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    On Dec. 8, Ray Carpenter and Art Engel visited the Board of Directors of the San Diego Convention Center Corporation to show off a plan that would finally, clearly, officially and totally kill that board’s decade-long push for an expansion at its current location.

    It was the latest chapter in a long drama between the pair of businessmen, the Convention Center’s leaders and the Port of San Diego.

    Somehow, some of those leaders believe an expansion could still happen. Maybe a government agency could derail Carpenter and Engel, who were presenting an attractive plan for a large hotel that day.

    The Convention Center expansion might be smaller than was dreamt up a few years ago. And maybe the government could just take Carpenter and Engel’s land even while it encourages them to build the hotel.

    It’s not really their land. Carpenter and Engel own the lease at Fifth Avenue Landing. It is a golden ticket. The land is coveted and valuable. It will be a major hotel in perhaps the most advantageous place possible.

    It would not be the only fortune made on Port land. The partners said their time has come.


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    “We paid for that golden ticket with 30 years of hard work there and millions of dollars,” Carpenter told me. The reticent partners have lately decided to engage the public more. They sat down with me to talk about perhaps the most contentious plot of land in San Diego.

    It’s this piece of property:

    FALmap

    The state of California owns the land, and the Port of San Diego is the landlord. Carpenter has leased it since 1980, when he ran marine construction and dredging operations. Engel is his business partner.

    The company’s operation was so unattractive that when the Convention Center expanded, officials asked Carpenter to move much of the industrial equipment.

    Makes sense, who wants to look at this while attending a proctologist convention, amirite?

    Photo courtesy of Fifth Avenue Landing LLC
    Photo courtesy of Fifth Avenue Landing LLC
    This is what the marine dredging and construction operation at Fifth Avenue Landing used to look like.

    It’s a story as old as San Diego – the fight between smokestacks and geraniums. The smokestacks lost this one. With the industrial uses put aside, Carpenter began to develop the idea of a hotel.

    It’s a great spot for one. His idea got some legs but then the recession hit. He put it aside.

    Seven years ago, the Convention Center Corporation and the city of San Diego decided they wanted the land for the expansion of the Convention Center. The two agencies agreed to buy the lease from Carpenter and Engel. The Convention Center Corporation essentially borrowed $12.5 million from Engel and Carpenter and agreed to pay $500,000 each year until 2015, when they’d pay it all off.

    The Port approved the sale but said that should the Convention Center expansion not happen, the land would have to be turned into a hotel with more than 400 rooms.

    “We didn’t want it back. We had moved on,” Carpenter said.

    By 2015, local officials assumed, the Convention Center expansion would be well under way and they would pay off the rest.

    Seems straightforward. But since then, the plot of land became enmeshed in a broader drama about the future of the waterfront, the tourism economy and the city’s sometimes dysfunctional politics.

    As the May 2015 deadline to pay off Carpenter and Engel approached, the pair began to wonder what the city and Convention Center officials planned.

    They asked. And asked. No answer came.

    Finally, in April, the Convention Center alerted the city that it was about to lose the land and thus the right to build an expanded Convention Center.

    Carpenter and Engel took the property back but found out the Convention Center had already rented it out for events for several months to come – like scheduling a party for months after your eviction date.

    Things had fallen apart for the city. Courts rejected the city’s taxing scheme to fund the expansion of the Convention Center. A lawsuit about the project’s design was going forward.

    The city still owed Carpenter and Engel $10.5 million but decided not to pay. The partners took back the land.

    “The city gave up their rights to that project. They had it for six years,” Carpenter said.

    Carpenter and Engel are accusing city officials now – and specifically longtime port and city maven Steve Cushman – of trying to deliberately shortchange them and run out the clock so that they would not have time on their lease to build the hotel the Port demands of them.

    Cushman said it was not unlike many big real estate deals. If the financing doesn’t come through, the deal falls apart and property owners keep their property.

    “It was always anticipated that if we could not put the money together, we would not be able to move forward,” Cushman told me.

