A month ago, speaking about candidates for the next round of expansion, Major League Soccer commissioner Don Garber said this: “Should the Chargers make the decision to not remain in San Diego, the market would be more attractive to us.”
Well, …
As Chargers chairman Dean Spanos was gassing up moving vans for the trip up Interstate 5, an investment group has quietly worked toward filling that void, literally and figuratively, in Mission Valley. People with knowledge of the plan, speaking on the condition of anonymity, say the group will submit an application for an MLS expansion franchise later this month with plans for a 30,000-seat venue on the Qualcomm Stadium site that would be shared by San Diego State football.
Things could move quickly. The group headed by La Jolla investor Mike Stone would generate a citizen’s initiative with hopes of receiving City Council approval by June. MLS has said it will choose two expansion cities in the third quarter of 2017 with the intention of them joining the league in 2020.
San Diego has been an expansion candidate several times before, going back to the league’s inception in 1996 when former Padres owner John Moores held regular talks with then-MLS commission Doug Logan and brought the 1999 All-Star Game to Qualcomm Stadium. Chivas USA considered San Diego in 2004 before becoming the second team in Los Angeles (sound familiar?) and folding a decade later.
“The Rams leaving St. Louis has certainly opened up an opportunity for us in that market that we had not seen in the years prior,” Garber said in December, when asked what has changed about San Diego. “We believe that because we’ve seen what happened in Seattle when the (NBA’s) Sonics left. In many ways, the (MLS’s) Sounders were able to fill a void in the professional sports landscape in that city.”
A public unveiling of the proposal is expected later this month, likely coinciding with the U.S. men’s national team game against Serbia at Qualcomm on Jan. 29. But several sources familiar with the details have shared the basics:
- The group would demolish Qualcomm and redevelop the 166 acres in Mission Valley with a mix of parkland, entertainment, restaurants, retail shops, office space, residential housing and a mid-sized stadium for soccer and college football.
- The stadium would occupy about 15 acres and cost $200 million, split with SDSU. The university eventually would assume ownership of the facility, which would then be leased back to the soccer club.
- The stadium would have 20,000 permanent seats for MLS and an additional 10,000 collapse-able seats at the top for football. The design would include provisions to add an upper deck to expand to 40,000 seats.
- MLS would be one component of a “Soccer City” complex that would capitalize on San Diego’s rich tradition in the sport, with international games and potential “rivalry” matches with the Tijuana Xolos of the Mexican league.
- The principal money man is Stone, the founder of FS Investors with offices on Prospect Avenue in La Jolla. His bio on the company’s website says “he has overseen or been involved with the completion of over 150 investments, cumulatively responsible for several billion dollars of equity capital deployment.”
- The investment group also includes Steve Altman, a former vice chairman at Qualcomm who was one of the major donors for SDSU’s JAM Center basketball practice facility (Altman is the “A” in JAM); and brothers Masood and Massih Tayebi. Padres owner Peter Seidler said last June he was part of the group but several sources close to him confirmed he is not currently involved.
Moores, the former Padres owner, also has been linked to a plan to redevelop the Qualcomm site as a university annex with a mid-sized stadium and possibly purchase an MLS team. An associate said he is no longer involved in either project.
SDSU officials declined comment Thursday, other than a brief appearance by President Elliot Hirshman at a news conference with Mayor Kevin Faulconer to discuss the Chargers departure.
“Looking forward,” Hirshman said, “I’m excited to work with Mayor Faulconer, our council members and our entire community to support Aztec football at a redevelopment of the Qualcomm site. While discussions about the site are still at a very early stage, we have an opportunity to create something very special as a community in San Diego. Let’s move forward together.”
Added Faulconer: “We’ll be looking at the economic impact of what we can do with Qualcomm, and having a place for the Aztecs to play for years to come.”
