Zephyr Partners Plans $250M High-Rise Development on Full Block in Downtown San Diego

By Gail Kalinoski, Contributing Editor

Zephyr Partners is planning a $250 million full-block mixed-use development of residential, retail and boutique hotel real estate. The project will be the largest and first high-rise to be built in San Diego’s downtown since the recession.

The development took a big step forward this week with the $21.1 million off-market purchase of one of the last remaining full blocks of available property in the city’s downtown. Zephyr, a San Diego-based development and investment company, said it acquired the site on Broadway between 7^th and 8^th avenues. It plans to begin construction in late 2015.

The developer said zoning would allow it to build up to 750,000 square feet in two 40-floor towers. The original eight-property portfolio, which consists of rundown and underutilized retail, parking and office space, was built in the 1950s and had fallen into disrepair, said Zephyr Co-CEO Brad Termini.

“This transaction offered a rare opportunity to acquire property in urban San Diego,” Termini said in a news release. “After studying the layout of other major urban areas such as Los Angeles, San Francisco and Seattle, we think this project will accelerate the transformation of downtown San Diego as it continues to evolve into a more walkable and accessible neighborhood.”

He said the goal is to create an urban living and retail destination for locals and tourists that will extend the city’s downtown core and revitalize the land between the Gaslamp Quarter and Financial District.

“The reinvented community will attract new downtown residents and provide Gaslamp visitors a connection to a dynamic retail experience with a range of dining and shopping options,” Termini said in a news release. “We are excited to further the renaissance of San Diego’s downtown core, and transform a once neglected property into a vibrant and appealing community.”

The team has not finalized plans for the residential and hotel portion of the property, but the San Diego Union-Tribune reports that it is considering apartments, condos and boutique hotel rooms at a variety of price points, including affordable studios and multi-million penthouses. The newspaper also reported Zephyr is planning about 60,000 square feet of retail in two two-story buildings on opposite corners.

Founded in 2008 by Termini and Co-CEO Dane Chapin, Zephyr focuses on building attached and detached homes, condominiums and luxury apartments. Zephyr recently announced it was building 60 luxury condominiums at 2850 Sixth Ave. in the city’s Banker’s Hill section that should be completed in 2015.

Forecasts from commercial real estate companies have said the San Diego multi-family and retail markets would be active this year as the city’s economy improves. Marcus & Millichap stated in its San Diego Apartment Research Report for the first quarter of 2014 that development of multi-family units would jump to 3,500 units this year, nearly double the completions of 2012. The report noted that nearly half of the apartments under construction at the beginning of this year are in the downtown and surrounding neighborhoods, and rents would be increasing about 3.2 percent to an average $1,534 per month.

Cushman & Wakefield said in its Marketbeat Retail Snapshot report for end of 2013 that San Diego’s downtown area “is in the midst of significant development activity.” The report said the city was making investments to create a more “walkable urban setting, stretching from the Airport down Pacific Highway to Broadway.”