REAL ESTATE NEWS

San Diego’s Economic Development Department has pulled out of talks with Carlsbad, CA-based Chelsea Investment Corp. to redevelop a city-owned block at Seventh Avenue and Market Street into a 100% affordable multifamily campus.

Economic Development Director Christina Bibler notified Chelsea in a letter last month of the city’s decision to terminate all negotiations with the developer on the project, which was announced last May and envisioned 402 units of low-income housing on the East Village site.

Bibler characterized the decision to pull out of the project as “a mutual agreement” that the project as conceived would not be financially possible, the San Diego Union-Tribune reported.

Among the reasons cited for the project’s collapse were a “scarcity of funding for multifamily affordable housing” and the city’s payment terms for the parcel, which at one time was valued at $20M.

Rachel Laing, a spokesperson for Mayor Todd Gloria, told the newspaper last week that the parcel at Seventh and Market is too valuable an asset to make any concessions on price.

“It wasn’t contentious,” Laing said. “We demanded fair market value for the land, and that wasn’t going to happen under current conditions. They said they wouldn’t be able to make it pencil out, and we’re not in a position to be giving land away.”

“There’s just not enough money out there in today’s cycle to bring together enough of the sources we would use to generate what the city needs for the site,” Charles Schmid, Chelsea’s CEO, said in a statement. “It’s unfortunate but it’s the hand we’ve all been dealt right now.”

Facing projected budget deficits of nearly $1.5B over the next five years, San Diego now has scrapped two redevelopment projects it had planned for city-owned tracts downtown.

Last month, the city ditched an ambitious plan to redo its aging downtown Civic Center complex. The plan, proposed by Mayor Gloria in 2022, envisioned selling or leasing the four-block city-owned complex, including the City Administration Building, the Civic Center Plaza Office tower and Golden Hall, the 3,000-seat Civic Theatre.

Proceeds from the sale or leasing of the Civic Center real estate had been earmarked to fund the construction or purchase of a new City Hall to replace the Administration Building, which was built in 1965.

After canceling the Civic Center redo, the city said it will renegotiate or terminate office leases elsewhere downtown and move more of its downtown workforce back into the Civic Center.

In May, the city entered into exclusive negotiations with Chelsea. The developer pledged to reserve all 402 units of the proposed apartment complex for households earning from 30% to 80% of the area median income in San Diego County.

The collapse of the project with Chelsea is the second time the city’s plans for the Seventh and Market parcel have failed to materialize. In 2022, the city terminated a longstanding deal with San Diego-based developer Cisterra to build offices, housing, a gourmet grocer and a Ritz-Carlton hotel on the site.

Source: GlobeSt/ALM