    He said that when courts threw out the plan to pay for the expansion of the Convention Center, they couldn’t move forward.

    “We had no choice but to go into default,” Cushman said.

    That’s what they did.

    Carpenter and Engel took the land back and began methodically taking their hotel through the process of getting a coastal development permit.

    The project would look like this:

    Rendering courtesy of Fifth Avenue Landing
    Rendering courtesy of Fifth Avenue Landing

    “Their new proposed hotel is well thought out and looks like an excellent project,” Cushman told me.

    But he has a new idea: Cushman wants Carpenter and Engel to consider putting their hotel on top of an expanded Convention Center.

    “It’s something that we feel could be very successful,” he said.

    This isn’t just him musing. As part of the permitting review, the hotel project managers asked Convention Center officials for their questions and concerns. One of them was to do this:

    Specifically, we recommend a contiguous convention center expansion with a hotel built above it. The two uses would be served by separate entrances and maintain use of the existing docks as well as new dock spaces.

    Carpenter and Engel are not – at all – interested in this. They think it’s a clever way to further delay their own hotel until their lease ends. They have eight years left. If they build a hotel, they’ll get 66 more years. If they don’t, well, the Port can do whatever it wants to the property.

    Another reason they aren’t so hot for the idea of putting their hotel on top of a bigger Convention Center is attorney Cory Briggs and his clients. Briggs and company went to court Dec. 15 to stop the old plans for the Convention Center. Their contention is that it walls off the waterfront, preventing access for the public.

    If Briggs wins, it would be an unprecedented rebuke for the California Coastal Commission, which already approved the previous expansion plans. It’s the commission, after all, that is charged with deciding whether a project provides the necessary access to the coast.

    What’s odd is that Cushman, still the mayor’s primary point man on a Convention Center expansion, does not necessarily support that project.

    If it wins in court, it’s likely still dead. Cushman supports a smaller expansion of the Convention Center now. He says costs have gone up since the city’s failed last try.

    “I would pursue a smaller project. I would not expect that the footprint would be exactly the same as it was,” he said.

    It’s a startling admission: Now even the top guy on the project says, at least the old version, is dead.

    But does even a new, smaller version have a chance?

    “(Cushman) lives in a fantasy world. There is not going to be any expansion on the waterfront,” Briggs told me in a text message.

    Even a smaller project would still need Fifth Avenue Landing. Carpenter and Engel are not selling. Recently, a Port commissioner, Bob Nelson, floated the idea that maybe the Port could just seize it through eminent domain.

    This, of course, did not sit well with the Fifth Avenue Landing guys. The city had the chance to build an expansion and did not.

    “When you have a situation that was a planned default and then for them to come back and say well, even though we defaulted, now we’re going to condemn it, that’s just not a good fact pattern. That’s certainly not fair dealing,” said Ralph Hicks, the project manager for the Fifth Avenue Landing hotel.

    For now, Engel and Carpenter will continue to push for approval of their hotel. It will have an 830-room, four-star hotel and another, 166-bed low-cost hostel of sorts. The public access improvements seem to be acceptable to Briggs’ clients.

    But the Convention Center expansion would die as it rose. Rip Rippetoe, the new CEO of the Convention Center Corp., inherited the drama.

    “The great news is we have customers begging us for more space. The hard part is we haven’t found the space that satisfies the concerns,” he said.

      This article relates to: Convention Center, Land Use

      Written by Scott Lewis

      I'm Scott Lewis, the editor in chief of Voice of San Diego. Please contact me if you'd like at scott.lewis@voiceofsandiego.org or 619.325.0527 and follow me on Twitter (it's a blast!): @vosdscott.

      21 comments
      Don Wood
      Don Wood subscriber

      The latest article I read said that FAL plans to go to the port asking for a 66 year lease extension once the get the required permits from the city. They are charging in their suit that the mayor and the convention center corporation are stalling the issuance of those permits because they need the property to expand the convention center on.  So unless FAL gets those permits, no lease extension.  Wonder how much money it would take the city to buy them out of their lease again? A whole lot I bet. Wonder where Faulconer would get the money to do that? From the taxpayers?  I suspect the voters will reject his center expansion tax increase ballot measure.

