Bayfront Skyscrapers : Navy-Civilian Venture Would Alter S.D. Look

For several months now the Navy has talked about turning its prime downtown waterfront property into the military version of a General Motors-type corporate headquarters.

According to the plan, the Navy would consolidate many of its far-flung regional administrative operations onto eight blocks now occupied by the downtown naval base and supply center--a strip of property between the popular Seaport Village tourist attraction and Broadway that has two drab, old and squatty 10-story buildings and a strategic deep-water pier.

Because of its choice bayfront location, the 16-acre property is thought to have the kind of handsome profit potential that makes developers swoon. And that’s exactly what the Navy is relying on.

If the Navy is correct--and a recently released consultant’s report says that it is--developers will want to construct offices and hotels so badly they will pay for that opportunity by absorbing about 75% of the cost of building new headquarters for the Navy.

Cost reductions of that magnitude have served to reinforce the Navy’s belief that its strategy of embarking on this unprecedented public-private development venture makes economic sense.

But no one knew what the development would look like, until now. Although final plans are still a year away, preliminary outlines show that the project will be massive, so immense in fact that questions are being raised about whether it’s too big for the waterfront.

A market research and economic study of the property prepared for the Navy by the Goodkin Group of San Diego shows that when the development is fully built in about 12 to 15 years, it would consist of eight high-rises of up to 28 stories totaling 4 million square feet.

Four office buildings--roughly the size of the First Interstate Bank building at 4th and B streets--would account for half of the total, including the critical 1 million square feet for the Navy. The other 1 million square feet of office space would be leased by the developer.

Four hotels, including space for restaurants, shops and commercial activities, would account for another 2 million square feet and about 2,600 hotel rooms--or the equivalent of about four new Inter-Continental hotels.

There are today about 4,100 hotel rooms downtown, according to the San Diego Convention and Visitors Bureau, with another 2,000 first-class hotel rooms scheduled for completion within the next two to three years.

In addition, the downtown has about 7 million square feet of office space. If built today, the Navy project’s 2 million square feet would amount to a 30% increase in office space.

Only one other construction project downtown is in the same league. Santa Fe Pacific Realty Corp. plans to develop its land around the railroad depot--a block from the Navy’s property--with a series of high-rise offices and hotels over 25 years.

Santa Fe officials are among those who have questioned the size of the Navy’s proposal, once known as the Broadway Complex but which consultants have renamed Pacific Embarcadero.

“I think the Navy project will have a significant impact . . . it will take away from the existing downtown center,” said Ed Levine, San Diego project manager for Santa Fe who also sits on the multi-agency committee that has reviewed the Navy’s preliminary plans.

“The Navy doesn’t necessarily respond to the same economic criteria as private sector developers do. The result could be that whoever is selected could gain pass-through advantages that place them in a superior economic position in regard to the competition,” Levine said, noting that his company is among those competitors.

“It’s in the Navy’s interest to see this project proceed. The result could be their development goes forward at the expense of other projects.”

Levine and others who have tracked the proposal are also worried about the design of the project, which as proposed would be constructed in four phases, with the first being finished in 1989.

“We’re talking about a major (building) explosion,” says Gerald Trimble, executive vice president of the Centre City Development Corp., the city’s downtown redevelopment agency. “One of the major questions is how does it relate to what’s around them? What about view corridors and other urban design considerations?”

And although the Navy thus far has kept agencies such as CCDC informed about its plans, Trimble says, “You have to be cognizant that the Navy has never done a real estate development before and this is a very unique type of development.

“If it’s too big and too massive,” Trimble said, “it has to be scaled down.”

The Navy is acutely aware of the questions and the concerns, in part because it views the development as a pilot project. If it works in San Diego, the concept can be transferred to other Navy facilities, which by their nature, are mostly located on waterfront properties.

A sterling project will generate positive publicity. If, instead, the development is looked upon as a monotonous blight on the waterfront, then not only will the concept become a hard-sell elsewhere but San Diego will be left with the scars.

“We want to produce a landmark development,” says Cmdr. Eugene Talmadge, an engineer and one of the managers for the project. “Over-building is a concern . . . but we don’t know what the absolute number is on that.”

And it’s likely the Navy won’t know until it receives official construction proposals from developers probably next spring, proposals that will indicate how tall and how wide buildings will be. “It’s up to the developer to decide how he’s going to make his money,” Talmadge said.

“What we’ve done so far is look at the market to see what makes sense. You spell that both s-e-n-s-e and c-e-n-t-s,” said Talmadge. From the standpoint of money, the project seems to be a winner.

