Troubled Valencia Business Park Gets a New Chance

The window in Bishop George McKinney’s second-story office looks out on land with a troubled history.

The southeastern San Diego religious leader has wanted to develop the barren parcel next door for more than a decade. But for years the 14.7-acre city-owned Valencia Business Park sat there, crippled by legal battles and controversy involving developers and their financial ties to the redevelopment agency responsible for the project.

Last week, the Southeastern Economic Development Corp. selected McKinney as its developer of choice for the project. It’s the fourth time SEDC, a city redevelopment agency, has awarded the long-stagnant project to a developer, but the first time since its former leaders were forced out of office amid scandal.

SEDC expects the City Council to approve its decision next month. If it does, the agency will sign a negotiating agreement with McKinney allowing him to prepare a formal development plan for the site, which the City Council would have to approve before McKinney could start building.

The decision is a step forward for McKinney and his ambitions for the neighborhood. He said he was stonewalled for years by SEDC’s former leadership despite his belief that, as a longtime and prominent member of the southeastern San Diego community, his proposal for the project would best meet local retail and service needs in the poor neighborhood.

In his office in a former school building next to St. Stephen’s Cathedral Church of God in Christ, McKinney sat frustrated as his proposals to turn the land into a retail center were repeatedly turned down by the redevelopment agency.

“They didn’t take us seriously,” he said.

The property’s previous developer, Santa Monica-based Pacific Development Partners, was twice awarded the project and twice stripped of development rights.

Its project was first spiked after a voiceofsandiego.org investigation raised questions about strong financial ties between PDP and Artie M. “Chip” Owen, the former SEDC chairman. A local couple had alleged in an ongoing lawsuit that it was duped into giving up its claim on the land so the developer could take control of the project.

City Councilman Tony Young and then-City Attorney Mike Aguirre subsequently forced SEDC to put the project back out to get new proposals. It was re-awarded to PDP.

SEDC was later engulfed in a public scandal that forced out its former president, Carolyn Y. Smith, after voiceofsandiego.org revealed she’d been clandestinely awarding bonuses to herself and agency staff.

Current SEDC president Brian Trotier said the original agreement had never been formally terminated. So SEDC, which is responsible for redeveloping blighted neighborhoods in much of southeastern San Diego, terminated it in November.

The agency never ended its first development agreement with the company, even though it should have before issuing a second request for bids in 2008, when it decided to stick with PDP. That forced the agency to issue yet another request for plans this March.

The agency received only one proposal: McKinney’s.

That was a surprise for Trotier, who said about a dozen developers had attended an SEDC meeting on the project a month before. Trotier said potential developers later told him several factors had discouraged them from bidding, including their banks’ reluctance to finance new construction and their inability to secure commitments from tenants willing to move into Valencia Business Park.

Though he hasn’t secured any tenant commitments, McKinney said that was not a concern for him and his development partner, Phoenix-based Dudley Ventures.

“We’re getting calls and are beginning to meet with people now,” McKinney said. He is in discussions with Fresh & Easy and Save-A-Lot grocery stores, he said.

McKinney’s proposal included an offer of $750,000 to buy the city-owned property, less than half what he offered in 2006 when he proposed to pay $1.75 million for the land — more than the $1.5 million offered by Pacific Development Partners, which was ultimately selected.

In 2008, when SEDC again selected PDP, it offered the company the land for $526,000 — even though the developer’s new plans to build a more profitable retail development had the potential to triple the land’s value, not make it cheaper.

That precedent, McKinney said, influenced his decision to offer significantly less this time around.

“After we saw SEDC close the deal with PDP for $526,000 although we had offered them a million more, why should we go and offer a larger amount?” McKinney said. “We felt we should not be a sucker.”

Trotier said despite McKinney’s proposal, the final purchase price was not settled. He said the agency is required to sell the land at fair market value, and that before it finalizes a price, it would hire a consultant to evaluate what the land is worth.

“That’s what they put in their proposal,” Trotier said. “By moving this forward, we’re not accepting that price.”

The land is currently zoned for industrial use. Before McKinney can develop his project, the city will have to re-zone it to allow retail development, which will likely increase its value.

McKinney said the recent change in leadership at SEDC has improved his relationship with the agency, though he wouldn’t elaborate on specific tensions with Smith and its earlier board. It has also cleared the way for McKinney to assume a developer’s role in the community where he serves as senior pastor at St. Stephen’s Church.

McKinney, 76, established St. Stephen’s in 1962, and has dabbled in development before. Over the decades, St. Stephen’s has made physical improvements in the neighborhood immediately surrounding the church, including the construction of a $12 million affordable senior housing development.

But his decision to venture into retail development hints at the broader role McKinney is positioning himself to assume in the neighborhood, which like many in southeastern San Diego, has long been starved for economic development opportunities.

His partnership with Dudley Ventures would turn 4.3 acres of the Valencia Business Park into a 130,000-square-foot development with a grocery store, drug store, fast food restaurant, space for community events and a parking structure.

He is also exploring the possibility of opening a comprehensive health clinic on the site, and a recording studio for young musicians, “to provide opportunities for the tremendous artistic talent that exists in this community,” he said.

The plan for the project is a significant shift from earlier proposals from Pacific Development Partners, who had initially planned to turn the property into an industrial park, and then shifted its focus to retail before SEDC revoked its rights to the project.

The Valencia Business Park, McKinney said, will provide basic services that have long been needed, and which he said redevelopment has always been intended to provide.

He said redevelopment in the hands of local leaders has more potential for improvement than it does led by non-local developers who may not recognize “the felt needs of the community or respond to their prides and their hurts.”

That connection to the community, McKinney said, is important for ensuring success of a retail development in a poor neighborhood where local business ventures often struggle to find the customer base they need to survive.

Trotier said SEDC was optimistic about McKinney’s development potential, despite his inexperience in retail development, because of his partnership with Dudley Ventures.

“Any small developer, regardless of their past experience, that’s trying to take on a large development in this economy would have a difficult time doing it,” Trotier said. “One of the reasons we felt this proposal was worth pursuing was the presence of an experienced development partner.”

If the City Council approves SEDC’s agreement next month, McKinney and the agency will have six months to finalize a formal development agreement giving McKinney final approval to start construction on the project.

Please contact Adrian Florido directly at adrian.florido@voiceofsandiego.org and follow him on Twitter: twitter.com/adrianflorido.