      Ed Price
      Ed Price

      The existing convention center could be expanded, possibly tripling or quadrupling its floor space, by simply building a deck from the center outward, over Harbor Drive and the train tracks. Street and rail traffic would flow as they now do, but the deck could be built several stories tall, impairing the view of the stadium only slightly (and who would care; nobody in the Stadium looks out at the Bay, and nobody on the water worries about the curving wall of the Stadium). This would also allow the train tracks to be bridged for pedestrian flow, eliminating the game-day crossing of the rail line by pedestrians at surface level. This would not affect the water-side footprint and wouldn't need any coordination with that leased piece of land.

      merlot4251
      merlot4251 subscriber

      Let Carpenter and Engel build their hotel. I ride my bike on the Embarcadero all the time and any blockage of the waterfront will be minimal. From your illustration of the proposed project, it seems to me it is being built on the vacant lot in front of the Coronado Ferry Landing. Time to move on and put this whole issue to rest.  And by the way what do you mean by "the city’s sometimes dysfunctional politics"???  It is eternally dysfunctional.

      Pat Flannery
      Pat Flannery subscriber

      Scott, you say “Carpenter has leased it since 1980”. You then quote extensively from this lease. Assuming that you have a copy could you please provide a Dropbox link, as you did with the hotel plans. It appears from my research that this lease was never recorded in the County Recorder’s Office. You can clear this matter up by either providing a copy of the unrecorded lease for the public to read in full or by providing the document number at the County Recorder.

      Scott Lewis
      Scott Lewis moderator administratormember

      @Pat Flannery where did I quote extensively from the lease? I have a copy of the amended, restated and combined lease to the Convention Center Corp when Carpenter and Engel sold it to the CCC. Document No. 56486 with the Unified Port District Clerk. 

      Pat Flannery
      Pat Flannery subscriber

      @Scott Lewis The purpose of a County Recorder is to "give notice to the world". A document once filed there cannot be changed. By filing a document in its own INTERNAL Clerk's Office the Unified Port District frustrates the purpose of the County Recorder. It is like the Voice of San Diego filing its lease with its landlord in its own filing cabinet (not that I don't trust you guys) and giving it a "Document Number".

      Pat Flannery
      Pat Flannery subscriber

      @Scott Lewis Your report is based on a copy of a fraudulent Carpenter and Engel lease that was created at the same time as it was "sold" to CCC on April 6, 2010. There never was a prior lease!


      The Port and Carpenter got away with it because nobody in the media asked to see that prior lease. And you are now compounding it by quoting from a fraudulent lease without looking at what it "amended, restated and combined", when there was nothing to "amend, restate or combine".


      I pointed all this out in advance of the April 6, 2010 Port meeting but nobody listened. http://www.blogofsandiego.com/Waterfront.htm#04/05/10

      Bill Bradshaw
      Bill Bradshaw subscribermember

      I don't get it.  If an expanded convention center "walls off" the bay from the public, why doesn't a big hotel?  What will Briggs and crew do about this development?

      Bill Bradshaw
      Bill Bradshaw subscribermember

      @Scott Lewis @Bill Bradshaw Thanks, Scott.  That's quite a presentation.  You have to wonder what might have happened if Spanos had hired this firm instead of Fred Maas.........

      Milton Lawson
      Milton Lawson

      I wonder if there's any room for compromise here? Sure looks like a new vision is possible. This comment explaining their objection to a new expansion plus hotel plan: "They think it’s a clever way to further delay their own hotel until their lease ends". 


      Do they think it's just a tactic, that's temporary in nature, and that once they're out of the way the forces in favor of convention center expansion would revert back to the original plan? Do they not believe that this new alternative has any merit?


