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The Emerging Development Plan Surrounding San Diego Sports Arena

New Housing, Dining, Entertainment Sought Near Latest Venue as American Cities Seek Revenue

Photo Via: Arena Digest

Entertainment giant AEG Management and the owners of the American Hockey League's San Diego Gulls team are taking a shot at creating the latest game plan for sparking real estate development around a U.S. sports stadium, a strategy that may get adopted by cities around the country seeking an economic boost from sports venues.

AEG and team owner H&S Ventures are among the firms fighting to control the aging San Diego Sports Arena, a venue that could become ground zero in transforming the entire neighborhood surrounding the 53-year-old venue into a hub for new housing, workplaces, entertainment, dining and shopping and the latest twist on leveraging stadiums.

Each company has submitted management proposals for the arena to the city, which is seeking them in relation to a master plan approved last year to revitalize the Midway District and neighboring Old Town in the heart of the city and to potentially reinvent the aging, 14,500-seat arena that sits on 32 acres at 3500 Sports Arena Blvd. in a way that could help grow an entertainment district.

The city owns the arena and about 100 acres surrounding it, and has been letting commercial leases lapse at some of the aging strip malls and other nearby properties in hopes of being able to attract new development or tenants that help it realize its vision.

"It’s a huge parcel and it’s going to have a big impact on what gets built around that area," said Kyle Clark, senior director in the San Diego office of brokerage firm Intersection Commercial Real Estate, who has tracked trends in the Midway District for several years. "It’s probably going to be a mixed-use village concept, with some additional streets put in."

The potential redevelopment of and around the stadium is the centerpiece of city planners' broader community plan covering 800 acres that could more than double the area's housing and add ample parks and more pedestrian- and bike-friendly support systems in the area just six miles north of bustling downtown. If it's successful in its plans with the arena and surrounding land, San Diego would join a growing list of cities that have leveraged public investments in crowd-drawing sports venues to spur privately financed projects that bring in year-round economic benefits in the form of enhanced consumer spending and resulting tax revenues.

From Atlanta to Green Bay, Wisconsin, and Los Angeles, sports team owners have been thinking like mixed-use developers to bring in adjacent elements like housing, restaurants, hotels and other entertainment centers. These ancillary tenants and partners help teams pay for venues, at a time when taxpayer support for stadium and arena projects has been waning, while providing steady streams of year-round income.

In the process, San Diego is aiming to boost its stock of affordable, sustainable workforce housing – in response to a statewide housing crisis – without creating new congestion headaches in a freeway-adjacent enclave notorious for traffic jams.

Management Decisions

First on government leaders’ agenda is deciding who manages the city-owned sports arena, after the current contract with Los Angeles-based operator AEG Management expires in 2020. The city earlier this year put out a request for proposals for the next operator and accepted applications through May 23, and AEG is looking to stay on.

The city has not released the number or names of candidate firms submitting proposals, but they are known – based on company filings and media reports – to include AEG, which has operated the San Diego facility since 2008, and Orange County-based H&S Ventures, owner of the San Diego Gulls team, which plays at the San Diego arena.

H&S Ventures also owns the National Hockey League’s Anaheim Ducks, and an H&S division operates the Honda Center, where the Ducks play. H&S has recently been in talks with Anaheim officials to convert underutilized property near that city-owned arena into an entertainment district.

AEG, known formally as Anschutz Entertainment Group, has spearheaded several U.S. developments centered around sports and entertainment venues, notably the mixed-use L.A. Live in downtown Los Angeles, which includes Staples Center, home to the National Basketball Association’s Lakers and Clippers, along with retail, hotels, apartments and other elements.

A spokesman for AEG said company officials would not be commenting until the current San Diego proposal and selection process is completed, and H&S officials did not respond to requests for comment.

San Diego city staff expects to review arena operator proposals over the next few weeks and will make a recommendation to the local city council. City leaders have said the selected firm eventually will be expected to contribute to the vision for what comes next in the neighborhood, which has several older strip retail centers and other elements that have aged along with the arena during the past half-century.

