San Diego Suing To Void Deals On 101 Ash Building, Civic Center Plaza

Speaker 1: 00:00 The address 1 0 1 Ash street has become synonymous in San Diego with the city's horrendous track record on real estate deals in 2016, the city council approved an agreement to lease and eventually purchased the high rise office building downtown. What followed was one scandalous revelation after another costly repairs, asbestos violations lawsuits. And this week we learned a chief architect of the deal was advising the city while also getting paid by the building sellers, another scandal, and maybe a chance for the city to get out of this mess. Joining me to unpack this story is Jeff McDonald, investigative reporter for the San Diego union Tribune. Jeff, welcome to the program. Speaker 2: 00:41 Hello, Andrew. Thank you so much for having me. This story Speaker 1: 00:44 Has been unfolding for years now. Uh, yet there are probably listeners who aren't too familiar with it. So let's start from the beginning. Why did San Diego decided it needed this building at 1 0 1 F street? Speaker 2: 00:55 Oh six or seven years ago? The city identified a need for additional office space for its downtown workforce. And they started poking around for where they could place, uh, uh, these workers as well as, uh, move some workers from, uh, uh, dilapidated city, uh, building right, uh, west of city hall into, uh, into new office space to upgrade. Uh, they were also concerned about rising rents. Uh, so they identified a number of buildings they could, uh, move into. And the one-on-one ask street was of course in the next, because Sempra had vacated the property, uh, in 2015. Speaker 1: 01:31 And as I mentioned, there were costly repairs. There was a speced dose dislodged into the air. The building has been uninhabitable for a basically since the city started leasing it. And the latest revelations about this scandal center on a real estate broker named Jason Hughes. So explain who he is and how he was involved in crafting this. Speaker 2: 01:51 Uh, Mr. Hughes is a longtime downtown real estate broker who, um, ingratiated himself with, uh, former mayor Bob Filner in an advisory role. Uh, he had earlier approached Jerry Sanders during his, uh, mayorship about advising, uh, real estate services. Uh, the Sanders administration did not take him up on that offer. Um, but, uh, after Mr Filner resigned, uh, in 2013, uh, Kevin Faulkner was elected and, uh, and, and did tap Mr. Hughes for his real estate acumen. Uh, that relationship, uh, ended up resulting in a lease that the city, um, signed for the civic center Plaza right across from city hall that the city had been operating in for years. Uh, the city signed a 20 year lease to own agreement for that property in 2015, and unbeknownst to everybody at the time, uh, Mr. Hughes took a $5 million commission. Uh, they replicated the same deal a couple of years later when negotiations for one-on-one as came to fruition. And at that time, Mr. Hughes got $4.4 million. Speaker 1: 03:03 So you've reported Monday night, and then the city is a city attorney's office confirmed Tuesday that Hughes did get this $9.4 million in fees for executing the one-on-one Ash deal. And the deal on the civic center Plaza brokers get paid fees like this all the time. So why does city attorney Mara Elliott say that these payments were improper? Speaker 2: 03:24 Well, the city's position today is that, uh, they were unaware of these payments until they learned about them in the discovery process. Uh, presumably earlier this year, um, that contradicts what Mr Hughes's attorneys have said is that he repeatedly informed city officials that he wanted to be paid. Uh, there was no specificity in the documents I've seen about how much Mr. Hughes would be paid or who specifically would be paying him, but it clearly was not going to be the city, uh, according to Mr. Hughes and his lawyers, uh, the senior officials at city hall knew about this and were aware of this. Uh, he is told [inaudible], which was the middleman broker, uh, that paid Mr. His that he has written, uh, authority to seek payment from the Stelara. Uh, I've not seen any evidence of that sister Cistera hasn't provided it. They've said that, that everybody was aware of Mr. Hughes was being paid, uh, everybody except the public. And, uh, presumably the city attorney until earlier this year about Speaker 1: 04:25 The new legal claims that the city has filed against Hughes, what are they and what are they hoping to accomplish there? Speaker 2: 04:32 Uh, well, it's a general, uh, excuse me, a government code violation, uh, an anti-corruption law. You can't have two masters when you're serving with, uh, you know, government officials. You either work for the government or consultant with the government, or you don't, he's accused of, uh, conspiring really to, uh, defraud the city of millions of dollars by not disclosing his financial relationship with Cistera this middleman broker, uh, what the city attorney's office is planning to do now is use that finding to nullify both lease to own arrangements for one-on-one Ash street and for the civic center Plaza, which again, the city has been occupying for years and years. So, uh, it'll be interesting to see if those contracts get thrown out and how, and whether they'll be able to claw back any of the tens of millions of dollars the city spent on this, uh, on this property. So this Speaker 1: 05:28 Deal for one-on-one Ash took place under former mayor, Kevin Faulkner's administration Faulconer of course is now running for governor. What has he said about these new revelations regarding Jason Houston, his involvement with the deals? Speaker 2: 05:40 Well, yesterday was the first statement I got from the former mayor in many, many months, which I found curious, and his position is that he didn't know anything about these financial arrangements and they're completely improper, uh, that of course contradicts with what, uh, Mr. Hughes and his lawyers have said. So, uh, you know, we'll have to see how that shakes out and as to how it might affect Mr. Faulkner's, uh, raise for California. Governor remains to be seen. Now, all this started, Speaker 1: 06:07 As you said, because the city needed more office space for its workforce downtown, but much of that workforce of course, has been working remotely for, for more than a year. Now, as have many of us, has the city begun to reassess its need for downtown office space? Speaker 2: 06:22 Yes. I think the city is always, uh, assessing its needs and its mid and long-term, uh, you know, needs. Uh, they still think that they need more office space. Now I haven't asked lately, but when I last looked into this year early this year, uh, their position is that they're playing the long game and they expect, uh, five years, 10 years, 15 years down the road, they will need this additional office space. As I said, some of the property that the city workforce is housed in today is probably in worst case in worse shape than, uh, than the one-to-one Ash building. So the city still is going to need downtown office space, post pandemic, but we'll see how that shakes out. Speaker 1: 07:06 Do we have a full accounting of how much money this one-on-one Ashdale has actually cost city taxpayers? Speaker 2: 07:13 No, they don't have a full accounting on where all the money they spent went. Uh, we know that they spent $30 million to rehabilitate the building, uh, from 2018 going forward, uh, only appears to be lost. They've also spent millions of dollars, uh, maintaining and operating the building, uh, providing for the building. So they're, uh, at least 50 million, probably higher than that, 60 some million. Uh, and that's just for what's. Uh, what's been spent already the, uh, and that, that excludes also legal fees. They've had, uh, at least three different law firms, uh, litigating this issue on the city's behalf. So it's going to be a long time before, uh, taxpayers have a, uh, a good firm understanding on how much they spent on this building. Speaker 1: 08:02 I've been speaking with San Diego union Tribune, reporter Jeff McDonald, and Jeff, thanks for joining us today. Speaker 2: 08:08 You bet. Thank you so much for having me.