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California Agency Ruling Halts Planned $1 Billion Redevelopment of San Diego Sports Arena

State Officials Say City-Owner Surplus Properties Must First Be Offered Up for Affordable Housing

By Lou Hirsh

CoStar News

June 17, 2021 | 8:43 P.M.

The state has informed local officials that city-owned land around San Diego Sports Arena should have been offered first to affordable housing developers before commercial developers, halting plans for a $1 billion mixed-used redevelopment by Brookfield Properties.

The notification by the California Department of Housing and Community Development, based on changes made in 2019 to the state’s Surplus Land Act, essentially puts planning for a revitalization of the aging sports facility back on square one. It means the city must consider whether city-owned land in the Midway District can go toward boosting the region’s supply of critically needed affordable workforce housing before it can bring long-sought commercial amenities to the neighborhood.

“I am committed to work quickly to restart this process in compliance with the Surplus Land Act,” San Diego Mayor Todd Gloria said in a statement. “It is critical that we do not squander this once-in-a-generation opportunity to build a modern arena through a process that prioritizes the affordable housing our region desperately needs.”

Under the prior administration of Mayor Kevin Faulconer, the city last year chose Brookfield and arena operator ASM Global to redevelop the sports arena along with 48 acres of city-owned land surrounding the 55-year-old facility. The selection capped a proposal process that began in 2019, as Brookfield beat out a competing concept plan from a team led by developer Toll Brothers for a project spanning a total of 100 acres.

New York-based Brookfield has proposed building 2,100 mostly market-rate residential units, a hotel and more than 590,000 square feet of retail, office and other commercial space near the arena, along with 5 acres of parks and recreational elements. The arena itself would be renovated as part of a self-contained entertainment district making use of its parking lot and adjacent city-owned properties, currently consisting mostly of aging retail and industrial buildings.

In April, the city and Brookfield paused negotiations on ground-lease and other final arrangements for the project as San Diego officials sought clarification from the state regarding how new guidelines issued April 6 by the housing agency would impact final planning for what actually goes into the sports arena redevelopment.

The guidelines stemmed from state legislation passed in late 2019 amending California’s Surplus Land Act that require that government-owned properties placed up for lease, not just for sale, be made available first to affordable housing builders before being offered to other developers.

The state on Wednesday informed the city that it could face potential fines or other corrective measures if it proceeds with the sports arena project in its current form, and the city is complying by restarting the disposition and planning process for the city-owned arena and surrounding land.

Among other process changes to comply with surplus land rules, the state agency called on the city to record a covenant requiring at least 25% of the total number of new residential units built near the sports facility on city-owned land be deemed affordable to lower-income households under regional income guidelines.

Brookfield is not precluded from future involvement with Sports Arena planning and is monitoring the situation.

“Brookfield Properties has expended significant time and efforts in good faith on this opportunity, so this latest development is disappointing, but we are looking ahead to the next steps,” said Ted Lohman, the company’s vice president of mixed-use development, in an email to CoStar News.

Gloria said he plans to introduce a measure to San Diego City Council next month, calling for a restart of the Sports Arena planning process.

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