U.S. Navy Vacating 100-Year Lease for Prime San Diego Bay Site

The US Navy is continuing to vacate prime property in San Diego that has been coveted for decades by developers.

The Port of San Diego Commissioners voted this week to approve an agreement with the Navy to terminate its 100-year lease on a 3.4-acre piece of property in proximity to San Diego Bay, currently occupied by three two-story buildings.

The parcel and the low-slung buildings, located on 1220 Pacific Highway, are both property of the Navy.

The site, sandwiched between the Wyndham San Diego Bayfront and the Lane Fields, has long been eyed by developers as a prime place to build a new hotel as well as public amenities. It sits opposite San Diego’s cruise ship terminal.

The vote by the Commissioners starts the clock on a process that will formally terminate the Navy’s lease on the property by the end of this year, giving the Navy up to four years to vacate the property, according to a report in the San Diego Union-Tribune.

In exchange for vacating the site—which the Navy had been expected to occupy for additional decades—the Navy will receive $5.75M in products and services from the Port of San Diego, the report said.

“In real estate, the most important factor is always location and 1220 Pacific Highway is one of the best locations in our region, adjacent to the North Embarcadero, San Diego’s front porch,” James Hammel, the port’s real estate developer, said during a Commission presentation on the deal.

“The acquisition of this site unlocks new public access, recreational and commercial development opportunities in a prime area of the San Diego Bay waterfront,” Hammel said.

The federal government has occupied the bayfront property since 1949, when it entered into a 100-year, rent-free lease agreement with the city of San Diego. In return, the Navy gave the city of San Diego a fee-simple title to 405 acres of federal land, as well as perpetual easements across Navy properties, a spokesperson for the Navy told the newspaper.

The 1220 Pacific Highway lease agreement was inherited by the San Diego Unified Port District when it was formed by the state in 1962.

In August, the Navy disclosed that it is considering proposals from four development teams to replace its NAVWAR facilities and redevelop a 70-acre site in Dan Diego’s Midway District.

The teams are competing for a 99-year ground lease on the site, which is adjacent to Interstate 5. The project, which may include a development of 20M SF, is shaping up to be one of the largest public-private projects undertaken by the Navy.

The Navy put the property on the market in November; in April, four development teams were invited to make detailed proposals. The Navy is offering the land for “in-kind” consideration, meaning it wants to exchange the property, in lieu of cash, for new facilities, according to a report in the Tribune.

The winning bid will be awarded before the end of the year. A transfer of the property through a 99-year ground lease would be subject to approval by the Secretary of the Navy.

The Old Town Campus at Naval Base Point Loma is home to the Naval Information Warfare Systems Command and Naval Information Warfare Center Pacific divisions.

The property, which has been owned by the Navy since the 1990s and is referred to by its acronym (NAVWAR), consists of two large parcels straddling the Pacific Highway and encompassing 1.7M SF of administrative, lab and warehouse space that are contained in a series of WWII-era hangers.