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October 06, 2017  

Builder Seeks Debt for Big San Diego Project

A development group is in the market for $650 million of floating-rate debt to finance a massive mixed-use project in downtown San Diego.

The joint venture, led by local firm Manchester Financial, plans to build 2.8 million square feet of office, hotel and retail space on four blocks along the city’s waterfront. The group is looking for a nonrecourse loan with a term of either seven years or five years with two one-year extensions.

Dubbed Manchester Pacific Gateway, the project has a projected cost of $1.3 billion. That puts the proposed loan-to-cost ratio at 50%. Berkadia’s hotels and hospitality team is pitching the lending assignment to banks, insurers and debt funds, with the aim of closing the deal by yearend.

Manchester in 2006 signed a 99-year lease with the U.S. Department of the Navy to redevelop the 12-acre site, at Broadway and Harbor Drive, adjacent to the U.S.S. Midway Museum. The agreement with the Navy includes construction of a new 17-story, 351,000-sf office for its Southwest Regional Command. Demolition of an existing Navy office complex began about six months ago.

The development will encompass 1.2 million sf of office space, roughly 400,000 sf of retail space, a 1,100-room convention hotel, a 260-room boutique hotel, 2,437 parking spaces and a waterfront park. Manchester is in negotiations with major brands for the hotels. It intends to build the project in one phase, planning to open all the buildings in late 2020.

Litigation sidelined development of the property for years. Most recently, the Ninth Circuit U.S. Court of Appeals ruled last year against a group arguing that a Navy environmental-impact study failed to weigh the risks of a terrorist attack. The Supreme Court declined to hear an appeal of that ruling, paving the way for redevelopment.

Manchester’s past projects in San Diego included the Manchester Grand Hyatt San Diego, the San Diego Marriott Marquis Marina and the Grand Del Mar resort. In all, it has developed more than $2 billion of properties in 11 states. It’s currently building a 1,066-room convention hotel in Austin. The firm is led by Douglas Manchester, the former publisher of the San Diego Union-Tribune. A prominent donor to Republican political campaigns, he was nominated in May by President Trump to become ambassador to the Bahamas.