"It’s not a matter of whether this area is going to be redeveloped, but when, and what is going to come in there," said Cathy Kenton, who chairs the city’s Midway Planning Group, which advises the city on development matters in the neighborhood located about six miles northwest of downtown San Diego.

Kenton said many long-term options are on the table when it comes to the future of the arena itself. Those include a partial renovation, a complete replacement, or simply the relocation of parking into new structures as the arena’s large asphalt parking lot is put to better use with new residential or commercial offerings.

The Sports Arena opened in 1966 and has seen several renovations over the years. Arian Collins, a spokesman for the city of San Diego, said the city plans to put out a long-term request for development proposals for the Sports Arena site next year. AEG recently announced a naming rights deal with the Pechanga Resort Casino in nearby Temecula, which will change the venue's name to Pechanga Arena San Diego.

The San Diego arena has plenty of existing business that could help draw new commercial activity to the neighborhood.

Concerts, Games, Events

According to AEG, it is host to 125 events annually, with a total of 750,000 visitors. In addition to hockey’s Gulls, it is home to the Major Arena Soccer League’s San Diego Sockers, the National Lacrosse League’s San Diego Seals, and the Indoor Football League’s San Diego Strike Force. It also hosts live concerts and popular regular weekend community events like Kobey's Swap Meet.

What gets built on and around the arena site will be based on a community plan update of the Midway District and next-door Old Town, a popular tourist neighborhood with historic buildings, which was approved last fall by the city council – about 30 years after the plan’s last significant revision.

The update raises potential housing capacity in that area from about 5,000 to nearly 12,000 units. The city also plans to add 30 acres of new parks and other infrastructure in coming years, with extensive traffic improvements planned at 20 intersections and several other road segments. The city’s goal is to make the neighborhood more pedestrian and bike friendly while minimizing vehicle trips, and adding denser multifamily housing options that can be offered at affordable prices to working households.

To prepare for upcoming new development, the city is letting lapse several commercial leases for tenants in city-owned buildings spanning nearly 100 acres around the arena, some of which expire in 2020 for retail tenants including Dixieline Lumber and the Salvation Army. Those and other tenants may need to seek temporary extensions or make other location arrangements as plans move forward in coming years, as they decide how they fit into the revised neighborhood.

Less than two miles from the Sports Arena, two other mixed-use projects in the works could also have a significant impact on the neighborhood. Developer Hammer Ventures is expected to begin construction later this year on a mixed-use redevelopment of a former Midway post office, slated to include office and retail elements.

In the same area, the U.S. Navy has recently been in talks with Midway and other city planners, and is in the process of seeking developer proposals to add office and other commercial elements to a large portion of its 42-acre technology research complex adjacent to Old Town. Also, Collins said the city is working with regional planners and the Navy on a proposed airport connection concept that could include the same Navy property, addressing a longtime city quest to boost local transit access to the nearby San Diego International Airport.

Clark said the Midway District changes around the sports arena will probably take 10 to 15 years to fully play out, but the neighborhood has the elements falling into place to eventually emulate what’s evolved in multiple cities, where sports venues have become the focal point for much larger mixed-use developments with full-year impacts well beyond game times.

In an October 2018 national report, brokerage firm Jones Lang LaSalle noted that many sports teams are migrating into the urban cores of cities, following consumers who also prefer those settings to live, work and play. Some teams have built new facilities, while others have renovated or expanded existing venues to meld with their surrounding communities.

Teams successfully pulling off mixed-use stadium projects have included the National Football League’s Green Bay Packers, and Major League Baseball’s Atlanta Braves. Baseball's Los Angeles Angels of Anaheim have recently been in talks with that city about commercial redevelopment of land near Angel Stadium, as that Southern California city looks to keep the team in town.

Article By: Lou Hirsh, CoStar | June 2019

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