SeaWorld Defaults on Retroactive Rent to City; San Diego say pay

Last year, as more businesses fully reopened amid easing pandemic restrictions, long-deferred rental payments came due for hundreds of tenants occupying San Diego-owned properties, including SeaWorld. Although it is now experiencing an upsurge in visitors, the theme park remains the only tenant in town in default of unpaid rent – totaling $10 million.

The city of San Diego, after months of negotiations, told SeaWorld this week that it must start paying its unpaid rent in installments or face late fees and penalties, said Jay Goldstone, director of the operating in San Diego.

“SeaWorld will not be spared,” San Diego COO Jay Goldstone said in an interview this week. “We have told SeaWorld that we are not going to offer any other special discount on what you owe as back rent.”

The park was notified by the city in September that it was in default of terms of its lease related to payment of rent. Like other tenants in the city, SeaWorld was informed last year that it had the option of refunding the to rent he owed over time — an offer several other San Diego tenants took advantage of, including two other Mission Bay tenants.

SeaWorld was informed this week that if it accepts the 24-month repayment plan that was available to all renters facing financial hardship due to the pandemic, the city will waive all additional fees and penalties, leaving a balance of $8,856,103.93, said Penny Maus, director of real estate and airport management in San Diego. Late fees have been waived for all tenants in the city, she added.

Company officials have yet to say how they plan to respond to the city’s latest offer, but in an interview Friday, Marc Swanson, CEO of the park’s San Diego parent company, SeaWorld Entertainment, said “SeaWorld has been in San Diego for over 50 years. years, and we have a dialogue with the city, and we will continue to dialogue with them in hopes of reaching a resolution that works for both of us.

At issue are millions of dollars in monthly rent that some 800 tenants — from Mission Bay hotels and marinas to airports, parking lots and wineries — pay in San Diego for the right to do business on city-owned land. When the pandemic forced many businesses to close or drastically curtailed operations in early 2020, the tourism and hospitality industry suffered a huge financial blow as revenues dropped to next to nothing for a time. .

While the city eventually agreed to defer rent payments for a while to help hard-hit businesses recover financially, that concession ended mid-last year and the city instead came up with a plan. payment plan that would allow 24 equal monthly payments until June 30. 2023.

SeaWorld, however, rejected repeated offers of a rent deferral plan, arguing early in the pandemic that it was not obligated to pay rent during mandatory closings. City officials, however, disagreed, explaining that there was nothing in the lease, law, or state and city emergency ordinances to support that conclusion. Rents could be deferred, but not canceled, the city said.

Many municipal leases, such as SeaWorld’s, are structured so that San Diego shares in the revenue collected by its tenants. SeaWorld’s rent for its 190-acre site is calculated based on a specified percentage of the park’s gross revenue from in-park admissions and expenses or, alternatively, a minimum annual rent, whichever is greater.

In normal times, the percentage of rent brings considerably more revenue to the city. Based on its current lease, SeaWorld’s minimum monthly rent is $866,775, or more than $10.4 million for a full year. Much of that was unpaid for 2020, and the total amount due for the first half of 2021 was more than $2 million short, the city said in a heavily worded letter to SeaWorld’s park president. , John Dunlap, in September.

At that time, the total outstanding amount was $11.9 million, including surcharges and penalties, but the amount owed has since dropped to nearly $10.1 million due to additional payments made since then. during.

“The tenant (SeaWorld) has been open and operational for several months, and now is the time for the tenant to clear their arrears,” Maus wrote. “The Tenant’s position that it should be the City and ratepayers who bear the brunt of the Tenant’s hardship is untenable, and the Tenant has not demonstrated how such a position is consistent with the terms and conditions of the lease or the applicable law.”

SeaWorld San Diego President Jim Lake said on Friday that the park had paid “the required percentage of rent for the times our park was actually open and deferred payment of the minimum rent for the times associated with the park’s closure. due to COVID”.

He added, “The City of San Diego has been a great partner for us over the years and we continue to work with them to try to resolve this issue.”

