Can convention center expansion backers gain control of bayfront site?

As backers of an expanded convention center push forward with a November initiative to finance the project, behind-the-scenes efforts are ramping up to overcome one of the development’s key challenges: control of the waterfront site.

At issue is a $300 million hotel project planned for the same site as the convention center expansion, which city tourism leaders and Mayor Kevin Faulconer have been pushing for years.

The expansion, though, has been on a collision course with the Fifth Avenue Landing hotel project, whose developers control the five-acre state tidelands site via a lease that is not due to expire until 2024.

Last year the Fifth Avenue Landing leasehold filed suit against the city and Convention Center Corp., claiming that they were interfering with its contractual right to move forward with its project, which would be built on the back side of the center.

Twice in the last month, though, scheduled court hearings on the city’s motion to dismiss the suit have been continued at the parties’ request. The most recent continuance was Wednesday.

In addition, San Diego port commissioners, who oversee the state tidelands properties, have had three closed-door sessions in the last month to discuss “price and terms” of the bayfront parcels under lease to Fifth Avenue Landing. The negotiating parties, according to the closed-session agendas, include Art Engel and Ray Carpenter, longtime port tenants who hold the Fifth Avenue Landing lease.

Meanwhile, consideration of the hotel project, which was expected to go before port commissioners next month, will not be on the April agenda. Late last year, the environmental analysis for the project was completed, clearing the way for consideration by the port and eventually the California Coastal Commission.

The confluence of recent events suggests that talks are intensifying to reach a financial settlement with Fifth Avenue Landing for returning control of the site to the convention center.

“This property is vital to the completion of the convention center expansion project and continued growth of San Diego’s tourism economy,” Matt Awbrey, Faulconer’s deputy chief of staff, said Thursday. “Discussions are being had by all relevant parties under litigation through mediation. We will not comment further on pending litigation at this time.”

Officials with the port and Convention Center Corp. also declined to comment on the ongoing negotiations.

Gil Cabrera, who chairs the convention center board, noted that the corporation remains interested in regaining control of the expansion site, regardless of whether the center gets enlarged. The top priority, though, remains the expansion, he stressed.

“Our clients often utilize the space for various things, for storage, event space, they’ll build tents back there,” Cabrera said. “Each time, Fifth Avenue Landing has to agree to do it and sometimes they may or may not want to do that.

“I’m always hopeful that we can come to a resolution on all these issues, and the recent activity makes me hopeful.”

Should there be a financial settlement, it is unclear where the funds would come from.

The lease held by Carpenter and Engel requires that they submit plans for a hotel of at least 400 rooms comparable in quality to other bayfront properties. In addition to an 830-room, four-star hotel rising 44 stories, Fifth Avenue Landing’s proposal calls for two acres of public plazas, open-air cafes along the bayfront promenade, an expansive rooftop garden plaza and a second hotel catering to budget-minded guests.

Until almost three years ago, the Convention Center Corp. had control over the Fifth Avenue Landing site but opted to back out of a deal it struck in 2010 to acquire the leasehold at a cost of $13.5 million as part of its plans to enlarge the convention center. But the expansion project fell apart after an appellate court ruled in 2014 that the plan to finance it with a hotelier-approved room tax hike was unconstitutional.

A coalition of business leaders, hoteliers, labor unions and homeless advocates are backing a November ballot initiative that would hike the city’s hotel room tax to help pay for an expanded center costing as much as $850 million, as well as boost funding for the homeless and road repairs.

The campaign group, Yes! for a Better San Diego, is currently circulating petitions in hopes of qualifying the measure for the November ballot.

In its lawsuit against the city, Fifth Avenue Landing asserts that continued efforts to push a convention center expansion are a “direct breach” of a lease agreement it has governing the project site.

In a legal brief supporting its motion to dismiss the suit, the Convention Center Corp. claims that the Fifth Avenue Landing case “relies on the faulty premise that (the corporation and city) were contractually obligated to forever refrain from seeking to expand the Convention Center onto the public tidelands property or from even speaking about it.”

No contract, says the corporation, contains any such restriction on efforts to seek an expansion.

lori.weisberg@sduniontribune.com

(619) 293-2251

Twitter: @loriweisberg