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Executive roundtable

Financing, public opposition stymie mixed-use projects

While mixed-use projects capture the imagination of developers and planners, challenges from community opposition to financing could prevent many plans from getting off the ground.

The promise of and obstacles to mixed-use development in San Diego were topics of a roundtable discussion at the Daily Transcript offices last week.

Yehudi Gaffen, Gafcon founder and CEO, said he has been encouraged by some out-of-the-box thinking.

Gafcon is working with 14 high school and community college districts with surplus property that might be suitable for some sort of mixed-use development via public/private partnerships.

"Financing models have been turned on their head in a good way for these type of projects," Gaffen said.

Gaffen, who is working with the Grossmont-Cuyamaca Community College District on a workforce housing proposal on a surplus property in El Cajon, said another surplus parcel where mixed-use might make a lot of sense is a large school-bus yard between Balboa Avenue and Clairemont Mesa Boulevard in Kearny Mesa.

Although public/private partnerships are one way to go, financing for privately developed mixed-use projects can prove elusive.

"Financial institutions don't like them," said Perry Dealy, Dealy Development president and CEO.

Dealy is overseeing the development of the massive Broadway Complex (also known as Manchester Pacific Gateway) mixed-use development in the North Embarcadero area.

Dealy, who may have an all-cash investor willing to pour $1.2 billion into the Broadway Complex development, said the good news for those who want to build mixed-use is that along with the all-cash buyers, financing is becoming available from large pension funds and international investors.

"There are a lot of different capital stacks," Dealy said adding that the HFF lending brokerage firm also has had a strong presence in San Diego.

As Dealy knows only too well from his experience with the Broadway Complex, getting big mixed-use projects through the approval process -- to say nothing of the legal process -- is daunting.

That said, he added, he would rather shepherd a project in downtown San Diego than the suburbs.

"I've handled more than $4 billion in entitlements, most of them in downtown. I've found that the more creative your idea you have out in the neighborhoods, the harder it gets," Dealy said. "We had a mixed-use project in Clairemont where the plan was to put higher-density housing around a transit center. There was a lynching at that town hall meeting."

Gaffen agreed with Dealy that introducing a project to a community can be difficult, or even dangerous.

"When we went on our pre-proposal walk for the Jordan Downs project in L.A., the cops had to go with us," Gaffen said.

Just because a mixed use development is dense doesn't necessarily mean it will be summarily rejected by the public.

Richard Gustafson, CityMark Development president, said that although some residents were concerned about obscured views for a five-block residential and retail project the developer was planning near the Oceanside waterfront, "we used a picture, and the people liked the higher-density project."

Frank Wolden, Skyport Studio founding principal, agreed.

"Progressive developers have to restart the dialogue," Wolden added.

Michael Stepner, NewSchool of Architecture + Design professor, also agreed that preconceptions about these projects need to be changed.

"If Henry Ford had asked people what they wanted, they would have said a faster horse," Stepner said.

David McCullough, McCullough Landscape Architects principal, said that what residents want in a mixed-use development is evolving. He said the residents of such properties don't want to see what is referred to as a "Texas wrap," in which a building wraps around structured parking.

"They're no longer satisfied with residential retail and a parking garage. They want amenities," McCullough said.

Amy Bridge, development director of the Berkeley-based MIG planning firm, said her company does what is known as a psychographic survey to determine what people want in a development.

Psychographics group people according to their attitudes and tastes.

"We don't want to guess what people want," Bridge said.

Wolden said there might be less opposition with more demonstration projects.

McCullough said the success of a mixed-use project generally depends on the neighborhood. He noted that while mixed-use is a way of life in communities such as Little Italy and North Park, many other communities may not be as receptive.

Others embrace the concept.

Jerry Jacquet, Meissner Jacquet principal, said some people -- himself included -- are bringing mixed-use concepts into existing buildings.

"I put a condo map on our little 20,000-square-foot building and I'm trying to see what we can put in it," Jacquet said.

Wolden said the "old-style mixed use" for San Diego was much more horizontal. The newer has been much more vertical.

Even the older-style mixed-use properties have been in high demand during the past 18 months.

Howard Blackson, San Diego Civic Innovation Lab program manager, noted that the 148,638-square-foot retail portion of Uptown District commanded $81.1 million when Regency Centers (NYSE: REG) bought the property in December 2012.

Although condominium development exploded from the late 1990s to the mid-2000s, Gustafson said that by contrast, not a single residential condominium is under construction in downtown San Diego today. The newer condominiums were required to have retail on the ground floor, which wasn't always successful.

Blackson said many mixed-use plans that are being considered could fail not due to any opposition, but due to new stringent stormwater permit requirements.

"That might not let anything happen," Blackson warned.

*****

Roundtable Participants

Howard Blackson, Program Manager, San Diego Civic Innovation Lab

Amy Bridge, Director of Business Development, MIG

Perry Dealy, President and CEO, Dealy Development

Yehudi Gaffen, Founder and CEO, Gafcon

Richard Gustafson, President, City Mark Development

Jerry Jacquet, Principal, Meissner Jacquet

David McCullough, Principal, McCullough Landscape Architecture (Sponsor)

Mike Stepner, Professor, NewSchool of Architecture + Design

Frank Wolden, Founding Principal, Skyport Studio

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