Bombshell Appraisal Puts Qualcomm Stadium Land at $110 Million

Land Use UNVEILING THE UNSEEN

Bombshell Appraisal Puts Qualcomm Stadium Land at $110 Million as Is

The SoccerCity Initiative, if successful, would require the investors in the project pay a "fair market value" for the land. This is that appraisal. Now all eyes turn to the developers to see if they still want the deal.

Mayor Kevin Faulconer may have just gotten the boost he needed to keep alive his push for a special election that could define his legacy.

The city’s real estate department sent city leaders on Tuesday the appraisal it commissioned of the city-owned land that a development group would need to acquire to build SoccerCity, a mixed-use project that includes a new MLS soccer stadium.

The land is worth $110 million, according to the appraisal, which was completed by a third party hired by the city. It includes not only the area under and around Qualcomm Stadium, but the property and office space in Murphy Canyon — the former Chargers headquarters.

The SoccerCity initiative, if successful, would require investors in the project pay a “fair market value” for the land. The initiative says the mayor would determine the fair market value based on an independent appraisal.

That valuation is supposed to consider the challenges of redeveloping the land, which houses an old stadium. The land is uneven and subject to flooding.

This is that independent appraisal. It considers things like the cost of demolishing Qualcomm Stadium ($11.5 million) and what a normal developer would likely have to pay to get it permitted ($8 million).

If this is indeed the mayor’s determination of fair market value the investors would have to pay, all eyes would turn to the SoccerCity team to see if they still want the deal. If the land is worth $110 million, it would have to be adjusted to SoccerCity’s actual plan, which is to buy 79 acres and lease the rest. A long-term lease at that valuation could be even more expensive.

In a letter last month to the mayor, FS Investors pledged to pay 10 percent of the fair market value every year for the land it leases.

If the investors stay the course, it could be a game-changer for the politics of the situation. For a City Council staring next year at yet another projected deficit, that could be too much money to brush off.

The appraiser, David F. Davis, wrote this to define what he and his team meant by market value of the property: “The most probable price that the portion being disposed of should bring in a competitive and open market under all conditions requisite to a fair sale, the willing buyer and willing seller each acting prudently and knowledgeably, and assuming that the price is not affected by coercion or undue stimulus.”

The valuation could scare off the developers and it could factor heavily into other future proposals for the site, including San Diego State University’s longtime desire to take over the land. It is the first formal appraisal of the land — at least the first released publicly — despite years of discussion about what to do with it while the Chargers negotiated with the city.

FS Investors, the group that put together the plan and collected the needed signatures to get it on the ballot, has said the issue must be decided in a special election this year. If not, the investors say they will miss their chance to get a team in Major League Soccer, the organization that is considering an expansion of two teams.

The City Council voted Monday not to spend $5 million for a November election, where voters could weigh in on the two biggest initiatives of the mayor’s administration: a plan to raise hotel taxes to expand the Convention Center and fund homelessness and infrastructure needs, and the SoccerCity plan to redevelop the Qualcomm Stadium site.

Democrats on the Council pushed a vote to 2018 and allocated the money for other things. In the end it didn’t matter: Thanks to authority few in City Hall knew he had, Faulconer can find the money he wants anyway so long as six City Council members don’t veto his changes.

The mayor can fund the election, but he still needs five Council votes to schedule it. The Council’s Democratic majority has already said it won’t comply.

The appraisal, however, may change minds. City Council President Myrtle Cole was one of four members of the body to publicly offer the Chargers a lease for the whole land for only $1. The framing of this sort of deal with the Chargers has been on the city’s radar since a stadium task force proposed it in 2003: Give the Chargers land and let them build around a new stadium to subsidize the project.

But the appraisal changes the calculus in favor of the city.

If that is indeed the price developers would have to pay for the land, it disarms one of the biggest criticisms of SoccerCity. The initiative’s language had previously left open the possibility that FS Investors could pay as little as $10,000 for the land. The appraisal seems to clarify the city will get real money for a real asset.

It wouldn’t be unprecedented for the city to subtract the costs of public improvements FS Investors makes to the property from annual lease payments. That’s what the city does for the operators of Belmont Park, for instance, where repairs made to the aging beachfront property are deducted out of annual lease payments through subsidies referred to as “rent credits.”

Late Monday, Cole issued an unambiguous statement: She won’t be changing her vote on budgeting money for a special election. All five Democrats on the Council were similarly clear: Voting on SoccerCity and the mayor’s hotel tax hike for a Convention Center could wait until 2018.

And they still may not budge. Their comments in support of Measure L, a voter-approved measure that defers initiatives to general elections, didn’t include caveats for potential windfalls from land sales. They’d have to backtrack in just a few weeks, and potentially abandon a progressive coalition standing behind them.

But for the mayor’s funding gambit to matter at all, something material in the deal needed to change. There needed to be something a Council member could point to as explanation for a change of heart. The city’s land appraisal may be that thing.

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