Nov. 21, 2003 - ESCONDIDO, Calif .-- And then there were three. One of four developers actively pursuing the city's downtown hotel project has dropped out of the running because its team could not financially swing the project, the developer said Thursday. 

"The model that we had in mind was not fitting the market," said Jens von Gierke, vice president of Newport Beach-based developer Makar Properties, who had proposed a Starwood hotel on the 1.39-acre, city-owned parking lot between City Hall and the California Center for the Arts, Escondido. 

"The financial scenario changed in the last three months," he said. "It wasn't applicable to the market for a hotel in Escondido." 

In October, the city sent a 14-page request for proposals to five hotel development teams that had expressed interest in building a 150-room hotel on city land that fronts Valley Parkway in the heart of Escondido. 

The city's view is that the development of an upscale hotel is critical in efforts to bring more tourists and tax money to downtown Escondido, and that such funds would especially benefit the financially struggling arts and conference center next door. 

Makar Properties, along with three other development teams individually offering a Crown Plaza, Hilton or Hyatt hotel, had already endured the first round of city scrutiny. All expressed interest in moving forward to the next phase, which requires each group to submit a development and financing proposal. 

A fifth development team, Springfield, Mo.-based John Q. Hammons dropped out in July. 

The remaining interested parties include: Texas-based developer FaulknerUSA, which is offering a Hilton hotel; San Diego-based Swinerton Builders and its partner, Hyatt Corp; and La Jolla developer C.W. Clark, who is partnering with Phelps Program Management and Crowne Plaza Hotel. 

The city is asking developers to pay their own way and not expect public financing. The City Council is willing to foot the bill to build a multistory parking garage for the hotel across Valley Parkway as well as being flexible on lease payments for the hotel land. The city also encourages any hotel developer to lease the arts center's 9,000-square-foot conference center that sits right next door. 

"The council has said there is a possibility of public financing but there is a strong preference for private financing," said Mayor Lori Pfeiler. "We are putting the parking garage and conference center out there as strong assets to attract the private financing." 

Starwood's project would have been funded entirely by private money but the economy makes that kind of proposal tough, von Gierke said. 

"The market has not picked up in the way we had estimated," he said. "It was our very specific model to have a hotel with Starwood and we did not feel with the private financing that it would work. It was the all-over economy, not specific to the area." 

Von Gierke said the decision was made two weeks ago and he sent a letter to the city advising it of the decision. 

Pfeiler said she didn't know about Makar/Starwood's departure but was sorry to see the developer team go. 

"It's unfortunate that they can't put the private financing together," Pfeiler said. "We have a great opportunity so they are missing out." 

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(c) 2003, North County Times, Escondido, Calif. Distributed by Knight Ridder/Tribune Business News. HLT, IHG, HOT,