In accordance with frequently changing COVID restrictions imposed by state and county health officials during the first year of the pandemic, the San Diego Marine Park was closed for several months but was finally able to reopen in the last part of 2020, albeit without its rides and roller coasters. In April last year it began a fuller reopening and more recently met its monthly rent obligations, despite underpaying in September and November, Maus said.

Goldstone said SeaWorld officials argued during negotiations with the city that he deserved special consideration beyond what other tenants had received because the marine park, unlike others, had no not the possibility of getting rid of all its expenses during its prolonged closure.

The company pointed out that although the park was no longer welcoming guests, it still had a large collection of animals to care for, animal rescues to perform and rides it had to operate periodically to ensure that ‘they were in working order,’ Goldstone said. Swanson reiterated this point in his interview with the Union-Tribune.

“So they felt they had a certain level of expenses that couldn’t go away at the same time that they had no income to offset the expenses, unlike other tenants who could get rid of a lot of their costs,” Goldstone explained. “We said, yes, we understand that there are some aspects of their operation that could not be reduced or closed, but we have not seen anything significantly different on a proportional basis than what our other tenants have lived, and so, we continue to offer them to participate in this deferral program where you establish a repayment plan, but we will not forgive the back rent that is due.

The rent stalemate comes as SeaWorld introduces two high-profile attractions to the county this month — the new Emperor diving rollercoaster, which debuted earlier this month at the marine park — and the opening this weekend of a Sesame Place theme park, which is a reboot of its former Aquatica water park in Chula Vista, themed around Sesame Street characters and attractions. Swanson was in San Diego on Friday in preparation for this weekend’s grand opening of the new park.

In its most recent annual report filed in late February, SeaWorld Entertainment informed investors that it had deferred the San Diego park’s “percentage rent” for 2020, but had made a partial payment of $1.6 million over the course of the year. first quarter of 2021. It also noted that it had accrued $10.8 million in rent payments and deferred charges as of December 31, 2021.

While noting that the company’s gross revenue has been “significantly impacted” due to pandemic shutdowns and capacity restrictions when parks may gradually reopen, SeaWorld Entertainment is now reporting record revenues, surpassing what it was taking in before the pandemic.

In 2021, revenue for the company, which operates a dozen theme parks in the United States, was $1.5 billion, more than $105 million more than in 2019. in the last quarter of last year, revenue reached nearly $371 million, nearly $73 million more than in 2019. same period in 2019.

In San Diego, very few of the city’s tenants have decided to take advantage of the extended rent repayment plan. Most have decided to go ahead and meet their minimum rent due, Goldstone said.

Among the seven tenants who have signed up are the Bahia Resort Hotel in Mission Bay and the Lodge at Torrey Pines in La Jolla, both owned by San Diego-based Evans Hotels. Others include the Dana Hotel on Mission Bay, the 19th Hole Restaurant at Balboa Golf Course, Surf Cup Sports and Everyday California Surf Camp.

Robert Gleason, chairman of Evans Hotels, said while the San Diego-based company has agreed to repay rent over time for two of its properties, he believes the city should have done more to ease the financial burden. businesses like hotels that have taken such a disproportionate hit for many months of the pandemic.

Evans Hotels, he said, is paying over time about $1.4 million owed to Bahia and $2.4 million to the Lodge at Torrey Pines, which covers much of the unpaid rent from March 2020 to the middle of last year.

“The city collects 100% of rent from tenants who received no percentage of their income,” Gleason said of the early stages of the pandemic. “Yes, there were government stimulus programs that helped businesses, but also helped local governments fill in the gaps. So it was a situation where the tenants were heavily impacted from a profitability and revenue perspective, and the lessor was not particularly impacted, after the stimulus payments.

“So we believe a more equitable burden sharing should have been done by the city, just as it has been done with many other municipal landlords along the coast.”

During the early stages of the pandemic, businesses across the country were able to take advantage of what were called Paycheck Protection Program loans, a federal COVID relief effort that helped sustain so many companies hard hit. While thousands of San Diego businesses and nonprofits have received loans, SeaWorld San Diego has received none.

Writer Natallie Rocha contributed to this report.

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