San Diego Union-Tribune (Sunday)
PROPOSED MIDWAY DEVELOPER DONATED TO ELECT S.D. MAYOR
Gloria’s office says political support not factor in choice
Before being selected to build a new sports arena and thousands of housing units in the Midway District, a developer and his wife made the two single largest personal donations to a political committee dedicated to electing Todd Gloria mayor of San Diego, records show.
Brad Termini and his wife, Stefanie, each contributed $50,000 to San Diegans from Every Community in Support of Todd Gloria for Mayor 2020, an independent expenditure committee sponsored by the Laborers International Union of North America, Local 89.
They also together gave at least $4,500 directly to Gloria’s mayoral campaign.
The political contributions were made in 2019 and 2020, months before Termini’s company, Zephyr Partners LLC, began preparing its bid for the massive redevelopment of the 48-acre site surrounding the aging sports arena, now known as Pechanga Arena.
The Encinitas businessman is one of the biggest marijuana entrepreneurs in western New York and has been sued more than a dozen times for breach of contract and other claims,
records show.
The 41-year-old developer was the subject of a tax lien that has since been settled, and at least one persisting civil judgment.
Zephyr Partners is now a driving force behind Midway Rising, the group Gloria picked to deliver a multibillion-dollar makeover of city-owned surplus property. It features a 16,000-seat arena, retail and open space and 4,250 housing units — almost half of which qualify as affordable.
Gloria announced earlier this summer that he preferred Midway Rising over two other finalists. The proposal was embraced by a City Council committee on Thursday and is scheduled to be reviewed by the full council on Tuesday.
If approved, the city would begin exclusive negotiations with the company to hash out a detailed development over the next two years. Any agreement reached by the parties would return to the council for a follow-up approval.
Opponents of the mayor’s decision say the city did not perform adequate background checks on Termini and his company. They also worry that Gloria was improperly influenced by the campaign donations and rushed the process.
Public confidence in the city’s real estate dealmaking has been marred by the several recent missteps, most notably the acquisition of the 101 Ash St. office tower.
The Mayor’s Office defended the city’s handling of the sports arena applications and said there was no connection between the Terminis’ political contributions and the mayor’s more recent decision to back the Midway Rising proposal over those of six other bidders.
“Absolutely not,” mayoral spokesperson David Rolland said by email. “Staff was not aware of any contributions made by any members of any of the teams to the mayor or any other elected official.”
Rolland said the city and its consultant examined all of the submissions carefully, and Midway Rising was the clear choice.
“Not only does Midway Rising receive ‘first priority’ under the law, the team also demonstrated the operational and financial wherewithal throughout this process to be the best partner for the city moving forward,” he said.
Midway Rising spokesperson Jeff Meyer of Southwest Strategies said the political donations and other complaints about Termini are being used as a distraction by project critics.
“We’re going to keep the focus where it belongs — delivering the most affordable housing to the San Diegans most in need,” Meyer said. “As with any other private individual, Mr. Termini supports causes and campaigns in the community whose values and vision he shares with no expectation of anything in return but a better, stronger San Diego.”
The sports arena remake has moved forward at a brisk pace since state housing officials rejected another plan last year that they said did not meet the requirements of the California Surplus Land Act. The law requires at least 25 percent of housing built on unneeded public property be designated as affordable.
Before the City Council panel Thursday, the Midway Rising application was endorsed by numerous speakers addressing the council’s land use and housing committee. But it was opposed by others who complained that the process was rushed and lacked sufficient due diligence.
“This is looking more and more like slot-machine development,” said Lori Saldaña, a former state Assembly member who lost her campaign for City Council in the June primary election. “You put $100,000 in, and you get millions back in development deals. San Diego is better than that.”
Records show Termini’s company was selected as a partner even though it has never built a project as large and complex as Midway Rising.
Zephyr Partners instead has focused on smaller housing projects of a few hundred units, according to the developments outlined on its website. The firm also has a history of selling its development rights to other builders once entitlements have been secured from local planning officials.
In the meantime, employees in the city’s real estate department say they have been sidelined in the sports arena redevelopment effort. They say the internal analysis has been dictated entirely by director Penny Maus and her top assistant, Lucy Contreras, who recommended Midway Rising to the city land use committee.
