Horton Plaza Tech Campus is a Go
Horton Plaza’s second act as a mixed-use office campus has received the official seal of approval from city leaders, who said Monday that the property’s new owners could move forward with their plan to turn the distressed mall into an engine for job growth downtown.
City Council members voted 9-0 to change a land-use restriction that dates to 1981, effectively removing the only immediate obstacle impeding construction. The project-affirming vote came in spite of opposition from Jimbo’s Naturally, a mall tenant that sought unsuccessfully to secure additional protections for its tenure at the center. The final action follows last month’s preliminary OK from the city’s four-person economic development committee.
“We’re excited by the support of City Council and committed to making this a success,” said Dan Michaels, managing director for Stockdale Capital Partners, which owns the site. “We’d like to get going as soon as possible, most likely in the next couple of months.”
Opened in August 1985, Horton Plaza helped to revitalize downtown San Diego and, according to historians, became the archetype of a successful American mall. In more recent years, however, the outdoor shopping center proved a victim of its fortress-like design and changing retail trends.
Stockdale, a 65-person real estate investment firm based in Los Angeles, purchased the property from Westfield for $175 million in August. It plans to reuse the post-modern buildings for a $275 million high-tech office park called, “The Campus at Horton.”
To achieve its vision, Stockdale needed, and received, a change to its “Owner Participation Agreement” with the city, which included a land-use restriction of 600,000 square feet of retail space. That’s because a bulk of the project is meant for commercial office use with 772,000 square feet of space designed for premium Bay Area employers and as many as 4,000 of their workers.
The office square footage includes four new floors, or 150,000 square feet of space that Stockdale must add to the former Nordstrom building, where a single tenant would presumably take over an open and light-filled building. In addition, the firm needs to remake the Bradley Building, a 1985 recreation of a historic office building, per the contract approved by the city. Stockdale has said it will turn that structure into a food hall that augments the adjacent Horton Plaza Park owned by the city.
The firm also expects to lease the park from the city and turn it into a celebrated public space, although a rental agreement has not been reached. In the interim, the developer agreed to pay for two security guards to monitor the park at all hours.
The crux of the new agreement is a requirement that Stockdale maintain a minimum of 300,000 square feet of retail to start, or half of what was mandated before. However, the restriction can be further reduced to 200,000 square feet and even eliminated altogether should the developer satisfy certain provisions of the contract. Those actions include securing a large, single office tenant within five years and adding density to the property.
The land-use change comes at a cost of $6.76 million to the city, according to a report prepared by real estate consultant Keyser Marston Associates. As such, the developer must reimburse the city using a formula that assigns monetary value to enhanced security costs at Horton Plaza Park and any lease extension provided to the Lyceum Theatre, which operates in the mall’s basement and pays $1 per year for rent. Should Stockdale and the city agree to a park lease within six months, as planned, then the developer would need to extend the theater’s lease by around seven years to satisfy its debt with the city.
City Council members for the most part spoke favorably of the project, offering up nostalgic tales of Horton Plaza’s past accomplishments.
“This is definitely, literally a once-in-a-generation opportunity to do something pretty transformational for downtown. I can only imagine what a council 35 or so years ago was able to do to … revitalize what was a failing downtown,” said Councilman Chris Ward, whose district includes Horton Plaza. “But markets change, and needs change and land uses change.”
Council members unanimously signed off on the plan after Assistant City Attorney Sanna Singer added language to the Horton owner agreement to protect San Diego from any legal fallout between Stockdale and existing tenants.
Jimbo’s, the local grocery chain named after its founder Jimbo Someck, is already tangled in ongoing litigation with Stockdale and the previous mall owner. At Monday’s council hearing, Someck protested the deed change and asked city representatives to postpone their vote.
“While I fully believe in the redevelopment of Horton, I do not believe that Stockdale wants me there and will do whatever they can, in their power, to make it virtually impossible for Jimbo’s to exist at Horton,” Someck said in his public testimony. “They stand to make north of $30 million if they can force to me leave, due to the low rent … that I pay.”
The grocer has a long-term lease in place and pays monthly rent of $1.41 per square foot, which is around a third of what Stockdale expects to command from its future office tenants, according to the Keyser Marston report.
Monday, Stockdale’s Michaels reiterated a desire to keep Jimbo’s at the center. His firm will honor the tenant’s lease, he said.
With the city’s sign off, Stockdale can move forward with a speedy timeline that culminates with the completion of phase one of the campus project by the end of next year. Along the way, the developer has agreed to a schedule of performance that requires it to submit design, demolition and construction plans to city staff within specified time frames.