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City Council Advances Midway Rising to Redevelop Sports Arena Property

CITY WILL ENTER INTO EXCLUSIVE NEGOTIATING AGREEMENT WITH MAYOR’S RECOMMENDED PARTNER TO DELIVER AFFORDABLE HOUSING, ARENA AND PARK SPACE

FOR IMMEDIATE RELEASE
Tuesday, Sept. 13, 2022

CONTACT:
MayorPress@sandiego.gov
 

SAN DIEGO – The City Council today approved Mayor Todd Gloria’s recommendation to enter into exclusive negotiations with the Midway Rising team to redevelop of the 48.5-acre Sports Arena property and replace the aging arena and its massive parking lot with thousands of affordable homes, a world-class arena and community amenities like shops and public open space.  

“Today’s approval is a major step forward in our goal of revitalizing the Midway District with much-needed affordable homes along with a world-class entertainment venue and great amenities for the community,” Mayor Todd Gloria said. “The Midway Rising team has not only the most compelling vision for re-using the site, but also the experience and financial wherewithal to execute. I’m grateful to City staff for their diligence in managing this process and scrutinizing the proposals so that I and the City Council could feel confident moving into negotiations with this team.”

The selection process closely followed the Surplus Land Act, the state law that regulates how public agencies redeploy their underused land. Of the three finalists in the year-long bidding process, which launched last summer, Midway Rising offered the most affordable homes and also offered significant community benefits, including an sports and entertainment arena to replace the aging 1960s venue as well as more than 20 acres of parks and plazas.
 
About the Project:

The Midway Rising project proposes to create:

  • A total of 4,250 new homes (2,000 affordable, 250 middle-income, and 2,000 market rate);
  • A new 450,000 square foot arena with capacity for 14,500-16,500 people;
  • A 200-room hotel and 250,000 square feet of retail; and
  • More than 11 acres of park and open space along with a 9.4-acre public plaza.

The Midway Rising team is comprised of three key partners. Chelsea Investment Corporation, as the affordable housing partner, specializes in the creation and preservation of affordable housing. Chelsea has developed over 65 projects in San Diego County and more than 120 affordable communities throughout Southern California including: special needs housing, senior housing and mixed-use development at a cost of more than $3 billion.

Zephyr, as the market-rate housing partner, has experience with residential, mixed-use and hospitality development, which has resulted in more than $1 billion worth of mixed-use developments. Chelsea and Zephyr have experience partnering with each other on a series of housing redevelopment projects over the past 15 years.

Legends, as the arena partner, brings more than 13 years of experience specializing in sports and entertainment organizations and venues around the globe. Collectively, it has more than $30 billion in project development experience including new arena development. Legends was founded as a joint venture of the New York Yankees and Dallas Cowboys ownership teams and most recently the $60 billion investment company, Sixth Street Partners, has taken on a majority interest to expand its growth. Legends worked with AECOM to build the $5 billion SoFi Stadium in Los Angeles, which recently hosted the Super Bowl and will be the home of WWE Wrestlemania this year.

The Process:

In 2021, the City received notice from the California Department of Housing and Community Development (HCD) that a proposal by the previous mayoral administration to redevelop the Sports Arena was likely in violation of the Surplus Land Act (SLA). Mayor Gloria immediately restarted the redevelopment process in order to fully comply with state law. Over the past year, the City worked closely with HCD in issuing a Notice of Availability in compliance with the SLA, moving the five respondents through the statutory 90-day good faith negotiating period, and ultimately shortlisting the respondents down to three teams in May 2022.

Although the SLA requires the City to provide priority to the respondent proposing the highest number of affordable units, the City conducted due diligence on the shortlisted teams to ensure it was picking the right partner by engaging JLL, a world leader in real estate services, to analyze the financial submittals of the teams. JLL’s team included experts from its Public Institutions, Affordable Housing and Sports & Entertainment practices. JLL and the City issued a Request for Information in late June to solicit a detailed financial model from each team in order to determine the financial reasonableness of each proposer to deliver the proposed project. JLL and the City conducted a working session with each team and followed up with individual questions throughout the course of review.

In parallel with JLL’s performing a financial analysis, City staff asked each team to identify representative projects for them to visit. With the City’s focus under the NOA on affordable housing and redevelopment of the Sports Arena, each team identified an affordable housing and a stadium arena project they delivered or were in the process of delivering. During these visits, staff were able to see the quality of each project, meet with the teams, and address operational and structural questions.

“Visiting ‘The Star’ entertainment district in Frisco, Texas, gave us a glimpse into the future of the Midway District,” said Penny Maus, Director of Real Estate and Airport Management. “With Council’s approval and a confirmation from HCD that our process fully conforms with the SLA, we are eager to see this project evolve from concept to reality and deliver a wonderful new asset for San Diegans.”

As such, and before finalizing its recommendation, staff verified references for the primary partners of Midway Rising (Zephyr, Chelsea and Legends) that could demonstrate their ability to deliver a project successfully. HCD subsequently endorsed the City’s recommendation, sending a letter to that effect to City leaders prior to the City Council’s Sept. 8 Land Use and Housing Committee meeting.

Next Steps:

City staff, led by the Department of Real Estate and Airport Management, will enter into an exclusive negotiating agreement (ENA) with Midway Rising in the coming months to negotiate the precise uses as well as financial and other benefits to the City and its residents. As part of the ENA period, the development team will fund an extensive environmental review by the City, which then will be considered for approval, along with contracts, by the City Council. Staff will be providing updates to City Council quarterly to keep the public apprised as to the status of the project.

The Sports Arena redevelopment area encompasses approximately 48.5 acres in the Midway-Pacific Highway Community area. For more information on the Midway Rising project, visit midwayrising.info.

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