“Seems incredible to me that they haven’t done much background searching on the successful bidder,” said one employee, who asked to remain unnamed due to fear of retaliation. “It seems kind of huge to me if Todd got sizable donations from the successful bidder.
“That is a huge red flag,” the person said. “And where is that due diligence?”
The political contributions to the Gloria campaign committee and questions over the city’s handling of the bidding and vetting process were first reported by La Prensa San Diego.
Zephyr Partners is joined in the Midway Rising group by affordable-housing developer Chelsea Investment Corp. and Legends, a sports and entertainment venue operator.
Chelsea and Legends disclosed past litigation in their filings with the consultant hired by the city to review the sports arena applications, but Zephyr Partners appears to have omitted some civil complaints filed against the firm.
In its disclosure to the city consultant, Termini’s firm acknowledged a prior “partnership dispute” but did not identify the case. According to San Diego Superior Court records, Termini and Zephyr Partners have been sued more than a dozen times.
Both mayoral spokesperson Rolland and Meyer, the Midway Rising spokesperson from Southwest Strategies, said Zephyr Partners complied with city rules because the required legal disclosures only went back seven years.
“Midway Rising followed that direction and submitted required material,” Meyer wrote. “The city has since confirmed multiple times, including at (the Thursday) hearing, that Midway Rising fully complied with all disclosure requirements.”
The other finalists disclosed litigation dating as far back as the 1990s.
Lawyers for the city conducted a precautionary review of the litigation, Rolland said.
“City staff worked with the City Attorney’s Office to obtain copies of the cases disclosed by Zephyr, which were settled, and had no concerns,” he said.
A legal judgment recorded in March shows that Del Mar Beach Resort Investors LLC, a limited liability company Termini formed in 2017, owes a plaintiff $134,000 plus interest as a result of a 2020 business dispute.
Other records show Termini was the subject of a $22,000 tax lien from 2007 but settled that dispute five years later. That debt was not included in paperwork filed with the city.
Termini also received three separate small-claims judgments worth just over $11,000, records show.
The Encinitas developer has recently become active in the emerging market for legal marijuana cultivation.
According to press reports in New York, Termini is one of the principals in a group of investors planning to spend hundreds of millions of dollars on a hightech cannabis campus in Buffalo over coming years.
“We envision that this facility will not only be meeting the cannabis demand of the Western New York community, but this facility will be exporting cannabis to New York City,” Termini told the Buffalo News last month.
In San Diego, several speakers at the City Council committee hearing last week urged the city to slow down and do more homework before signing an exclusive negotiating agreement with Midway Rising.
They said they worry the city will sign another bad real estate deal like the one for the former Sempra Energy headquarters at 101 Ash St.
In July, Gloria recommended the city settle its litigation against the building’s owner and its lender and pay $86 million for the 19-story building, even though it cannot be safely occupied due to asbestos and other issues. Six council members voted to approve the purchase against the advice of the city attorney.
A spokesperson for Midway Village+, one of the other two finalists competing to redevelop the sports arena site, said San Diego officials did a poor job evaluating the bids and the companies behind them.
“The city is making a multibillion-dollar decision based on a rushed and incomplete process and without any community input,” spokesperson Tony Manolatos said.
Manolatos said the city misinterpreted the Surplus Land Act, placing too much weight on language that prioritizes the number of affordable-housing units to be developed and did not properly weigh experience and other qualifications.
“Many other important factors did not receive the consideration they should have,” he said. “Important questions were not asked or answered, and the community was never given an opportunity to weigh in.”
Rolland said that the city relied on Surplus Land Act rules in making the highest number of affordable housing units the top priority in deciding which development group to support.
“Staff ran a clean, transparent and legal NOA (notice of availability) process under the SLA (Surplus Land Act),” he said.
Termini, the youngest of three sons of prominent New York developer Rocco Termini, did not testify before the Land Use & Housing committee last week.
If city officials move forward with Midway Rising, the parties would then negotiate a long-term ground lease for the 48 acres that would return to the council for consideration next year or in 2024.