Driving Range on E. Harbor Island Lease Up for Approval by Port of San Diego — Tues., Dec.5

San Diego Union-Tribune for subscribers only

Topgolf International and the Port of San Diego are close to reaching an agreement on preliminary lease terms for a 9.5-acre site on East Harbor Island, opposite San Diego’s airport, where the entertainment company is looking to a build a flagship, driving-range venue with panoramic views of the bay and downtown.

Tuesday, December 5, Port of San Diego Commissioners will vote on whether to sign a non-binding term sheet with Topgolf, as recommended by the agency’s staff.

The document, as drafted, calls for a 40-year lease term — a 20-year base term with four, five-year options to extend — and sets the entertainment venue’s initial minimum annual rent at $1.53 million. If approved by commissioners, the term sheet would help the agency draft a more comprehensive lease agreement for consideration by the board in the second half of 2024.

Construction of the project, which requires a Port Master Plan Amendment and Coastal Development Permit, is expected to start in 2025, a spokesperson for the agency said. …

The brand has been eyeing a location on East Harbor Island since 2015, when the port first sought developer interest in airport-adjacent land along North Harbor Drive. The land is used by car rental companies that have moved their customer-facing operations to the airport’s consolidated rental car center.

The most recent Topgolf proposal, however, dates to 2019. It became a more realistic prospect when port commissioners last year OK’d an environmental review of the project. As currently proposed, the project calls for a 70,700-square-foot, three-level facility with 102 hitting bays that open up to a 4.5-acre outfield and 10 underground golf targets. The entertainment venue would take over nearly 10 acres on the basin side of East Harbor Island along North Harbor Drive just west of Liberator Way. It would feature multiple restaurant and bar areas, outdoor decks, event space and 293 surface parking spaces, according to project documents. The driving range would be surrounded by a polyester barrier netting system suspended on poles up to 170 feet in height.

A notice of preparation for a draft environmental impact report covering demolition of three rental car facilities, construction of the Topgolf project and other East Harbor Island public realm improvements was issued last month. Public comments are due by Dec. 18. The document identifies potentially significant impacts to air quality, transportation and aesthetics, including scenic vistas, among other things.

If approved,

• Topgolf will be required to spend at least $61 million on its new facility and the associated parking lot.
• Minimum rent set at $1.53 million per year, with adjustments based on sales in year 11, year 16 and during lease extensions.
• The company will, however, likely pay rent as a percentage of sales, starting at 5.5 percent of sales and increasing to 7 percent of sales toward the end of the full term.
• In the first year of the lease, which will start once construction is complete, the port expects to collect $1.9 million in rent based on revenue projections,
• the port will be obligated to find room for another 100 off-site parking spaces located elsewhere on East Harbor Island.
• Topgolf agreed to a fair-share contribution of up to $4 million for public infrastructure costs associated with the broader redevelopment of East Harbor Island, which includes the realignment of Liberator Way to serve as the primary circulation route for cars, bikes and pedestrians.