AEG and H&S lobbyists vying for fresh Sports Arena deal

After more than a year of closed-door negotiations with AEG Worldwide to extend the company's lease of what is currently known as Pechanga Arena San Diego, the city has launched a public solicitation for possible new operators.

"The City is seeking proposals that reflect the City’s desire to have an operator who provides a high level of service to the local and regional community, while operating the Property in a fiscally responsible manner," says an April 23 Request for Proposals by the real estate assets department, with a closing date of May 31.

The current lease runs out in May of next year. According to previous accounts, AEG has been seeking to extend the contract from five to seven years. But rumors have been swirling regarding plans by other developers who covet the location to remake the property.

In October 2017, lobbyist California Strategies disclosed that it had been retained by Orange County-based H&S Ventures, LLC, owner of the Gulls hockey team an arena tenant, to seek either “improvement” of the venue or “entitlement of a facility in the San Diego region to host the San Diego Gulls, an American Hockey League team.”

For its part, incumbent leaseholder AEG has ingratiated itself with mayor Kevin Faulconer by way of $5000 the entertainment giant kicked in for One San Diego, Faulconer's non-profit operation, in March 2018. On April 16 of this year, AEG hired the lobbying outfit of Southwest Strategies to lobby for a "short term lease extension for Sports Arena facility," per Southwest's disclosure filing.

The city's Request for Proposals appears to meet at least one of AEG's key objectives. "The goal of this solicitation is to enter into a short-term lease of no more than three years," the document says. "The Lease may contain a provision authorizing the Lessee to request up to two one year extensions. However, any extensions will be granted in the City’s sole discretion. "

"It is of the utmost importance to the City to have continuity in the operation of the Property, including the event types and usages that are currently common and ongoing for the Property. It is the City’s desire that Property continue to operate with minimal if any interruption in service to the regional community."

Formerly known as the San Diego Sports Arena, the building built in 1966 currently generates $594,806 a year for the city from rent participation, including 15 percent of the parking lot usage take, amounting to $366,302, and 20 percent of the swap meet usage rental, at $157,555, for last fiscal year, per the document.

The amount of future rent remains open, per the solicitation. "City may, at its option, adjust the Percentage Rent upward to fair-market Percentage Rent. Percentage Rent increases shall be determined by qualified CITY staff which rates shall only be higher, not lower, than the then-current percentage rates."

"Having opened in 1966, the Sports Arena is currently home to the San Diego Gulls AHL hockey, the San Diego Seals indoor lacrosse team and San Diego Sockers North American Soccer League team. On average, the Sports Arena hosts approximately 145 events and sees over 650,000 visitors each year and can seat upwards of 16,000 visitors.

"The Sports Arena has been a major concert attraction for the region and has attracted performers such as Justin Timberlake and Elton John. Since the 1980s, the parking lot of the Property has also been home to the Kobey Swap Meet; an enjoyable fixture within the community which draws roughly 30,000-40,000 shoppers weekly."

In September of last year, the city council ratified controversial plans to redevelop the bulk of the city-owned surrounding retail property for intensive commercial and residential uses, leaving the question of the arena's long-term future for another day.