Business

Follow-Up File: Embarcadero plan dissolves in Morro Bay

Name: Burt Caldwell

Job: Owner

Project: Embarcadero Grill What he said then:

In July 2009, developer Burt Caldwell was optimistic about plans to build a conference center in Morro Bay.

As originally planned, the two-story building would hold up to 400 people, plus areas for retail and a restaurant. It would replace the Embarcadero Grill, the Outrigger restaurant and several shops between 801 and 833 Embarcadero.

In September 2008, the Morro Bay City Council approved the $3.5 million project.

Expecting to attract meetings and weddings, the developer hoped the center would boost the city’s hotel occupancy in the offseason.

What he says now:

The conference center plan has — in the words of Councilman George League — died “its natural death” when the council ended negotiations on a lease with Caldwell in March.

League and Nancy Johnson were elected to the council in November. Both publically voiced opposition to the plan before the election, citing parking as a primary concern. Mayor Bill Yates was also elected at that time.

League was the only council member who could be reached for comment. But his sister owns the Outrigger, a conflict of interest that made him ineligible to vote on matters relating to the conference center.

Nine months after presenting a draft lease to Caldwell, City Attorney Rob Schultz sent him notice on March 10 that the “City Council has directed City Staff to cease any further negotiations.”

The main issue, according to Schultz, was an inability to agree on rent. The city requested $90,000 a year, which included the Morro Bay Boulevard street end that was to be converted into a public plaza.

The Coastal Commission does not include areas restricted to public use, such as the street end, when calculating maximum square footage of tidelands projects, according to documents related to its December 2009 approval of the project.

Requiring a smaller footprint, the commission agreed to a compromise, Caldwell said. The main floor could be 10,653 square feet, with just 629 square feet upstairs.

The new design limited retail and restaurant space and lowered building costs to less than $3 million, he added. The street end would still be developed, but Caldwell asked the city exclude the area from rent calculations — a drop of about $28,000 a year.

“I needed to do about $3 million in business to make the thing economically viable,” he said. “I didn’t want to be locked into a base rent that was so high.”

The council refused, saying that would impact leases for the other Embarcadero sites it manages.

“He was not willing to comply with city standards,” Schultz said. “We have to have a standard lease.”

A letter stated that Caldwell failed to submit “a detailed estimate of project costs and an economic analysis.”

The developer, who spent roughly $250,000 on plans and studies for the project, said he was preparing the remaining documentation.

“I was getting ready to package everything up and send them,” Caldwell said. “If they hadn’t cut off negotiations I probably would have caved on the $90,000.”

The sticking point for him was a clause that would terminate his lease if the project wasn’t completed within three years. Caldwell understood this to include the site of his existing restaurant.

Leases on the Embarcadero Grill and the Outrigger are set to expire in 2018. Schultz said a new lease wouldn’t have changed that if the conference center weren’t built.

But Caldwell said the city wouldn’t give him that assurance in writing.

“I never saw a document stating I would retain lease of that (Embarcadero Grill) site,” Caldwell said. “If I had, I would have moved forward more expeditiously.”

— Raven J. Railey

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