COUNCIL REDUCES MIDWAY BIDDERS TO THREE
Unanimous vote selects HomeTownSD, Midway Village+, Midway Rising
San Diego will move forward with three of the five teams in the running to lease and remake the city’s 48-acre sports arena site in the Midway District.
On Monday, City Council members voted unanimously in favor of continuing negotiations with development teams Midway Rising, HomeTownSD and Midway Village+, as recommended by the mayor and the city’s real estate department.
The decision, which departs from an April vote by the city’s Land Use and Housing Committee, appeared to be primarily based on guidance from California’s Department of Housing and Community Development. The state agency requires the city to prioritize teams with the greatest number of residential units reserved for low-income families, as defined by the recently amended Surplus Land Act.
“It seems clear to me that we want to make sure to avoid the missteps of the past,” said Council President Sean Elo-Rivera.
“The prioritization put forward is aligned with what (HCD’s) expectations are. Any member of the public, or even a member of the council, may take exception to whether or not those are the right priorities, but these are the priorities that HCD has told us that we have to consider,” he said. “Any deviation from the process that
they’ve laid out leads us into very, very murky waters.”
With the vote, San Diego will soon begin a deep dive into team financials and project feasibilities, as well as review each developer’s track record. Penny Maus, who heads the city’s real estate department and is leading negotiations, said she expects to bring a recommendation for selection to the council before the end of the year.
“I want to thank the City Council for unanimously supporting our recommendation to initiate the next phase of negotiations with these bidders,” San Diego Mayor Todd Gloria said in a statement. “We are now a step closer to realizing a revitalized Midway District that all of us can be proud of.”
At stake is the city-owned real estate at 3220, 3240, 3250 and 3500 Sports Arena Blvd., which has been on and off the market since February 2020. In its second attempt to offload the site, the city’s real estate department is following the Surplus Land Act by the book.
The purpose of the Surplus Land Act is to provide affordable housing in all areas of the state, David Zisser, who oversees HCD’s housing accountability unit, told council members during Monday’s meeting. The statute was amended in 2019 to ensure that surplus, local agency land was first made available to affordable housing builders.
“The Surplus Land Act gives local agencies some discretion (in selecting a development team), as long as certain requirements are being met,” Zisser said. “It is important that the city engage in good-faith negotiations and truly prioritize according to the statute.”
The state defines affordable housing as units reserved for families making 80 percent of the area median income. The median income for a family of four in San Diego is now $106,900, according to the state’s 2022 list of income limits for affordable housing units.
Currently, the Midway Rising proposal from Encinitas-based Zephyr Partners includes the most affordable units offered to the lowest income levels — or 2,000 deedrestricted units with an average affordability of 40 percent of the area median income.
Zephyr Partners is teamed with sports-and-entertainment venue operator Legends and affordable housing builder Chelsea Investment Corp. on a plan that calls for a total of 4,250 residential units, a new 16,000-seat arena and 20 acres of open space. The project also includes a 200-room hotel and 250,000 square feet of commercial space concentrated in a central public plaza.
“Assuming that nothing changes, I think we heard today that the Surplus Land Act is very specific about one thing and that is giving priority to the team with the highest number of affordable units,” Maus told The San Diego Union-Tribune. “And, at this time, that is Midway Rising.”
HomeTownSD from Monarch Group and Midway Village+ from Toll Brothers Housing — with 1,726 and 1,610 affordable units, respectively — were also included in the short list so that the city can have options as it performs due diligence on the teams.
The City Council’s decision to approve the short list came despite objections from community members, some union leaders, and representatives from the two teams that did not make the cut. Public speakers, including Kobey’s Swap Meet Vice President Chuck Pretto, argued that it is premature to cut any teams, especially without understanding how the projects will be financed.
“I have mixed feelings. It’s not the outcome we came here asking for. But I would say, based on what we learned from HCD ... I have a lot more confidence in the overall process,” said Dike Anyiwo, who chairs the Midway-Pacific Highway Community Planning Group. “We do eventually have to get down to one group, and this is the process and mechanism by which we get there.”
With the decision, ConAm Group’s Neighborhood Next proposal and Brookfield Properties’ Discover Midway bid have essentially been eliminated from the competition.
Neighborhood Next, which proposed the highest total number of residential units and the thirdhighest number of affordable units, was not recommended for the short list because the group did not have an arena operator on its team.
“Our proposal with Neighborhood Next is to help San Diego reach its true potential. We are committed to enhancing San Diegans’ quality of life and sharing it more equitably,” said Zach Adams, who is senior vice president of development with The ConAm Group. “That will continue to be our goal, in everything we do going forward.”
Discover Midway ranked last in terms of affordable housing, proposing the fewest units at the highest rates. The group’s plan called for 1,035 affordable units with an average affordability of 56 percent of the area median income.
“While we are disappointed in the outcome of today’s City Council hearing, our commitment to San Diego is unwavering,” said Jessica Jones, who is a senior director at Brookfield Properties and is based in San Diego. “We are grateful for the community relationships formed during this process and look forward to partnering on future opportunities in the region.”
The city can revisit the discarded proposals if the other three are deemed infeasible.
Next up, San Diego expects to hire outside real estate consultant Jones Lang LaSalle to help vet the shortlisted development teams. The City Council will consider the contract in the coming weeks.