      Wouldn't such a hotel be even more lucrative for them, financially, if it were attached to an expanded convention center? Wouldn't they have incentives to see both goals progress forward? They've got leverage with their near-decade's worth of lease time, and the urgent need to expand the convention center. And presumably this new expansion could in theory be less disruptive of the existing convention center's ongoing status? Couldn't it be built without having to shut down major parts of the current center, which is one of the ongoing concerns of the current proposal?

      Don Wood
      Don Wood subscriber

      Some key points to keep in mind:


      Carpenter and Engel do not own any of this land. These are public tidelands owned by the state of California. The port district does not own the land, but is charged by the state with managing it for the benefit of the public, not the district or any individual leasees. The port should buy out Carpenter and Engel's lease or allow it to expire with no further action. It is too late for the current leaseholders to invest in a new hotel, given the short duration of the lease.

      The port has not done any recent studies on hotel saturation on the bayfront. With all the other hotels going up on downtown land controlled by Civic San Diego, hotels are having to offer discounts to fill their rooms. With dozen of additional hotels on the drawing boards, we're likely to hit a tipping point where any new hotels cannot be profitable, even ones built on port tidelands. The existing property is already being used in a manner that limits public access to the bay, and the port should not support any new proposals that would further limit public access to our downtown waterfront. Despite signing off on some initial principles at the beginning of what is supposed to be a comprehensive planning process leading to a proposed comprehensive update of the port master plan, the port district appears committed to just building as many hotels on the property it controls, regardless of economic impacts and loss of public access to our bay.  Carpenter and Engel have already made a fortune off their port leases, they don't need anymore.

      Scott Lewis
      Scott Lewis moderator administratormember

      @Don Wood Don, the status of the land could not be more clear in my story: "The state of California owns the land, and the Port of San Diego is the landlord. Carpenter has leased it since 1980, when he ran marine construction and dredging operations. Engel is his business partner."

      tarfu7
      tarfu7 subscribermember

      @Scott Lewis @Don Wood Scott, I don't think Don was trying to say you didn't report this fact. I think he's asking about it because it's a huge detail that is being given relatively little attention: This is public land! This seems to be much more significant than the potential plans of the current lessees. 

      Why haven't the City and the Port worked together on this? Clearly they aren't on the same page when it comes to managing this public land. Has the Port commission even taken a position?

      craig Nelson
      craig Nelson

      @Don Wood The story implies that the current lease includes a clause that if the hotel is built the lease is extended  for another 66 years. Not sure what the extension terms are but the TOT going to the City would be huge.  Seems to me the City, Port & Convention Center have had years to get their stuff together...and failed. We should give these guys a shot, their track record is certainly superior to the Government. 

      Don Wood
      Don Wood subscriber

      No disrespect of your reporting Scott. VOSD has done a better job of impartially reporting on this story than the cheerleaders at the UT.

      Don Wood
      Don Wood subscriber

      The  port commission can't take a position on this because their lease with FAL ties their hands, at least until the lease runs out.

      Fotis Tsimboukakis
      Fotis Tsimboukakis subscribermember

      So much "competence", from the Mayor, to the Port Commission, to their advisors and lawyers. All to potentially "LINE" pockets (directly through political contributions or other indirect benefits within the realm of legality), on some long term expectations, on the backs of San Diego Taxpayers.

      Incompetence would be another reason for the fiascos, though politicians who do NOT slither in to their elected positions with a cover of slime, are rare.

      And by the way; Where is the San Diego Taxpayer Association in all these matters? Covered in so much slime they just can't see that far?  

      Chris Brewster
      Chris Brewster subscribermember

      Interesting that all of this has been so murky until now. How was all this kept under wraps?

      Chris Brewster
      Chris Brewster subscribermember

      Yes, the motivations were really unclear. Thanks for illuminating the dark space. 

      Scott Lewis
      Scott Lewis moderator administratormember

      @Chris Brewster I don't know that it's been kept under wraps but probably the biggest change was Carpenter and Engel's decision to talk to me and be more open about what their interest and history was.