sumner, the port’s assistant vice president for real estate development, “and the port, together with the city, helps fill the missing piece.”

Historically, the project began as a counterpoint to the port’s funding of the San Diego Convention Center that opened in 1989 and its expansion, completed in 2001. In 1996 the port approved a funding agreement to help underwrite projects in the four other port cities. Chula Vista used its share to plan its port-owned bayfront tidelands. In 1999 the city and port engineered the relocation of the former Rohr Industries operations, which started as an aircraft manufacturer, and the 2013 demolition of the South Bay power plant.

After the original Gaylord plan was abandoned in 2008, the port worked out an exchange, completed last year, of 97 acres owned by Pacifica for a 35-acre parcel on the bayfront where the company plans 1,500 condominiums. The port and city also reached an agreement with several environmental groups to govern wildlife habitat areas and establish design guidelines.

Besides the Gaylord hotel and convention center, RIDA also is seeking priority rights to build a 550-room hotel next door. Another 1,000 rooms in four other hotels are planned elsewhere at the bayfront site.


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roger.showley@sduniontribune.com; (619) 293-1286; Twitter: @rogershowley