Sports Arena redevelopment group Midway Rising scraps middle-income housing and hotel

Midway Rising, the group that was selected to redevelop the 48-acre Sports Arena site in the Midway District, says the project will no longer include 250 residential units that had been planned for middle-income housing, or a 200-room hotel.

The subtractions were revealed at a San Diego City Council meeting Monday. 

The original plan included a new 16,000-seat arena, 25,000 square feet of commercial space, 20 acres of plazas and parks, a 200-room hotel, and 4,250 residential units. Around 2,000 of those units are set aside for low-income affordable housing, or families who make 80% or less of the area's median income. Those units are required because of California's Surplus Land Act, but the group had also said they would dedicate 250 units for middle-income housing, which would be for families who make anywhere from 80% to 120% of the area median income. Now the group is saying those 250 units are no longer financially feasible.

"With the middle-income housing, there are statewide programs that are incentives that offer subsidies, so to say, to developers to incentivize different types of housing and right now, some of those housing sources just aren't available due to the economic market," said Penny Maus, director of the city of San Diego's real estate and airport management. "For the team to pursue that, outside of those economic incentives, with interest rates being as high as they are right now, just wasn't something that's feasible."

But several San Diego City Councilmembers expressed anger and disappointment about this new development. 

"It's [Midway Rising] going to build the units, but they're not going to be middle income, so they're now going to be market or luxury suites and that's really just unacceptable because they've been telling us this whole time that regardless of the economic details they were going to live up to their promises," said San Diego City Councilmember Raul Campillo, who represents District 7.

In addition, Midway Rising has said that they can no longer build a 200-room hotel they had planned. This is because they discovered an 8-foot sewage line that was previously undisclosed underneath the ground they were planning on building the arena on. The city requires a 30-foot setback area from sewage lines to conduct maintenance and repairs, meaning it was no longer possible to build the arena where they were planning to. Now, Midway Rising will build the arena where they were planning on building the hotel leaving no more space to build the hotel and everything else the group had promised. 

"We also have an approved Midway Community plan in place, which requires a lot of things for the benefit of the residents of that area with open space, and to continue to pursue the hotel would have impacted the team's ability to deliver that open space and that was just a higher priority," said Maus.

"The loss of the hotel concerns me. Part of that is, it was going to be part of the entertainment district, along with the sports arena, that was going to draw tourists here in terms of TOT (transient occupancy tax) revenue, in terms of creating thousands of good jobs for hotel workers that are unionized hotel workers as well, it's sad to see that go," Campillo said.

NBC 7 reached out to the Zephyr Group, one of the three developers of the housing in the Midway Rising project, but did initially hear back. On Wednesday afternoon, however, we received the following statement from Shelby Jordan II, a project director at Legend's, one of other developers, who said he was speaking on behalf of the whole development team:

"Midway Rising is proud to be the largest affordable housing project in California state history. As is common with transformational projects like this one, site due diligence revealed a pre-existing site condition – in this case, an immovable 96” sewer line – that has reshaped aspects of our original proposal. We remain committed to delivering a world-class entertainment center along with more than 4,000 homes, of which 2,000 will be affordable for working San Diegans.”

Maus said the city's exclusive negotiating agreement with Midway Rising ends in December of 2024. After the environmental impact study is conducted, permits will be issued. Maus doesn't expect ground to break on the site until 2026. 

The final plans will still have to be approved by city council. Public meetings about the Midway Rising project and updates are held quarterly. You can check here to find out when the next one will be.