News Summary
San Diego is negotiating with 101 Ash Venture LP to transform the vacant 101 Ash St. office building into 247 affordable housing units. The complex deal requires City Council approval and involves a 60-year lease agreement aimed at recovering losses from a previous lease-to-own arrangement. Key features of the redevelopment include housing units, retail space, and a childcare center, with a total estimated cost of $267.6 million. Concerns about conflicts of interest and differing property valuations add to the discussion as the council is set to decide on the future of this project.
San Diego is considering a crucial deal with 101 Ash Venture LP to repurpose the vacant 101 Ash St. office building into 247 affordable housing units. This complex transaction, which requires the approval of the San Diego City Council, includes a 60-year lease agreement aimed at resolving issues from a previous ill-fated lease-to-own arrangement that cost the city $96.1 million. Currently, the property has a diminished value due to significant asbestos contamination, making it nearly worthless.
As part of the redevelopment, the team of housing developers, comprising MRK Partners and Create Dev LLC, has proposed plans that will not only include residential units but also incorporate retail space and a childcare center. The total cost for this redevelopment is projected to be approximately $267.6 million. To finance the project, the city plans to loan $45.6 million, which aligns with the building’s estimated value, at a simple interest rate of 4%. This loan will not involve any upfront cash from the city, with payments expected to start 15 years after the project’s completion.
Under the lease agreement, San Diego will establish an annual base rent of $15,000, which will increase by 3% yearly or based on the Consumer Price Index, whichever is higher. Potential future payments to the city could amount to $90.2 million, but given the time value of money, the net present value is assessed at only $3.6 million, which has raised eyebrows among critics. Concerns have been voiced that the arrangement may disproportionately benefit the developers, who will not have to invest their own funds initially, receiving payments before the city experiences any financial returns.
In terms of financing, the developers aim to obtain $124 million in federal tax credits, which are essential for the project but involve a competitive and unpredictable application process. Christina Bibler, the city’s Economic Development Director, argues that the deal represents a strategic sacrifice of immediate financial gain in favor of fostering long-term public and community benefits through affordable housing.
The proposed agreement has faced scrutiny due to potential conflicts of interest stemming from one of the developers, Kelly Modén, also serving as a commissioner on the San Diego planning board. This dual role has raised ethical questions regarding the fairness of the negotiations and the integrity of the decision-making process involved in the project.
Disparities in property valuations have also emerged as a point of contention. Two separate appraisals reflect significant differences; while the developers’ appraisal estimates the building’s value at $45.6 million, the city’s own assessment finds the property to be worth only $3.9 million. This stark contrast calls into question the financial basis for the current redevelopment plan.
The 101 Ash St. building has a troubled history marked by a disastrous remodel that led to asbestos exposure, alongside ongoing legal challenges linked to these contamination issues. This has complicated the city’s handling of the property and emphasized the need for careful consideration of any future agreements.
The San Diego City Council is set to deliberate on the proposed lease agreement on July 29, 2025. This pivotal meeting will determine the future of the 101 Ash Street project and its potential impact on the city’s affordable housing landscape.
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Additional Resources
- San Diego Union Tribune: Deal to Turn 101 Ash St into Low-Income Housing
- NBC San Diego: Turning 101 Ash Street into Affordable Housing
- CBS 8: San Diego to Offload 101 Ash Street
- Times of San Diego: Taxpayer Sues Over Transparency in 101 Ash Street Proposal
- Wikipedia: Affordable Housing
