San Diego picks team with worldwide experience creating entertainment districts for arena project

hafiz caem

San Diego’s efforts to create a massive entertainment district on the city’s 48-acre sports arena site will be led by a development team with experience creating similar districts in places like Los Angeles, London and Berlin.

Mayor Kevin Faulconer announced his selection of the development team Saturday, saying the city’s goal is to have the entertainment district include a completely new arena that would replace the 54-year-old Pechanga Arena.

“The vision for this property is for a world-class arena, park space and amenities,” the mayor said. “A new arena has always been a priority of mine, and it’s the right time.”

The district will also include thousands of housing units in high-rise buildings to help pay for the amenities. The developer initially proposed building 2,100 units, but city officials said that number may need to increase to help pay for a new arena.

Faulconer chose a development team led by Brookfield Properties, which specializes in mixed-use districts, and ASM Global, which runs L.A. Live, The O2 in London, Mercedes-Benz Arena in Berlin and Pechanga Arena.

Faulconer said ASM Global’s many years running San Diego’s arena gives the team crucial local knowledge that was appealing to the selection panel. Despite its age, the arena was hosting about 150 events per year before the COVID-19 pandemic.

The team was chosen over one other finalist in the process, a development team led by Toll Brothers Housing. That team proposed more public amenities than Brookfield, including an amphitheater, a soccer stadium and a large public park.

The city gathered public feedback on both proposals for 10 days in July. While the results of that feedback haven’t been released, Faulconer said it was clear the public wants park space on the site and a completely new arena.

The city’s selection panel faced a tough choice between two appealing and comprehensive proposals, but the Brookfield team ultimately won out because of its experience with entertainment districts and its financial wherewithal, said Erik Caldwell, one of Faulconer’s top aides.

“A key factor was their ability to finance and execute a project of this size,” said Caldwell, a deputy chief operating officer who led the city’s selection panel.

ASM Global operates 325 venues around the world, including 115 arenas. Many of those venues were built by public-private partnerships similar to the deal San Diego will now begin negotiating with Brookfield and ASM Global.

Faulconer said negotiations will begin soon and continue into early next year. He predicted that a formal deal will be presented to the City Council for approval during the first quarter of 2021.

A key factor in the process will be a November ballot measure that could lift the city’s 30-foot coastal height limit in a targeted area surrounding the arena that is known as the Midway District.

If the proposition, which will appear on the ballot as Measure E, gets support from a simple majority of city voters, it will allow more intense development on the site and give the city and Brookfield more flexibility.

The negotiations will span two mayoral administrations, because Faulconer is termed out and will be replaced in December by either Barbara Bry or Todd Gloria.

While a shift in leadership could be a challenge for the negotiations, Caldwell said he does not expect any hiccups.

“Negotiations will be centered on their response to our request for proposals, and legally they can’t really drift away from that,” he said. “It’s really just going to be fine tuning.”

While Brookfield’s initial proposal included a scenario where the city’s sports arena would be completely rebuilt, the proposal didn’t specify a proposed square footage, cost or a method of paying for a new arena.

The rival development team led by Toll Brothers estimated this month that a new arena would cost between $300 million and $600 million, with the higher number necessary only if the city wants an arena large enough to attract a franchise from the National Basketball Association or the National Hockey League.

Brookfield’s initial proposal included 5 acres of public parks, 2,100 housing units and 590,000 square feet of retail space — a total of 2.3 million square feet of development. The proposal didn’t include office buildings, a hotel or additional entertainment venues beyond the sports arena.

Brookfield officials estimate that development could generate approximately 3,200 jobs and an annual economic impact of more $300 million.

Leaders of the development team said they were grateful to Faulconer and the city for the opportunity.

“Brookfield Properties and ASM Global appreciate the city’s confidence in our team and vision for the iconic sports arena site,” said Zach Adams, a Brookfield vice president of development. “We are excited about leading a collaborative conversation with the community, and we plan to form a community advisory panel to help shape the project and provide ongoing input to our team.”

Chuck Steedman, executive vice president of strategy and business development for ASM Global, said the team is focused on including a completely new arena in its plan.

“The future of the sports arena site is bright, as we are committed to creating a world-class destination by delivering an exceptional mixed-use development and working towards a collective goal of building a new sports arena,” he said.

Caldwell, the leader of the city’s selection panel, said another strength of Brookfield’s proposal was that it allowed for a scenario where voters reject Measure E, requiring a less ambitious redevelopment of the sports arena site.

The Brookfield team said they plan to help support the campaign promoting Measure E, but they declined to specify how large a financial contribution they plan to make toward the effort.

City officials have long touted the 48-acre arena site as an ideal location for a thriving entertainment district with dense housing projects. It is located between Mission Bay, the airport, Old Town and San Diego’s beach communities.

The City Council approved a new development blueprint for the Midway District in 2018 that envisions a significant increase in housing units and breaking up the area’s “megablocks” to create a more cohesive community.

Faulconer said he is eager to begin the negotiating process.

“We had two very good proposals, and now I’m excited to have a selection,” he said.

The mayor said the public should be confident the negotiations will be handled well by the city because they are following a new model created in the wake of the city’s notorious purchase of a large downtown office building on Ash Street.

The Ash Street building has required millions more in renovations than anticipated by city officials, who have been criticized for not consulting with real estate experts before buying the building.

For the arena project, the city hired real estate investment experts Jones, Lang and Lasalle to help with the negotiations. The firm has helped San Diego negotiate its recent deal with SDSU West for the city’s Mission Valley stadium property.

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