SDSU’s lease at Qualcomm Stadium runs through the 2018 season, although the city can terminate the agreement prematurely “if all or part of the stadium is taken through condemnation proceedings or under threat of condemnation by any public authority with the power of eminent domain.”
The stadium, according to a 2011 audit, operates at an annual loss between $10.6 million to $13.8 million to the city. Without it, though, SDSU football is essentially homeless. In its current configuration, Petco Park cannot fit a 120-yard football field, and the Petco lease, while it allows soccer and rugby, specifically prohibits football games.
SDSU’s $100 million contribution, sources said, would come from a combination of fundraising and bonds theoretically offset by the increased revenue streams of a new stadium. At Chargers-controlled Qualcomm, the Aztecs were low-level tenants with no sponsorship or premium seating income.
But that means some or all future football revenues in an already cash-strapped athletic department would go to repaying bonds, not balancing the budget. And even if the fundraising portion was as little as 25 or 50 percent, that still could pose challenges.
The university’s largest capital project for athletics was the $15.8 million basketball practice facility, which tapped its biggest donors for its most popular sports team and offered naming opportunities. They got to just over $11 million, including a generous contribution from former athletic director Jim Sterk, and Hirshman controversially topped off the remaining $4.7 million using a presidential discretionary fund from leases of campus broadband frequencies that had accumulated over four years.
Beyond the viability of SDSU’s financial contribution, the project could face two other obstacles.
One is the willingness to completely redevelop the Qualcomm site, which the city has said is the best location for a new NFL stadium, and jeopardize hopes of attracting another team not owned by the Spanos family. History, at least, is in San Diego’s favor. Every city that has lost an NFL team before last year eventually landed a replacement: Baltimore, Cleveland, Houston, St. Louis, Oakland and Los Angeles.
Stone’s project is angling for City Council approval by June and MLS approval later in the year, raising the question: Is San Diego prepared to potentially abandon NFL aspirations that quickly?
Another snag could be the terms of the land transfer. Stone’s plan requires no tax dollars and would relieve the city of the eight-figure annual operating loss of Qualcomm Stadium. But the 166 acres situated between three freeways is arguably San Diego’s most lucrative real estate asset, and essentially giving it away free to a for-profit enterprise – a professional sports team plus retail and residential development – with the promise of residual economic benefits may meet public resistance.
Last year, when a university annex plan was being floated for the Mission Valley land should the Chargers leave, a spokesperson said then-City Council President Sherri Lightner “does not support the donation of such an extremely valuable piece of city property to anyone.”
The valuation of the land varies wildly. Some have said, given the environmental issues from an adjacent petroleum storage facility, it is worth only about $50 million. A 2015 stadium task force commissioned by Faulconer estimated it at $3 million per acre. Others have appraised it even higher.
MLS will have 22 teams when the 2017 season opens in March, including newbies Minnesota United FC and Atlanta United. Los Angeles FC is set to join in 2018, and the long-delayed Miami franchise owned by David Beckham, assuming it finds a stadium solution, would be the 24th team.
The next round of expansion will take the league from 24 to 28. Two teams are expected to be announced in the back half of 2017 and two more sometime after that. The first two would begin play in 2020, the others likely in 2021 or 2022. The current expansion fee is $150 million.
Sources said the San Diego group, which has exclusivity with MLS for this market, is intent on pursuing the first round of expansion despite the tight time frame. Sacramento and St. Louis were considered the prohibitive favorites for those early slots, and Sacramento remains on track. But the St. Louis bid, which was seeking $80 million in city funding and $40 million in state tax credits, was recently derailed by the governor-elect’s announcement that “to be very clear, I have completely ruled out state funding for stadiums.”
Seven other expansion candidates were identified by MLS last month: Charlotte, Cincinnati, Detroit, Nashville; Raleigh-Durham, San Antonio and Tampa-St. Petersburg. Of those, Cincinnati and Detroit are given the best chance.
mark.zeigler@sduniontribune.com; Twitter: @sdutzeigler
