The San Diego municipal complex often referred to as City Hall will be rebuilt a block away from its current location should the winning proposal for the state of California’s land at 1350 Front Street — as pitched by residential real estate development firm The Michaels Organization — come to fruition.

Earlier this month, the Camden, New Jersey-based development firm was selected through a state-run competitive bidding process to lease and redevelop the state’s two-block property.

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The 3.2-acre site is bordered by West Ash to the north, West A to the south, State Street to the west and Front Street to the east. California’s Department of General Services, or DGS, which manages the state’s real estate portfolio, is working on an exclusive negotiation agreement and intends to execute a 99-year ground lease at a rate of $1 per year.

The Michaels Organization is proposing 1,007 residential units at varying levels of affordability that are split between two, 500-foot towers. The units would accompany 413,151 square feet of office space reserved for the city of San Diego. The plan, which is not final and will likely evolve, also calls for a new City Council chambers, a civic plaza and a fire station.

“We’re excited to see this progress, and work with the city and the surrounding community to really make this an exemplar project for the area — and show what’s doable under the (governor’s) executive order,” said Jason Kenney, who is the deputy director of DGS’s real estate services division.

A best-case scenario could see the developer break ground in 2024 and complete the project in 2027, he said.

The Michaels Organization did not respond to a request for comment. Partners on the project include The Plenary Group, an investment firm that specializes in public-private partnerships, architectural firm Carrier Johnson + CULTURE and Suffolk Construction.

San Diego participated in the state’s solicitation process and helped to evaluate team responses, but it has not made any formal commitment to the selected developer, said Penny Maus, who heads the city’s real estate department.

“The city will be meeting with the state in the coming weeks to explore what level of participation, if any, it will have with The Michels Organization’s proposed project,” she said.

California’s land at 1350 Front Street is currently home to a 1960s-era, seven-story state office building that has historically been 50 percent occupied. Efforts to vacate the building along with a pandemic-forced shift to remote work have significantly reduced occupancy levels in recent years, Kenney said. The site also includes two quasi-condemned, single-story structures, including a former state garage, that the state says are not historically significant.

The real estate holdings are being offered for lease under Gov. Gavin Newsom’s 2019 Excess Land for Affordable Housing Executive Order. The order directs DGS and the Department of Housing and Community Development, or HCD, to identify excess state-owned property and enter into low-cost, long-term leases with housing developers to create affordable housing on an expedited basis.

In November, DGS issued a request for qualifications for the downtown San Diego site at 1350 Front Street. The land is not subject to the Surplus Land Act, as the statute only applies to local governments, however, respondents were required to reserve at least 20 percent of housing units for low- and middle-income families.

The solicitation document also identifies the city as a potential, “long-term tenant at market rates” for contemplated office uses on the site.

The state received six statements of qualifications and based its decision on team experience, site vision and community outreach plan.

“Michaels presented a hell of an overall team. They really did a great job with who they picked as partners, (and) their experience with the type of development in question. Their professionalism in their approach really stood out,” Kenney said. “It was a hard-fought race, but Michaels did a great job. ... Their vision for the site was definitely attractive.”

The Michaels Organization plan envisions high-rise residential towers on the east and west side of the site. Per the proposal, the eastern tower is devoted to middle-income housing with 501 units deed-restricted for families making between 80 percent and 120 percent of the area median income. The western tower includes 101 units reserved for families earning 50 percent of the area median income and 405 market-rate units.

The median income for a family of four in San Diego is $106,900, according to the state’s 2022 list of income limits for affordable housing units.

The proposed facilities for city of San Diego workers are largely contained in a mid-rise tower extending along the site’s northern edge, backing up to Ash Street. New City Council chambers appear, at least as depicted in renderings and graphics included in the developer’s response, contained in an egg-shaped architectural structure that anchors a civic plaza. The open-space plaza also takes over Union Street, which currently bisects the property but would be closed and incorporated into the public realm and overall development footprint.

Other proposed elements include 1,203 parking spaces and a 26,000 square-foot fire station that would replace the existing Fire Station 1 at the City’s Operation Building.

The state, as a sovereign entity, has land-use authority and permitting power over the parcels, meaning local zoning laws do not apply. San Diego will have a say in some matters, including whether or not Union Street can be vacated and absorbed into the development footprint. The City Council would, of course, also need to approve a lease agreement with the developer.

Although the prospect of a new City Hall is not a done deal, San Diego officials have oft-expressed a pressing need for modern workspaces to house roughly 3,000 office workers, as its current facilities are either in poor condition or legally encumbered. The city currently owns around 400,000 square feet of office space in the downtown core, with properties located between A and C Street, and First and Third Avenue. It is also entangled in a complex legal scandal related to lease-to-own deals for the Civic Center Plaza and 101 Ash buildings.

Mayor Todd Gloria has communicated a desire to combine the city-owned sites with the state land for an all-encompassing Civic-Center-meets-Grand-Central-Station complex in partnership with the San Diego Association of Governments. It’s unclear how that vision aligns with The Michaels Organization proposal.

The blocks at 1350 Front Street are in an area dominated by office towers, government buildings and parking lots, with redevelopment efforts stymied by employment-specific zoning restrictions that date to the 2006 Downtown Community Plan. The Civic Core employment overlay zone, as it’s known, was initially adopted to prevent a residential chokehold over downtown parcels during a period of rapid growth. It is still in effect, although it was greatly relaxed earlier this year and now allows residential-focused projects if certain criteria are met.

With a mixed-use project of this scale, the developer will get to define the character of what’s historically been a soulless cross-section of downtown San Diego, said real estate analyst Gary London, who is a principal of local firm London Moeder Advisor.

“This is downtown no man’s land. It has always been an under-developed, in-between site between (the Marina District) and Little Italy,” he said. “This is one of the last areas (downtown) that really needs to be paid attention to. From that standpoint, the state’s efforts to move forward are incredibly welcome.”

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