San Diego ready to solicit interest in sports arena property in Midway District

The city of San Diego will alert a state-vetted list of affordable-housing builders — and the larger development community — that it intends to lease out the 48 acres it owns near Pechanga Arena in the Midway District for redevelopment.

The act, expected to occur within the next two weeks, will officially restart the city’s effort to remake the area — this time prioritizing teams that commit to reserving a substantial number of future housing units for lower-income families.

City Council members voted unanimously Sept. 21 to declare the site “surplus land,” meaning it is not needed for the city’s use. The resolution replaces the body’s Aug. 3 declaration that improperly stipulated that future development must include renovation or replacement of the existing sports arena. The new pronouncement does not include the condition, as California’s Department of Housing and Community Development, or HCD, advised the city that conditions cannot be imposed on surplus land.

However, San Diego can still impose the sports arena requirement in the documents distributed to the state’s interest list, said Penny Maus, the city’s director of real estate and airport management.

“HCD did agree that the development condition that the city proposed to preserve the existing regional entertainment venue use is reasonable,” Maus told The San Diego Union-Tribune. “So we worked [with HCD], cleaned up the item and now the resolution was approved.”

The cleaned-up item is part of San Diego’s careful effort to strictly follow the state’s new rule book for excess government-owned land, as required by the Surplus Land Act, after the city previously ran afoul of requirements.

“Since we received HCD’s feedback on the process, under this administration we’ve been working very collaboratively and closely with their staff. We’re both committed to the same outcome in the end, which is ultimately providing more affordable housing in the region,” Maus said.

In February 2020, the city first sought developer interest in revamping the Midway District site, which is north of San Diego International Airport, south of Mission Bay and bounded by Kurtz Street on the north and Sports Arena Boulevard on the south.

The property includes Pechanga Arena, the longtime home of the American Hockey League’s San Diego Gulls and the Major Arena Soccer League’s San Diego Sockers. The 16,000-seat venue opened in 1966. It hosted about 145 sports and entertainment events per year before the COVID-19 pandemic.

San Diego originally picked Brookfield Properties to redo the site. The developer’s plan included an all-new sports arena, housing, parks and retail, but no formal commitment to subsidized units. However, that redevelopment effort was scrapped in June after HCD said the city should have first offered the site to affordable-housing builders.

Now the city will distribute a “notice of availability” to a list of affordable-housing developers that are registered with the state. The notice will spell out that interested teams must respond with a plan that reserves at least 25 percent of proposed housing units for lower-income families. The notice also will be posted to the city’s real estate web page, making it more broadly available, although all responses must comply with Surplus Land Act guidelines and the development conditions in the notice of availability, Maus said.

Development teams will have 60 days to respond to the notice. The city is then required to engage with all interested parties in a 90-day “good faith” negotiation period. Per the state’s requirements, the evaluation process will favor teams that offer the greatest number of affordable units at the lowest average affordability level.

At least three groups are preparing to respond.

Brookfield has assembled a team that includes an affordable-housing partner and is working on a new plan.

Toll Bros., which also participated in the city’s previous solicitation process, is back with a rebranded vision that it plans to unveil at an event Oct. 17. The Toll Bros. group, now known as Midway Village+, has expanded to include affordable-housing developer Bridge Housing and arena developer-operator Oak View Group.

A group led by The ConAm Group, an apartment builder and property management company, also is in the mix.

Last week, each team gave a brief presentation at a Midway-Pacific Highway Community Planning Group meeting, according to Dike Anyiwo, vice chairman of the group.

“I’m super optimistic now that we’re in compliance with state law,” he said. “As much as I’m frustrated by the delay, I’m a big affordable-housing advocate and I think the final product will be a better one by virtue of the Surplus Land Act.”

City staff will review any responsive proposals and present recommendations first to the City Council’s Land Use and Housing Committee and then to the full council, likely next spring, Maus said. The council may make additional recommendations, meaning the selection process could stretch into the summer and fall of next year, she said.

Alternatively, if no one responds to the notice or a deal cannot be reached after the negotiation window, the city can solicit interest through a more standard request-for-proposals process that has fewer restrictions.