A new team emphasizing strong ties to San Diego has surfaced in the do-over competition to remake the 48 acres of city-owned land near Pechanga Arena San Diego in the Midway District.
Developer Zephyr Partners has partnered with sports-and-entertainment venue operator Legends and affordable-housing builder Chelsea Investment Corp. to submit a bid for the property that includes more than 1,000 subsidized units, 29 acres of parks and public space, and a new arena.
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The three partners are calling themselves Midway Rising and have formed a limited liability company with the same name, in a nod to the project’s aim to make over a blighted part of town and uplift the community.
“This local team that’s come together … is really sitting in a unique spot, because the vision for this project was born at a couple of local coffee shops. We had the benefit of watching the previous (request-for-proposal) process as community members, not as participants,” Brad Termini, co-CEO of Zephyr Partners, told the Union-Tribune. “We’ve been discussing this informally as a team for some time. But it wasn’t until the city came out with the (solicitation) 60 days ago that we really saw that the city’s core principles and goals really aligned with our coffee shop conversations that we decided to formally submit.”
Although project specifics were not disclosed, the Midway Rising vision reflects the city’s expectation for its sports arena holdings at 3500, 3250, 3220 and 3240 Sports Arena Blvd., meaning the plan is focused on producing affordable housing and creating a destination arena.
The team’s pitch will be submitted alongside at least four other bids for the property, due Friday, as the city puts to bed the first phase of a second solicitation process — this time following rules prescribed by the state of California.
The group’s early plan, as designed by project architect Safdie Rabines, envisions a roughly 16,000-seat, privately financed arena on the eastern edge of the property that flows into an urban public square. Here anyone can gather to watch games or concerts on the arena’s exterior video board, or patronize the project’s 250,000 square feet of shops and restaurants.
On the western side, an unknown mix of affordable units, middle-income apartments and market-rate housing are spread across mid-rise towers that open onto a central paseo. A series of rooftop parks, which cover above-ground parking garages, and elevated walkways connect residents and visitors to the sports complex. Midway Rising also calls for a hotel near the arena.
The team is, of course, emphasizing its affordable housing promise.
The product type is a highly regulated category of housing that is typically distinct from market-rate units in for-rent or for-sale price only. Specialized real estate developers use state and federal government subsidies to lower overall project costs. As a result, the developers are required to rent the units to people making 80 percent or less of the area median income at discounted rental rates, with income limits defined by the Department of Housing and Urban Development. Currently, the median income for a family of four in San Diego is $95,100.
Chelsea Investment Group, a for-profit company, is spearheading Midway Rising’s affordable component, with the firm aiming to produce the highest number of rent-restricted units on the sports arena site.
“It’s transformative,” said Jim Schmid, who is the founder and CEO of Chelsea Investment. “We want to produce a lot of affordable housing. We want the types, whether it’s for families or seniors, or disabled people or veterans; we want it to mirror the needs of the community.”
Midway Rising is also banking on its San Diego-stacked roster making an impression on city officials.
Encinitas-based Zephyr has built luxury homes and apartments across the county, including The Park condo building in Bankers Hill. Chelsea Investment, based in Carlsbad, was started 35 years ago by Schmid and is a prolific builder of affordable units in town. And Legends, which oversaw the construction of SoFi Stadium in Inglewood, isn’t based here, but CEO Shervin Mirashemi is a UC San Diego alumnus who recently moved back to town.
Formed in 2008, Legends’ ownership group includes the Dallas Cowboys and the New York Yankees. It was recently valued in a transaction at $1.3 billion including debt, according to The Wall Street Journal. The hospitality group plans to pay for, develop and operate the San Diego arena with an eye toward booking big acts year-round, Mirashemi said.
“From our perspective, this city deserves a state-of-the-art, new sports arena that can attract major events from all around the world,” Mirashemi told the Union-Tribune. “This needs to be a hub, if you will, and a calling card for the city when it comes to cultural events, music, family shows, residency programs; a multifaceted meeting place for major events, ticketed events and non-ticketed events, where the community can gather and really celebrate everything that’s great about the city of San Diego.”
San Diego’s sports arena holdings, on and off the market since February 2020, consist of six contiguous parcels, the largest being the 34 acres occupied by Pechanga Arena San Diego, the longtime home of the San Diego Gulls. The plots are north of the San Diego International Airport, south of Mission Bay, and bounded by Kurtz Street on the north and Sports Arena Boulevard on the south. The site is zoned for a total of 2,112 housing units, although a developer can build double that amount if it meets specific affordable housing requirements.
“(Redevelopment) will have very significant ripple effects in terms of jobs, incomes and taxable revenues for the city,” said Lynn Reaser, who is the chief economist at the Fermanian Business and Economic Institute at Point Loma Nazarene University. Reaser is also a member of a volunteer community advisory group that was organized by rival sports-arena-site bidder Brookfield Properties. “It’s a very important catalyst for reviving a part of the city that has been neglected for many years.”
Originally, Brookfield Properties was selected to lease and redevelop the contiguous site through a city-run competitive bidding process that was later invalidated by the state. The land is considered surplus and must be disposed of through a specific process that starts with a formal declaration of the property’s surplus status and a notice alerting affordable housing builders of its availability, per new rules created to enforce a recently amended Surplus Land Act. The city, which did not complete the required steps, was forced to hit the reset button earlier this year to comply with the law.
The second solicitation process started in October, when the city published what’s called a “notice of availability,” notifying affordable housing developers registered with the state that the city was ready to lease its parcels. The action started the clock on a 60-day window allowing interested bidders to respond with their high-level interest.
Teams must submit a redevelopment plan by Friday that includes at least 25 percent of proposed housing units set aside for lower-income families, and commit to renovating or replacing the existing sports arena if they want to be considered. Qualified applicants will then have 90 days to not only negotiate with the city but also refine their conceptual proposals into more detailed projects ahead of presenting them to the City Council next year.
At least five teams including Midway Rising have signaled an interest in redeveloping the property. Previous bidders Brookfield Properties and Toll Brothers Housing will try again with new teams and pitches that also emphasize a substantial number of affordable units. Two additional groups, one led by The ConAm Group and another Monarch Group, are expected to participate as well.