The tall structure in the center of the above image is a boring, empty building in downtown San Diego, commonly referred to as “101 Ash Street.”
Boring, empty, and just sucking up money.
$18,000 a day worth of taxpayer money.
Now, I love San Diego and I have no quibble when residents call it “America’s Finest City.”
But this story is such an egregious screw-up that it’s given the city’s leaders a large and well-deserved black eye.
And it’s so convoluted, I’m not sure that anyone has been able to thoroughly sort it out.
Here’s my understanding:
In 2016 San Diego agreed to do a lease-to-own deal on the former Sempra Energy headquarters (see boring building, above). The goal was to consolidate – move about 1,000 city employees from other buildings into this one building.
It was a 20-year, $127 million deal which Mayor Kevin Faulconer persuaded the City Council to approve.
Council members were told the $535,000 monthly lease was a bargain that would save the city $44 million in rent payments over two decades.
They were told the 315,000-square-foot building was in good shape, all it needed was a $10,000 power wash, and employees could start moving in.
Let’s pause for a moment here.
There are nine people on San Diego’s City Council, elected by their constituents who believed they were choosing smart, competent people who would best represent their interests.
So wouldn’t you think that all – or some – or even one of those council members might have raised their hand and said, “That building was built in 1966. It’s more than 50 years old, and you’re telling us it needs nothing but a $10,000 power wash?”
Alas, it appears that not even one did.
Alas, again – the city did no due diligence to establish the condition of the building.
Instead, they accepted what they were told by Cisterra Partners.
Cisterra Partners, a San Diego real estate firm that acted as a broker between the city and building’s formers owners.
Let’s pause for another moment here.
If you’ve ever considered buying a residence, you have the option of paying to have a home inspection done. This is called “due diligence,” and every smart buyer does this. A home inspection can reveal problems the owner was unaware of – termite damage, for example – and reveal problems the owner didn’t disclose. Because the reality is, some owners don’t disclose what they should.
Buyers who don’t have a home inspection – their due diligence – are why we have phrases like…
So, too, with San Diego’s mayor and City Council.
Except – the taxpayers aren’t fools.
But they are being parted from vast amounts of their money.
$18,000 a day, $535,000 a month.
And there were red flags: Cisterra had insisted that the city accept the property “as-is, where-is, with all faults,” and included language in the lease agreement precluding any liability of Cisterra.
Yup. Red flags.
Did the mayor and council have blinders on?
And somehow, these Powers That Be missed this red flag, as well: In 2014, a real estate consultant for Sempra Energy told the California Public Utilities Commission (CPUC) that Sempra considered the building to be “functionally obsolete” because of its vulnerability to damage during an earthquake and because…
Are you ready?
Because of the building’s asbestos issues.
You know – asbestos, used for ages in buildings because it was a good, heat-resistant electrical insulator?
Asbestos, that’s been totally banned in this country since 2003 because it’s known to cause several types of cancer?
This guy is telling the CPUC in 2014 that Sempra knows there’s asbestos in the building, and nobody at the CPUC thinks to tell San Diego’s Mayor or City Council when they started doing the Happy Dance about this building?
Nobody at Sempra – the former owners of the building – shares with the Mayor or City Council, either?
Nobody – not the mayor, no one on the City Council – thinks so say, “Golly, don’t buildings that old sometimes have that asbestos stuff in them?”
So the city signed in early 2017, and taxpayers began paying $18,000 per day for the lease of a building no one can use.
I haven’t mentioned that the building was appraised for $72 million.
The mayor’s office estimates it will cost $115 million to fix the asbestos problem, along with other items including the earthquake retrofit, and issues with plumbing, heating, elevators, electrical, and fire alarm.
An editorial in the August 7 San Diego Union-Tribune called 101 Ash Street “the city’s worst land deal ever.”
An August 6 article in the Union-Tribune reported that Faulconer, in search of a solution, presented the council with “five options for moving forward” on 101 Ash Street.
Councilman Chris Cate summed up the options, and the situation, with a succinct, “This whole thing, it friggin’ sucks.”
The finger-pointing has begun, and there’s lots of it. According to an August 9 editorial, also in the Union-Tribune, “the mayor and his aides emphasized that the City Council and City Attorney’s Office didn’t raise questions about the Ash Street deal…he alternately blamed ‘the bureaucracy,’ ‘the system’ and ‘the city.’”
The mayor also “blamed construction crews for what went wrong.”
Independent Budget Analyst Andrea Tevlin blamed the Mayor’s Office for failing to keep the council informed about problems with the Ash Street building.
Consultants blamed city officials for relying too heavily on representations from Cisterra Development.
The Union-Tribune blamed “Faulconer’s failure to take the most fundamental step in considering any real estate transaction: getting an independent evaluation of the property’s condition.”
A different media outlet blamed “Real Estate Assets Director Cybele Thompson’s failure to seek an independent appraisal and assessment of the building’s true condition upfront.”
And yet another outlet blamed “the city” for failing to conduct due diligence, “the city” being the catch-all when there are too many culpable people to name individually.
The more articles I read, the more finger-pointing I read about. Everyone is pointing at everyone.
Except for San Diego’s taxpayers…
The only thing taxpayers are pointing their finger at is…
Update, August 18, 2020:
According to an August 18 article in the San Diego Union-Tribune:
“Two San Diego law firms have teamed up with a prominent Los Angeles civil litigation specialist to sue the former owners of the downtown high rise at 101 Ash Street, a 19-story building the city of San Diego acquired without so much as an independent inspection.”
The lawsuit asserts,
“This taxpayer action is brought because San Diego city officials have failed to vindicate the rights of plaintiff and other San Diego taxpayers to stop the waste of funds and to recover funds already wasted relating to the 101 Ash Street building.”
Update, September 1: