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San Diego chooses developer to redevelop sports arena site

Midway Rising will now work exclusively with the city on a final plan to develop the 48-acre site.

SAN DIEGO — A majority of city council members agreed to enter into exclusive negotiations with Mayor Todd Gloria's selection to redevelop 48 acres of city-owned land that is currently home to the San Diego Sports Arena.

The team behind the Midway Rising proposal, composed of lead developer, Zephyr Partners, affordable housing-building Chelsea Investments, and arena hospitality management group, Legends International, will move forward with one of the largest and most transformative developments in the city of San Diego. 

That plan includes building 4,000 apartments, 2,250 of them affordable, as well as thousands of square feet of retail space, a new sports arena, and 20 acres of open space. 

City council voted seven-to-one in favor, with councilmember Vivian Moreno out on maternity leave.

And while the majority voted in favor of entering into exclusive negotiations with Midway Rising, some councilmembers raised issues with the process.

District 7 councilmember Raul Campillo voted against entering into the negotiation agreement, citing questions about the arena developer as well as the lack of financial guarantees that Midway Rising offered.

CBS 8 reported on many of those concerns before last week's committee meeting. A look at the lead developer, Zephyr Partners, revealed a slew of lawsuits, including default judgments against him, an unreported federal tax lien, as well as questionable experience. 

CBS 8 also revealed some questions regarding the experience level of Legends International, the company selected to build the new sports arena. While a large and reputable arena and stadium management company, Legends has not built any arenas and was recently forced out of plans to build the Los Angeles Clippers' new arena. 

According to a report from city staff, that project broke down after the Clippers said they felt more comfortable going with the company CAA Icon - a member of another competing Midway team - to build their arena. 

"[The Clippers representative] described Legends as responsive and available, but also conveyed that the project manager had too much on his plate and needed additional resources..." reads a letter from the city's real estate director Penny Maus to city councilmembers.

In addition, as first reported by La Prensa, the Midway Rising group donated over $120,000 to then-candidate Todd Gloria's mayoral campaign, with lead developer Brad Termini and his company Zephyr Partners throwing in the vast majority, of $113,800. 

Several members of the public accused the city of jumping headfirst into a major real estate deal.

"There are significant deficiencies in the vetting process," said Andrea Guerrero, executive director of local nonprofit, Alliance San Diego. "There are numerous red flags in this deal. Alliance urges the council to send this back so we can make sure we avoid another 101 Ash Street."

Meanwhile, others such as representatives from Father Joe's Villages spoke in favor of the project and the need for more affordable housing apartments in San Diego.

Despite requests from some speakers, the majority of the city council moved the mayor's selection forward while ensuring the public that the process is still in its early stages and does not guarantee that Midway Rising will make it through to the final phase.

"I do not want to set a precedent where we establish a process where the best liar can win," said council president Sean Elo-Rivera. "That 2,000 affordable housing units to me is a floor that for me will not be moved."

Adding to those concerns, councilmember Monica Montgomery-Steppe requested that the Independent Budget Analyst be informed and present during negotiations.

The Mayor's Office and Midway Rising will begin to iron out the details, a process that could take as long as two years to do. 

In order for the development to take place, voters will need to approve raising the height limit from 30 feet and the city must defeat a lawsuit challenging its environmental review.

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