DEVELOPMENT: EIR in Process; Port District to Weigh Entertainment District
BY: BRAD GRAVES
DECEMBER 20, 2023
San Diego Business Journal
Topgolf USA could begin building its first golf-themed entertainment center in San Diego by 2025 under a timeline announced early this month by the Port of San Diego. The port also disclosed rent for its prospective tenant and the possibility of putting other venues on surrounding land.
Port officials are considering making Topgolf the anchor of a wider entertainment district sandwiched into a narrow strip of land between San Diego International Airport and Harbor Drive to the north, and the Harbor Island boat basin to the south. The district, called the East Harbor Island Redevelopment, would include a swath of parkland between the new development and the waters of San Diego Bay. The land currently supports non-recreational uses such as rental car agencies.
Additional entertainment venues or a brewery might become part of the district.
The port entered exclusive negotiations with Topgolf in 2022 and has proposed a 20-year lease with options that could bring the deal to as many as 40 years.
The 2025 target includes time for California Coastal Commission review if necessary, according to a Port spokeswoman.
A Driving Range and More
Topgolf combines the features of a driving range with digital entertainment; it adds the food and drink options of a sports bar. Some in the hospitality space have coined a new word to describe recreation with good-quality food: “eatertainment.”
Topgolf charges by the hour for the use of its hitting bays. A Friday evening session at a Topgolf on Pacific Coast Highway in the Los Angeles metro area was advertised at $75 per hour. Up to six players can share a hitting bay.
Rafael Castellanos, chairman of the Board of Port Commissioners, said his agency would like to consider features for other prospective visitors, including people looking to spend a moderate amount or nothing at all.
“This is an exciting redevelopment strategy to bring people to the bayfront to enjoy it and the beautiful views, which is a major part of what the port is charged to do,”
Castellanos said in a prepared statement. “The overwhelmingly high public interest in and support of Topgolf has attracted interest from other ‘eatertainment’ concepts, so let’s see what’s out there and bring a variety of activities and recreational offerings, at a variety of price points – including low and no cost, that locals and visitors to San Diego Bay can enjoy.”
The Port is considering leisure activities such as pickleball, mini-golf, darts, pingpong and shuffleboard in tech-infused settings similar to Topgolf. The district might include a brewery – a nod to a San Diego hospitality staple – or other retail operations that blend entertainment with quality food and drinks.
The port announced plans to issue a request for proposal – perhaps more than one – for one or more food, beverage and entertainment venues at the end of the first quarter of 2024. Responses from interested businesses would be due at the middle of the year and Port commissioners would consider staff recommendations for new venues no sooner than the third quarter.
Activating the Property
According to the Port district, one positive aspect of the proposal is that it would bring public access to a spot where there is none; that it would “enhance and activate” that portion of land along San Diego Bay.
Topgolf has proposed using 10 acres of the site. Its plans are to build a 70,700 square foot, three-story facility with 102 hitting bays, facing east toward the downtown San Diego skyline. The outfield would encompass 4.5 acres, surrounded by pole-mounted netting system ranging from 90 feet to 170 feet in height. The outfield would include 10 underground targets for golfers.
Also proposed is a 293-space parking lot.
The East Harbor Island Redevelopment project takes up 43 acres and includes the Harbor Police headquarters.
The state Coastal Commission will consider a Port Master Plan Update that includes the Topgolf project. Port staff anticipates the state commission will certify the master plan update before construction begins, a spokeswoman said.
Financial Terms, Environmental Effects
The Board of Port Commissioners authorized port staff to sign a nonbinding term sheet with Topgolf. Following the completion of construction, minimum annual rent would be $1.53 million. Based on a percentage of rental rate projections, Topgolf would pay approximately $1.9 million in the first year of operations. The term sheet serves as a “negotiating framework” for any potential future real estate or lease agreement to be submitted for the consideration of Port commissioners.
The proposed lease would be for 20 years, with four five-year options for a maximum of 40 years.
The Port district announced plans to draw up an environmental impact report. A public scoping meeting in the EIR process was held Dec. 7. The Port will take comments in the initial part of the EIR process until 5 p.m. Monday (Dec. 18).
Dallas-based Topgolf is part of Carlsbad-based Topgolf Callaway Brands Corp. (NYSE: MODG). Callaway previously owned a small portion of Topgolf and bought a majority stake for $2 billion in 2020 in an all-stock purchase. The corporation then changed its name to incorporate Topgolf.
Callaway executives remarked at the time that Topgolf has the potential to bring new players to the game of golf.
The corporation said in November that it expects Topgolf to contribute approximately $1.75 billion to the corporation’s overall 2023 revenue, which is expected to be the range of $4.24 billion to $4.26 billion.
Topgolf planned to open 11 new venues in the United States by the end of the year and was delivering strong venue-level margins, the corporation said in a release.
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