September 28, 2022
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Midway Rising’s affordable housing proposal makes it clear choice for sports arena site, city says

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The city of San Diego’s real estate department on Wednesday formally recommended Midway Rising as the winning contender for remaking the 48-acre sports arena site in the Midway District, citing the project’s commitment to a high number of affordable housing units.

The staff recommendation, along with a financial assessment performed by outside real estate consultant Jones Lange LaSalle, comes just two days after Mayor Todd Gloria announced that he, too, favors Midway Rising’s plan to
redevelop the city’s real estate holdings at 3220, 3240, 3250 and 3500 Sports Arena Blvd.

The project team’s plans to include 2,000 deed-restricted units at an average affordability of 48 percent of the area median income represent the highest number of affordable units among the three teams competing to develop the city-owned site. Its low-cost housing plans also position it favorably in light of California’s Surplus Land Act, which states that excess government-owned land be made available for affordable housing.

In addition to extensive analysis, city officials also made recent site visits to affordable housing projects and arena/stadium developments previously undertaken by each of the competing teams to assess their ability to execute the kind of major development being sought for the sports arena site.

“Following the city’s site visits, review of reference letters and receiving JLL’s analysis, it was clear that, while all of the teams were capable of delivering a project, Midway Rising would not only receive “first priority” under the SLA (Surplus Land Act), but would also be the best partner for the city,” the staff report concludes. “They demonstrated a clear and cohesive vision for the full site and stability throughout the process.”

Similarly, Jones Lang LaSalle highlighted the larger number and average size of the affordable units, as well as a financing strategy that “limits direct funding requests from the city and has provided a financial proforma model with key assumptions that generally align within the current market context.”

The city staff report was released in advance of two crucial meetings next month when elected leaders will make their pick for the next stage of reimagining the Midway district — a Sept. 8 session of the city’s Land Use and Housing Committee, followed on Sept. 13 with a meeting of the full council.

Midway Rising’s plan calls for a total of 4,250 residential units, a brand new 16,000-seat arena, a 200-room hotel and 20 acres of open space. The group is also proposing 250,000 square feet of commercial space concentrated in a central public plaza.

Its development team is comprised of market-rate housing developer Zephyr, sports-and-entertainment venue operator Legends and affordable-housing builder Chelsea Investment Corp.

The staff recommendation to move forward with Midway Rising drew quick criticism Wednesday from rival Midway Village +, which upped its number of proposed affordable units from 1,610 to 1,780 after the 90-day “good faith” negotiating period had ended. Spokesman Tony Manolatos noted that the development team, led by Toll Brothers Housing, is the only one offering for-sale affordable housing.

“It appears the city misinterpreted the state’s surplus land act and therefore it appears the city attached too much importance to one factor,” he added. “Because of this, many other important factors did not receive the consideration they should have, important questions were not asked or answered, and the community was never given an opportunity to weigh in on the competing plans or the city’s process.”

City staff pointed out in their report that as an extra precaution, they reached out to the state housing department to gauge its reaction to recommending Midway Rising based on the team’s level of affordable housing. The department, the staff report said, was pleased with that decision and the city’s willingness to give “first priority” under the Surplus Land Act to the developer with the highest number of affordable dwellings.

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 $106,900, according to the state’s 2022 list of income limits for affordable housing units.

“City staff and JLL did an exceptional job navigating through volumes of data and responses and confirming with HCD that the Surplus Land Act was followed correctly given our commitment to providing the most amount of affordable housing of any team,” said Brad Termini, CEO of Zephyr Partners and Midway Rising principal.

Like Midway Village +, HomeTownSD from Monarch Group also sought to beef up the number of its affordable units. Several days ago, it notified the city that it would like to add at least 300 more affordably priced dwellings to its submitted total of 1,726, the city’s real estate department reported. HomeTownSD decided to do so after it became clear to the development group that affordable housing was a “singular priority” in the evaluation process, states the staff report.

The city concluded it would be unfair to all of the developers submitting proposals to begin allowing changes after the negotiating period had ended March 4, said Penny Maus, who runs San Diego’s real estate department.

Sara Kruer Jager, project lead for HomeTownSD, provided a statement in response to the staff recommendation.

“Trust. Integrity. Commitment. These are the values HomeTownSD brings to this process and that San Diegans deserve in the team that is chosen to develop their public land,” she said. “We look forward to “engaging in a robust conversation with the community and city officials in the weeks ahead about our track record, our proposal and most importantly our values.”

In addition to evaluating the affordable housing proposals and the wherewithal of the individual teams to develop a major arena, the city also took into consideration subsidies and financial assistance sought by the developers. Of the three contenders, Midway Rising, Maus said, was seeking the least amount of financial assistance.

The report notes that Midway Village + is asking that the city allow it to take a 50 percent share of arena event parking revenue, while HomeTown SD is proposing that the city own and maintain all the streets developed as part of its proposed project.



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