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SeaWorld San Diego, hotels and other businesses that rent properties in city-owned Mission Bay Park are imploring the city to provide relief as their business tanks.
In a letter sent to Mayor Kevin Faulconer Wednesday morning, hotelier and Mission Bay Lessees Association president Bill Evans called on the city to consider letting leaseholders to pay rents that will likely come in well under the minimum amounts they are required to pay as part of their city leases for 90 days. Per their agreements, Mission Bay lessees typically pay rents based on the revenues they generate and must pay a minimum amount each month even if business drops. Now, amid the coronavirus pandemic that has crushed local businesses, it’s unlikely those businesses can hit their minimum requirements with this month’s revenues.
“The impact grows daily and is now significantly greater than that of 9/11 and the 2009 recession combined,” Evans wrote in the letter. “Customer demand has dropped dramatically, nearly all business for the next 90 days has canceled, and revenues for most businesses have declined in excess of 90 percent.”
Mission Bay and other city leases with tourism-related businesses are typically based on agreements that those businesses will give the city a cut of various revenue sources.
For example, the Mission Bay Resort’s latest lease with the city calls for the company to pay 7.75 percent of gross revenues it receives from room bookings, 7 percent from its gift shop and 3.5 percent from meal service.
Those leases also include minimum rent payments to ensure the city gets sufficient cash if business falls.
For the Mission Bay Resort, that means a $160,000 bill is soon coming due. SeaWorld, which has temporarily shuttered amid the coronavirus pandemic, will owe $875,000.
Last fiscal year, rents from Mission Bay leases totaled more than $30 million that flowed to the city’s day-to-day fund.
Evans and others say they can’t afford those bills right now and are asking the city to accept cuts of the revenues they do have.
“The whole request is for them to just allow us to pay a percentage rent that will allow us to weather the storm and keep on employees,” Evans said.
Evans said hotels that are the park’s anchor tenants are often seeing just five to seven rooms booked on a given night – and that’s leading to discussions about temporary closures.
“It’s my understanding that by the weekend everybody but me will be closed,” said Evans, whose family has long owned the Bahia and Catamaran resorts in Mission Bay. Evans Hotels also owns the Lodge at Torrey Pines, which also holds a city lease.
The coronavirus is also ravaging smaller Mission Bay businesses.
Joe Busalacchi, who owns bayside restaurant and fish market Sportsmen’s Seafoods, said he has been forced to let go of 10 of his 14 employees in recent days as business trickles to a halt. Now he’s trying to hold onto remaining staff that have been working at his family business for years – and to keep the business his grandfather founded in 1952 alive.
During this time of year, Busalacchi said, the business usually sees 60 to 80 customers a day. The pandemic has changed everything.
“We’ve probably had maybe two people a day show,” Busalacchi said.
Busalacchi said for now he’s planning not to write his monthly $4,000-a-month minimum rent check to the city. He estimated he’s only bringing in about $100 a day and he wants to direct that money to his employees.
“In these times, that’s $4,000 when I have next to nothing,” he said. “I’ve gotta pay my employees. I’m not gonna pay it.”
Christina Chadwick, a spokesman for Faulconer, said the city is considering options for business owners, particularly those like Busalacchi.
“The mayor has directed city staff to work with leaseholders on city property who have experienced significant financial impact due to COVID-19, with a particular focus on small businesses with less than 100 employees to negotiate payment options during this unprecedented time,” Chadwick wrote in an email.
Evans and Namara Mercer, executive director of the San Diego County Lodging Association, argued that the city should consider relief for all of its leaseholders, large and small.
Mercer said Kris Michell, the city’s chief operating officer, has shared that the city is working on a small business relief package.
“We countered back that it should be everyone,” Mercer said. “Everyone is in the same boat. Everyone is suffering whether you’re a big company or a small company.”
Chadwick said the city is considering options for businesses of all sizes.
“The city is open to discussing the financial situations and solutions with all leaseholders,” Chadwick wrote. “We encourage leaseholders impacted by COVID-19 to contact the city.”
Evans said he hopes the city will consider the group’s proposal given the potential long-range impact on area businesses.
Companies in Mission Bay that go out of business won’t be able to pay rents when the coronavirus cloud clears, he said.
“Unless the lessees are here, they will not have that (rent),” he said.