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Newport Beach developer group wins county contract and 66-year lease for $200 million Dana Point Harbor revitalization

Oct 23 2017

SANTA ANA  — A $200 million overhaul of Dana Point Harbor is expected to include buildings with gabled standing seam metal roofs, open plazas, unique restaurants and shops, two hotels and possibly a surf museum.

The long-awaited plan, a proposal by the Dana Point Harbor Partners LLC development group, was unanimously approved by the Orange County Board of Supervisors on Tuesday, Oct. 17. It was a milestone in a harbor revitalization plan that has gone on for nearly two decades.

Dana Point Harbor Partners is made up of Burnham-Ward Properties for retail and restaurants, Bellwether Financial Group for the marinas, and R.D. Olson Development for hotelsRenderings of the proposed Dana Point Harbor Revitalization project provided by R.D. Olson DevelopmentRenderings of the proposed Dana Point Harbor Revitalization project provided by R.D. Olson Development

The supervisors directed the county to begin contract negotiations. If successful, a draft lease agreement would be completed within 90 to 120 days and would return to the board for approval as early as February.

Construction is expected to start in the next 12 months on retail, with completion possibly within three years. Construction on the docks and hotels would start upon receipt of entitlement which Dana Point Harbor Partners says could be within 12 to 24 months. There are plans to remodel the existing Marina Inn until they gain entitlements to demolish it and build the new ones.

“This is a legacy project for every one of our team members,” said Scott Burnham, of Newport Beach, a partner in Burnham-Ward Properties.

“This has been a labor of love,” said Supervisor Lisa Bartlett, who first worked on plans for the harbor overhaul from 2007 to 2015 as a Dana Point councilwoman. “I’ve been laser-focused to make this a reality.”

Dana Point Harbor Partners was selected over Dana Point Partners LLC — a group made up of DJM Capital Partners for the commercial core, Pacific Marina Development for the marinas, and Pacifica Hotels. Dana Point Harbor Partners was recommended as the front-runner by county staff.

The two development groups were selected by an evaluation committee of public and private-sector professionals familiar with coastal development and marine operations and experience with public-private partnerships.

“If we had to make a decision on the project alone, this would be a virtual tie,” Bartlett said. “It’s not about the completed project but the overall vision.”

The project includes reconstruction of the commercial core, the east and west marinas, the Marina Inn Hotel and 52 guest slips. Under the proposed public-private partnership, the developer would design, fund and build the improvements, then operate those portions of the harbor on a 66-year lease, before returning the property to the county.

Supervisors Todd Spitzer and Shawn Nelson asked Scott Mayer, the county’s real estate officer, whether the county had made a master lease mandatory. Mayer explained that was left open to the developer group.

Supervisor Andrew Do questioned Mayer about a $200 million difference between the proposals and why county staff didn’t ask for additional information on prior development projects completed by each group.

“There was an inconsistency of what was being proposed by their structure and their real estate model,” Mayer said of Dana Point Partners, which projected the extra $200 million revenue to the county. “Dana Point Partners also indicated that before the 8 percent rate (of return) could be paid to the county, they need to get an 8 percent rate of return of the project. If they didn’t get that, it would limit their payment to the county.”

In the end, the board agreed with county staff that Dana Point Harbor Partners would be more likely to complete the project on time. They also liked the idea of a master developer, where each component of the harbor project is under one lease. That way, if one component of the project does not hold its own financially, it could be covered by the other two parts.

“Looking at the financial aspects of the harbor, I think the staff recommendation is spot on,” Bartlett said.

Twenty-two people — largely harbor merchants, boaters and business operators — spoke during public comments, Tuesday, 14 favoring Dana Point Harbor Partners, eight speaking on behalf of Dana Point Partners. Dana Point Mayor Debra Lewis also asked the board for a swift decision.

“We are elated with the monumental day the County of Orange, with the direction of Supervisor Lisa Bartlett, would choose Dana Point Harbor Partners in a 5-0 vote to lead us into the future with a new 66-year lease,” said Donna Kalez, who operates Dana Wharf Sportfishing and Whale Watching, the harbor’s first business when it was started by her father, Don Hansen, in 1971.

Jim Miller, who has operated Coffee Importers for 37 years and is president of the Dana Point Harbor Merchant Association, said Tuesday’s vote was pivotal for the future.

“Today was like putting 18 years on the line in one morning,” he said. “The merchants are relieved that the decision’s been made in the process of revitalizing the Dana Point Harbor and is now moving forward.”

James Lenthall, president of the Dana Point Boaters Association, said his group has developed a strong relationship with Dana Point Harbor Partners, “and we look forward to building upon this foundation as we work together to give our boating community the world-class harbor we deserve.”