Transforming the 101 Ash St. office tower into affordable housing units.
San Diego plans to lease the vacant 101 Ash St. office tower for a 60-year ground lease aimed at creating affordable housing for low-income families. The initiative involves a significant investment by a development team to retrofit the tower into 247 residential units, alongside retail space and childcare facilities. The city’s Economic Development director highlights the project’s potential to address housing shortages despite previous asbestos issues. A City Council vote could happen soon to secure funding for the extensive renovations.
The city of San Diego is poised to lease its long-vacant office tower located at 101 Ash St. on a long-term contract aimed at transforming the property into affordable housing for low-income families. This initiative follows a comprehensive review by the city’s Land Use and Housing Committee, which is set to discuss the arrangement that involves a 60-year ground lease.
A development team, comprising MRK Partners and Create Dev LLC, is slated to invest hundreds of millions of dollars to retrofit the 21-story tower into residential units. The deal values the property, which has been unoccupied for nearly a decade due to asbestos contamination, at $45.6 million. To recoup this amount, the city will provide a seller’s note structured as a 55-year loan with a 4% simple interest rate, with payments commencing in year 15.
Christina Bibler, director of San Diego’s Economic Development department, expressed optimism about the agreement despite the building’s troubled history stemming from its contamination issues. The development team sees this project as a significant step toward increasing affordable housing options in the city while alleviating financial challenges related to the vacant office property.
If the Land Use and Housing Committee approves the plan, the full City Council could potentially vote on the deal by the end of July. This timeline is strategically aligned to allow the project to compete for state-allocated tax credits by September, which are critical for financing the extensive renovation.
The estimated total cost for converting the Ash St. office tower into affordable housing stands at $250.3 million. Of this amount, around $114.7 million is anticipated to be raised through tax credit proceeds. The Create-MRK team’s construction plan includes developing 247 residential units directed at families earning approximately 30% to 80% of the area median income, which currently is $130,800 for a family of four in San Diego County.
In addition to residential units, the project plans to incorporate three unrestricted manager units, 25,000 square feet of retail space, and a 4,000-square-foot childcare center. Notably, the costs for transforming the building exceed $1 million per unit, with considerable expenses allocated for asbestos abatement ($40.1 million) and residential remodeling ($67 million).
Approval of the project is contingent on securing $82.5 million in low-income housing tax credits and $32.2 million in tax credits for historic properties, although the building has not yet been designated as a historic site. The proposed ground lease allows a two-year window for the developers to secure the necessary financing, with the city’s $46.5 million seller’s note intended to help close any financial gaps.
After year 15, the city is set to receive 50% of the project’s rental proceeds, retaining ownership of the improved property post-lease. There are no upfront lease payments required from the developer, reflecting the significant costs associated with the transformation of the contaminated tower into livable housing.
The 101 Ash St. building, constructed in 1967, previously served as the headquarters for Sempra Energy until mid-2015. The city initially engaged in a 20-year lease-to-own agreement in 2017; however, complications due to asbestos contamination led to a costly settlement in 2022. In the upcoming fiscal year, the city has allocated $2.5 million for regular upkeep and security for the now-empty building.
Experts have commented that this deal not only serves as a remedy for past mistakes regarding the building’s contamination but also provides a long-term public benefit by addressing the pressing need for affordable housing in San Diego.
San Diego City Council Approves New ADU Regulations
San Diego’s Federal Settlement for Affordable Housing Equity
San Diego City Council Approves Settlement for COO Amid Discrimination Claims
San Diego Ranked Ninth Most Expensive City in the U.S. Amid Rising Cost of Living Crisis
San Diego City Council Approves New Restrictions on ADUs
San Diego County Home Prices Remain Flat Amid Market Shift
Pro-Housing Advocates Push for Reduced Lot Sizes in San Diego
San Diego Ranks Third-Worst for First-Time Homebuyers
San Diego City Council Approves Paid Parking on Sundays
San Diego Faces Homelessness Shelter Crisis
News Summary San Diego will host a vibrant array of concerts spanning three days, featuring…
News Summary Marvel Studios is set to launch its Treatz Truck at Comic-Con, providing free…
News Summary Mosquitoes in the Rolando neighborhood of San Diego have tested positive for West…
News Summary The trial of J.C. Blake Sartor, accused of attempting to murder San Diego…
News Summary The USS Pierre, the last Independence-class littoral combat ship, has successfully completed its…
News Summary San Diego County is set to host a dynamic Fourth of July celebration,…