While the Reagan Administration and Congress have dramatically increased military spending this decade, particularly for items tied directly to war, such as ships and planes, it has been less generous for things such as construction of military office buildings.

Faced with that reality, the Navy hit on a plan it hoped would provide the necessary new office space at little or no cost. The idea is simple enough: Give developers long-term leases and building rights on Navy property. In return, developers build offices for the Navy, using revenue from the hotels and private offices to pay for the Navy construction.

The Navy had hoped that it could get a free ride, but the scale of development required to make that happen, Talmadge said, “would have been unreasonable.” Instead, the Navy will pick up 25% of the cost to build its offices.

The report by the Goodkin Group estimates the Navy’s bill over several years of the phased development will amount to $33 million. If the Navy had been forced to demolish its existing old buildings and then construct its 1-million-square-foot headquarters complex, the cost would have been about $148 million, the Goodkin Group report said.

As for the concern about walling off the bay, Talmadge says that almost anything built on the property is better than what’s there now. “Right now, we’ve blocked off two whole blocks. No one can get through them to get to the waterfront,” he said. “Our plan is to have view corridors and pedestrian access and to maintain linkages to Seaport Village and the waterfront.”

This will be done, Talmadge says, through the construction of buildings he labeled as “tall and slender, not flat, squat and low.”

Winston Elton, the Goodkin Group’s project director for the Navy project, says the value of the Pacific Embarcadero when complete will probably range from $750 million to $1 billion. Because of its size, it’s expected that several developers will be involved, a fact that makes some observers wary that the project won’t have a master plan and will instead be built on an ad-hoc basis.

That doesn’t worry Elton, who finds nothing wrong with the lack of a precise master plan if individual phases are properly planned. “If you talk about a master plan . . . that’s a process that has to be extremely flexible. Development like this, it’s extremely dynamic.”

To buttress his argument, Elton points to the changes in downtown from 1965 to 1985. “If you in 1965 would have said this is the way downtown is going to look in 1985, everyone would have said you’ve lost your mind,” Elton said. “You can spend a long time waiting for a master plan. The Navy has to do what it has to do.”

“The Navy has to take the most to get the most,” said Elton, explaining that the building scenario outlined by his company foresees high-rises ranging from 16 stories to 28 stories, perhaps higher. He said building heights on the property would not be constrained by Federal Aviation Administration regulations, as some have said, noting that high-rises could reach 500 feet.

Elton says he and the Navy will continue working with a group headed by Councilman Bill Cleator. The committee consists of representatives of the San Diego Unified Port District, CCDC, the Chamber of Commerce, San Diego Assn. of Governments, Seaport Village, Santa Fe and others. It was formed at the Navy’s request.

The committee, which has reviewed the preliminary plan, will help establish criteria for developers and review the proposals that are submitted. But some committee members will be excluded, Elton says.

“I would think that those who have development proposals can’t be on the committee that evaluates the (proposal) or sets up the criteria,” said Elton, explaining that companies such as Santa Fe and Seaport Village would have conflicts of interest.

Sen. Pete Wilson (R-Calif.), who supports the Navy’s concept, wants the committee involved in the review of the project, and has formalized that relationship in a bill. “We think it’s critical that the committee be part of the whole process,” said Ken Carpi, Wilson’s legislative director. “If the Navy were to select (a development plan) to the complete and undying opposition of that group, the Navy would be hard put to go ahead.”

Both Wilson and Rep. Jim Bates, (D-San Diego), have submitted legislation amending the 1987 military construction authorization bill and giving the Navy power to enter into long-term leases with private developers for development of the Pacific Embarcadero property. So far, the amendments have proceeded smoothly and expectations are they will become law this fall.

Bates, who says he doesn’t object to Wilson’s amendment, said the concept of private developers undertaking military construction in return for development rights is long overdue.

“It’s a lot cheaper than anything else. It’s certainly cheaper than having the Navy doing it (building) outright,” Bates said. As for the worry of over-building, Bates says, “I think it’s pretty clear they want to meet all the requirements, urban design and all that.”

In an effort to identify more clearly what kind of impact the Navy’s project will have on the part of downtown nearest to the waterfront and to pinpoint both real and potential conflicts, a number of agencies are planning to fund a $75,000 study, said Jack Koerper, special project director for Sandag, which will coordinate the study.

The study, which should be finished by the end of this year, will be paid for by the Navy, CCDC, Sandag, the San Diego city planning department, the county planning department and the Port District.

“We don’t know just yet how that (Navy project) is going to shake out,” Koerper said. “What we want to do is look at that entire area. After studying it, the City of San Diego may take a second breath and say, ‘We don’t want all that development’ and maybe scale it down.”