Project name: Liberty Station

Location: San Diego, Calif.

Developer: San Diego Redevelopment Agency and The Corky McMillin Cos.

Size: 361 acres

Public subsidies are a fact of life in the base-redevelopment process. Those subsidies make sense because many communities believe their fortunes are tied to the future development of abandoned bases. In the case of the former Naval Training Center in San Diego, Calif., the reuse process was done exclusively with private financing.

The $500 million base-reuse project, known as Liberty Station, relies largely on tax-increment revenue to pay for current and future operations. Increasingly popular as a means to make redevelopment pay for itself, tax increment is the portion of property taxes generated in a redevelopment area above the level of tax revenues prior to new construction.

The proceeds of a municipal bond help pay for infrastructure, planning and other start-up costs, while tax increment from new buildings goes to bond payments and to seed further new development.

The naval training center was placed on the BRAC list in 1993. Redevelopment efforts started in earnest in 2000 when the San Diego Redevelopment Agency began converting some existing buildings on site and building others. To date, the former naval facility has completed 300,000 sq. ft. of new and commercial space in six new office buildings designed to resemble historic military structures.

As in many successful base conversions, a long planning process preceded construction. After the Navy conveyed the former training station in 1998, the city spent the next four years planning the future direction of the base, including land uses and square footages.

After the plan was completed, the city issued a request-for-proposals for developers to step up and build the project as specified by the city. The basic points of the plan were not negotiable, says Greg Block, a spokesperson for Liberty Station. “The thinking was that they either adopt our plan, or they don't do the project.”

Taking the reins

A local firm, the Corky McMillin Cos., was eventually selected as the master developer and private partner. McMillin was charged with building $125 million in infrastructure improvements and rehabilitating 361 acres.

In exchange, the developer was allowed to build and sell market-rate homes and commercial space on a portion of the property, while the city retained 80% ownership of the base.

Work on the massive mixed-use project began in January 2001 and is slated for completion in 2008. The site will include residential, office, schools, retail and hotel at a total cost of roughly $1 billion.

An arts-and-culture district, which is a project of the non-profit NTC Foundation, together with 125 acres in parks and a 9-hole golf course are under construction in addition to several charter schools.

The biggest retail project, the 150,000 sq. ft. Marketplace at Liberty Station, includes the adaptive reuse of historic buildings into a conventional supermarket and a Trader Joe's specialty grocery.

Developing the neighborhood-oriented shopping center was a mixed blessing, says developer Craig Clark, president of CW Clark. One obvious challenge was to rehab a set of historical buildings, including a chapel. “It's much more expensive to do an adaptive-reuse job on a building than to do new construction,” he says.

Clark was hoping federal historic tax credits would ease his financial burden, but officials with the U.S. Interior in Washington, D.C. declined the tax credits, saying building interiors were altered too much. However, the retail center is now 60% leased, with letters of intent to occupy another 30%.

The residential component of the master plan has 349 residential units arranged in three separate neighborhoods consisting of single-family homes, row-style houses and a condominium complex. At least 80% of the housing has been built to date, and more than one-third sold in San Diego's brisk residential market.

The hospitality portion, to be known as Liberty Station Resort Village, was submitted to the City of San Diego for review this spring. The Corky McMillin Cos. signed a contract with Huntington Hotel Group to develop the resort. Plans include two hotels totaling 350 rooms and four retail or restaurant sites.