Marea Village moves forward after hotel concerns resolved

ENCINITAS — The Marea Village mixed-use project proposed in Leucadia is moving forward after over a year of negotiations between the developer and the California Coastal Commission regarding hotel room affordability.

Planned for 1900 and 1950 North Coast Highway, Marea Village is a mixed-use project with 94 apartment units (including 19 affordable units), a 32-room hotel, and six commercial buildings. The project is the sister development to Fenway Capital Advisors’ luxury Alila Marea Beach Resort, located to the north. 

Despite receiving city approval in August 2022, the project was delayed until late last year due to an ongoing disagreement with the California Coastal Commission about the required number of low-cost hotel rooms in the project. 

Ultimately, both parties agreed in October that Fenway Capital would forgo any low-cost rooms and instead pay a $1.1 million in-lieu fee to go toward other affordable local projects. This agreement was confirmed at the commission’s Feb. 8 meeting, and the developer is awaiting building permits from the city.

“The Marea Village revised plans have been submitted to the city for review and approval and we’re hopeful things will move quickly with a groundbreaking hopefully later this year,” said project attorney Marco Gonzalez. 

The project earned the approval of the Encinitas Planning Commission in June 2022, with plans at the time for a 34-room hotel that would include eight “affordable” rooms covering the range of low, moderate and high affordability. 

Two months later, the City Council affirmed this decision by rejecting an appeal filed by a group of residents from the adjacent Seabluffe neighborhood, who argued the project was inconsistent with the city’s character and development standards.  

Despite council support, the project faced another appeal shortly afterward, this time by two members of the California Coastal Commission with concerns about the low-cost visitor accommodations. Fourteen months later, the matter was officially heard before the commission on Oct. 12. 

Commission staff said that under their guidelines, Marea Village was required to provide a “full range” of affordability among all of its hotel rooms, meaning that 25% of rooms must be provided at a lower cost rate.

Instead, the commission argued, the project conflated two different rate-finding methods by providing a range of affordability among just 25% of its units.

“We were left with the understanding that they were going to require the eight or nine lower-cost rooms as part of that proposal. We were very surprised when we got notice of final action from the city, because what they did was spread the low, moderate, and high-cost range of affordability across the eight rooms, not the total rooms,” said the commission’s San Diego district manager, Karl Schwing. 

Fenway Capital said they were following the guidance set by the commission when they reviewed the city’s Housing Element and declined to offer the six affordable rooms requested by the commission. 

“We’re stuck in this spot right now, and trying to figure out what would work for everybody,” said Larry Jackel, principal at Fenway Capital.

After much discussion, Fenway Capital agreed during the October meeting to provide 32 market-rate hotel rooms and pay an in-lieu fee of $1.1 million to fund affordable visitor accommodations elsewhere in Encinitas. 

On Feb. 8, the Coastal Commission discussed the project once more to adopt findings reflecting their October decision. Staff stated that a coastal development permit for the project would be issued once the developer had paid the in-lieu fee. 

Gonzalez said the developer is looking forward to working with the city to identify an appropriate project for the in-lieu funds. 

A spokesperson for the city of Encinitas said the project is still under review by the city, but will not need to go before the Planning Commission or City Council again. 

“At this time, nothing has been found to cause the project to be reviewed by the Planning Commission or City Council,” said spokesperson Lois Yum. 

The project will require the demolition of four existing commercial structures on the site, including the former location of Davina’s Cabo Grill and Cantina. The majority of the site is undeveloped.