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59.5 F
San Diego
Tuesday, May 21, 2024

$2.25B Plan for Qualcomm Site Proposes Entertainment District

An ambitious plan to remake Qualcomm Stadium into a sports entertainment district could transform what is now a money-draining facility into a profit center, said an analyst whose ideas were delivered last week to elected officials and decision makers.

“This proposal is meant to create a year-round destination in a place now draining the city’s funds,” said Jeff Rice, a financial analyst with CB Richard Ellis Inc. in San Diego.

In addition to a new football stadium at the 166-acre site in Mission Valley, the proposal calls for building a 20,000-seat indoor sports arena and convention center, plus three hotels, four garages; and a mix of office, retail and residential development for about $1.2 billion.

The price tag for the three-phase project that would take 15 to 20 years to build out is estimated at $2.25 billion.

Mark Fabiani, the San Diego Chargers’ point man for the team’s quest for a new stadium, met with Rice several times, and said he thinks it’s a wonderful plan , but not realistic given the city’s current fiscal and political situation.

“There’s a lot of it that makes a lot of sense, but we think it will founder,” said Fabiani last week to a meeting of 100 attending an Association for Corporate Growth gathering in Mission Valley. “Getting something of this size and magnitude done in the city of San Diego just is not possible.”

The Chargers abandoned negotiations with the city more than a year ago to pursue three sites in the county. National City dropped out of the mix earlier this year, but the team has narrowed the search to two sites in Chula Vista and one in Oceanside.

No Development Partner

Fabiani has said the team gave up on San Diego because it couldn’t attract a development partner, plus the city’s ongoing fiscal crisis and opposition from City Attorney Michael Aguirre.

While Fabiani said the Chargers have a good relationship with Mayor Jerry Sanders, “he’s openly indifferent” to the team’s future plans.

Rice, who said he spent more than 1,000 hours of his own time developing the detailed proposal, is well aware of the bad blood that exists between parties, yet thinks there is hope an agreement can be hammered out to keep the Chargers in San Diego.

“Mr. Aguirre has shown he can litigate, but can he negotiate?” Rice said. “Part of being an attorney is putting together an agreement, not just filing lawsuits.”

Bill Harris, deputy press secretary to the mayor, said Sanders has not had a chance to evaluate the latest stadium plan.

Sanders is not indifferent to the Chargers, but has said that finding a new stadium is not a priority at this time, Harris said.

The city’s blas & #233; attitude toward the Chargers troubles Rice, who said he was motivated to come up with a solution because San Diego State University, his alma mater, would benefit from a new football stadium.

“At some point this is going to be a crisis, and that will be as soon as (the Chargers) move to Anaheim,” he said.

At least one county official, Supervisor Ron Roberts, has been supportive of the plan, but he’s deferring to the city of San Diego for now, Rice said.

While the CB Richard Ellis plan is similar to one proposed by the Chargers in 2003, it differs in several key areas:

– Arena: The plan calls for building an arena and convention center from the shell of the existing stadium. The Chargers’ plan called for razing the stadium after a new one is constructed. The new plan contains a possible parcel within the Qualcomm site for a new sports arena.

– Financing structure: The CB Richard Ellis plan keeps the property in city hands, with the city leasing it to a master developer. In exchange for paying all costs for the stadium and infrastructure, the Chargers were asking the city to donate 66 acres to build residential and commercial development.

– Type of development: The CB Richard Ellis plan calls for building far more commercial space, 2 million square feet of office, 800,000 square feet of retail and 1,000 hotel rooms. The plan also includes construction of 1,500 to 2,000 condos compared with the 6,000 condos and hotel in the Chargers’ plan. The first phase calls for the construction of an entertainment retail center similar to what exists in New York’s Times Square, the Universal City Walk, or Westgate in downtown Phoenix, Rice said. The center would include a movie complex, outdoor stage, sports bar, family-oriented arcade and bowling alley. It would also include restaurants, retail and some office space. The idea would be to create a site that would attract visitors year-round.

While San Diego has been unable to keep a professional basketball team, Rice said the new arena doesn’t depend on a new franchise. Instead, the city would benefit from having a larger venue to attract more popular performers.

The venue would also host such events as hockey and ice shows, as well as motor sports. It would replace the 40-year-old Sports Arena in the Midway district, and free up that city-owned parcel for development, Rice said.

As for financing, the Ellis plan calls for the issuance of $172 million in public debt , $100 million from the city; $50 million from the county; and $22 million in transportation bonds from the San Diego Association of Governments, a regional planning agency.

Total private equity investment for the project is estimated at $225 million, which includes $92.5 million from the Chargers and their parent company, Stockton-based A.G. Spanos Cos.

The CB Richard Ellis plan calls for the construction of a $600 million stadium, $200 million below the Chargers’ current estimate. Rice said much depends on the design. Indianapolis is building a stadium with a retractable roof for $620 million.

The Ellis plan also calls upon Charger fans to shoulder a share of the stadium cost by instituting seat licensing to generate $200 million in cash. The Chargers proposed seat licensing in the mid-1990s, but the city rejected the proposal in favor of a so-called “ticket guarantee.”

The 1997 guarantee, expunged from the latest contract, called for the city to pay for shortfalls beyond a minimum of 60,000 seats sold for each home game. The concept resulted in the city paying the Chargers $34 million during the seven seasons it was in the contract.

The key to the financing part of the CB Richard Ellis deal is creating a master developer to sublease 20 separate parcels for specific projects, such as the hotel or retail center. The rents from the commercial and residential developments would pay for the costs of the infrastructure, such as the garages, as well as part of the stadium and the indoor center, Rice said.

The city and county would use taxes collected from the new properties (this assumes the area qualifies as a redevelopment zone) to pay off the public bonds that would be issued for the project.

The current Qualcomm site is a money loser, costing the city $8 million annually, and will continue to lose money as long as the current arrangement exists, said Rice.

By adopting the CB Richard Ellis financing structure, the city could pay off or refinance the remaining $57 million in bonds issued in 1997 to improve the stadium. Rice said the plan would result in a projected annual $7.9 million in net revenue and cost savings, compared with a total loss of $140 million under the lease that expires in 2020.


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