San Diego’s Dumpster Fire of a Real Estate Deal
And people wonder why I get cynical...
Our fair city has a not-good history when it comes to real estate deals. If taxpayers are not ripped off outright, then a very loud group of naysayers is ready in the wings to say we could have done better.
The latest chapter in this never-ending story of (maybe) grift and (almost always) incompetence involves the building formerly occupied by Sempra, corporate overlords for San Diego Gas and Electric, at 101 Ash Street.
Lest anybody misinterpret my sentiments here, let me say upfront that everything to do with this deal and/or the proposed settlement strikes me as wrong. I also predict that, despite the fact that this reeks of criminality, exactly nobody will ultimately be brought to account.
Here’s the Voice of San Diego very condensed version of what happened:
Quick refresher: The city has poured more than $60 million into 101 Ash St. since it acquired the building in 2017. It occupied the high rise for just a few weeks before rushing to evacuate city employees in early 2020 after a series of asbestos violations. Since then, there have been many bombshells, including the revelation that the city’s landlord paid Jason Hughes, who had been publicly portrayed as a city real estate adviser, $9.4 million for his work on the city’s 101 Ash and Civic Center Plaza leases.
I’m going to do readers a public service and list some other media accounts at the end of this post for those with pockets full of Adderall or a bottomless coffee cup who insist on more of those darn pesky facts.
I remain unsure about whether there are any white knights to be found in this mess. There are a million eye glazing details, none (or all) of which point to who dunnit.
Pick a name, any name, from the assemblage of politicians and financiers whose names are found in legal documents and news accounts and there is all-but-guaranteed to be a court-ordered deposition or an investigation by La PrensaSD, the Union-Tribune, and/or Voice of San Diego providing a negative viewpoint.
This week the City Council will be asked to vote on a proposed settlement with Cisterra Development, the real estate player being sued by over leases made for 101 Ash Street (which sits empty, stewing in its asbestos) and Civic Center Plaza, the office building adjacent to the Civic Center and City Hall.
UPDATE: The mayor and his allies on the council have decided to postpone the vote for a month so the public has the opportunity to review the independent budget analyst’s report on the proposed settlement.
La Prensa San Diego reports that a majority of council members have already agreed to buy both properties as part of a settlement proposal to resolve the lawsuits. The website says six of nine council members have agreed to a (post primary election) deal ending the litigation.
Mayor Todd Gloria is eager to settle. Maybe too eager. Maybe he sees a future redevelopment project, perhaps alongside the 3.2-acre site currently occupied by the State of California office building, could generate a makeover between downtown and Little Italy. Or he wants in on the SANDAG downtown transportation hub. In any case, this is a chance to nail down some prime real estate.
In either of the above scenarios, there’s probable cash for development of city office space that skips voting on a ballot measure (like the one Mayor Jerry Sanders envisioned a decade ago) that’s certain to fail. Carl
DeMaio and his ilk don’t believe that the government (outside of police stations and jails) needs any office space, and would certainly flood the airwaves with sphincter tightening ads about waste at City Hall rather than agree to a new building.
These properties are just about the last piece of a puzzle showing shiny new things, currently occupied by decrepit buildings that nobody but government agencies would normally consider for space.
City Attorney Mara Elliott, whose involvement in this deal looks iffy to me, says that settling with Cisterra Development is not a good idea. She’s issued a report laying out nine specific reasons not to take this deal.
Those reasons boil down to a) the city will do better in court than what’s being offered and b) there are a host of other plaintiffs being left out of the deal. Elliott is also concerned that the mistake of not performing due diligence when it comes to office leases will be repeated.
From the Union-Tribune:
The elected city attorney questioned the timing of the proposed settlement. The litigation is nearly two years old; the cases are set for trial in January, and the city keeps learning more about the deals, she said.
There is “no compelling need to settle before the investigations are completed,” Elliott wrote. The proposed agreement does not bar the defendants from doing future business with San Diego.
“The city will be forever barred from pursuing any legal actions against Cisterra or the lender relating to the dispute, even if the city later discovers new information that divulges a higher degree of culpability,” the city’s lawyer said.
Her position assumes the properties will remain as is for as long as it takes (a decade?) for these various court cases to be resolved via the appellate courts.
No matter what choice gets made, many of the lawsuits will continue; the mayor’s option seeks to ensure that the properties are not part of any damage awards. Gloria wants to move expeditiously to tear those white elephants down, meaning they’ll be gone in less than a decade; five years, maybe.
So many questions— Asbestos at 101 Ash Street? Who cares? It’s all going to end up in some superfund landfill somewhere.
Did then-Mayor Kevin Faulconer sucker the city council into making a sweet deal that ultimately benefited mogul Doug Manchester? Who knows? Plausible deniability is the name of the game, and Manchester “sold” his share before the deal was done.
Did then-councilmember Todd Gloria close his eyes to the gnarly sides of this transaction because it was politically expedient? Can we ever know? Loose lips sink ships, and those who might know aren’t talking.
Did City Attorney Mara Elliott really overlook the details on 101 Ash Street because she was newly elected and hadn’t the time? Or was this just a case of momentum (from the Jan Goldsmith era) overcoming common sense.
Shouldn’t all this real estate be given over for low cost housing (that nobody will pay for)?
The cynic in me says what’s done is done. Bring on the clowns.
A few links:
Email me at WritetoDougPorter@Gmail.com