Deadline extended for $67.6M Harbor Island marina replacement project

The owner of the 1970s-era marina at the westernmost portion of Harbor Island expects to soon start construction, after a longer-than-planned permitting process, on a $67.6 million redevelopment project that will see the marina’s docks, land-side buildings and public viewing deck remade into a resort-like facility.

On Tuesday, the Board of Port Commissioners for the San Diego Unified Port District unanimously approved the second amendment to an option to lease agreement with HIW Associates, LP for the Harbor Island West Marina at 2040 Harbor Island Drive. The amended contract gives the marina operator until the end of the year — or March 31 if staff decides to administratively extend the deadline — to secure a loan to complete the redevelopment project.

“I’m very confident that we’re going to get the financing and commence the lease well before the (March 31) date,” said Eric Leslie, who manages the property and co-owns the project’s development company, Beauchamp Leslie Management & Development. “We’re ready to commence (construction) right now. … We’re already staged with temporary construction trailers in the parking lot.”

The marina owner expects to finalize a loan with an unnamed lender next month, he said.

In the works for more than a decade, the Harbor Island West Marina project amounts to a total rebuild of the marina, which includes 3.8 acres of land and 22 acres of water. HIW Associates has leased the property from the Port of San Diego since it bought the marina facility in 1981.

In the water, the marina’s existing 11 docks will be reconstructed and reconfigured to hold a total of 623 slips, accommodating a wider range of boat sizes.

On land, the current one- and two-story buildings will be demolished and replaced with 15,682 square feet of modern marina facilities spread across two, two-story buildings. The new buildings are designed to create a resort-like atmosphere where boat owners can work, work out or enjoy two separate bayside recreation areas.

The development also promises reconstruction of a 6,000-square-foot public viewing deck and a new 12-foot-wide pedestrian promenade, both overlooking Harbor Island’s West Basin.

“With our new facility we plan to provide the premier recreational boating destination in Southern California with enhanced capacity to accommodate vessels ranging from mega yachts to smaller entry-level sail and power boats as well as all sizes in between,” Leslie said. “Our expanded amenities will create a resort-type facility while maintaining a local sense of community that Harbor Island West Marina is known for. It is our goal to improve the user experience to become more of a recreational destination, beyond simply a place to dock your boat.”

The project was approved by the port board in December 2023. Shortly thereafter, HIW Associates entered into an option to lease agreement with an 18-month term, which expired in June, to complete pre-construction work, such as finalizing architectural plans, obtaining permits, hiring contractors and providing proof of funds. The company secured most of the required permits, with the exception of a building permit with the city San Diego, by the deadline. As a result, the option agreement was first amended with a new expiration date of Sept. 15.

HIW Associates later received its final permit, but ran into a hiccup with its initial lender, necessitating the second amendment to the option agreement, approved Tuesday.

“We didn’t have the confidence that we were going to get to the finish line (with the lender). There were some issues (the lender) had with the port lease and the language in the port lease,” Leslie said.

The marina owner is now working with a back-up lender more familiar with port operations to finance around 65% of the project cost, he said. The ownership group will contribute the remaining funds.

The HIW Associates option to lease agreement includes a negotiated 50-year leasehold — a 40-year base term with a 10-year option to extend — for the marina property. The long-term lease agreement, set to take effect after the conditions of the option agreement are met, includes minimum annual rent of $895,000 in years one and two, with a steep increase to $1.8 million in year three and followed by additional increases. The company is expected, however, to pay rent on a percentage base, starting at 22% of slip revenue and increasing to 25% of slip revenue toward the end of the term.

The port expects to net $29.3 million in rent over the lifetime of the 50-year lease agreement, according to a staff report prepared for commissioners.

Once HIW Associates secures financing and executes the lease, the marina owner will have two years to complete the redevelopment project. The company, Leslie said, will use a phased approached to keep some of its docks in operation as it works to replace others.