(The Center Square) — The San Diego City Council will look over a development team’s proposal to convert a 21-story office building at 101 Ash St. into low-income housing later this month.
San Diego’s Land Use and Housing Committee voted unanimously last week in favor of recommending approval of a $250 million housing development project. The project is a 60-year lease with housing developers MRK Partners and Create Dev LLC that aims at taking the city-owned building in downtown San Diego and creating 247 affordable housing units for people earning between 30%-80% of the Area Median Income.
As well as housing units, the project includes three manager’s units, 25,000 square feet of retail space and 4,000 square feet of commercial space intended for a childcare center for kids up to age 5, according to a staff report issued June 23.
The city is proposing to spend over $1 million per unit on the project, former Coronado Mayor Richard Bailey, who has written about the project on social media, told The Center Square Tuesday. Coronado is a San Diego suburb.
Under the project, the city will give the development team a seller’s note of $45.6 million. The loan has an interest rate of 4% over a 55-year period, and the loan does not require any payments until after 15 years of its origination.
In the proposal, the development team is asking for $82,541,000 in low-income housing tax credits and $32,173,000 in historic tax credits to help fund the project, according to the project analysis.
Bailey said the office building was not a historical building. However, the building could potentially be considered historic because it surpasses the age requirement for a property to be potentially classified as historic in San Diego. In San Diego County, properties that are 50 years or older have the potential to be considered historic. The office building is 58 years old.
Bailey said the developers are banking on the city recognizing the office building as a historical property in order to receive the historic tax credits.
The office building was built in 1967, and was occupied by San Diego Gas and Electric from 1968 to 1998. The office building was soon after occupied by Sempra Energy until the company vacated the building in 2015.
Cisterra Development bought the building, and in 2016, the city entered into a lease-to-own agreement with the company, according to the lease-to-own agreement proposal. The agreement stated the ownership of the building would go to the city after 20 years with the total rental costs marking at $127.8 million.
The deal with Cisterra and the city was finalized in January 2017, but soon after that, asbestos was discovered. That delayed the move of workers into the building.
The city of San Diego bought the office building in 2022 for $86 million after undergoing a settlement agreement with Cisterra. Currently the building is still empty, yet the city is spending money on its upkeep and security. For instance, the city allocated $2.5 million for property management costs in the 2026 fiscal year.
The idea to convert the office building into affordable housing originally came from the development company Reven Capital in response to the city’s 2023 request for proposals for the site. The city decided in April 2024 not to go through with Reven Capital’s project proposal. The city instead picked up MRK Partners and Create Dev LLC’s proposal.
The current project proposal raises many questions and concerns among people in the city.
Chad Carpenter, chairman and CEO of Reven Capital, told The Center Square Tuesday he doesn’t know how the city will pull off the project because spending $1 million per unit is expensive. Carpenter added having an expensive project makes it harder to get tax credits.
“If the project’s too expensive, it might be hard to get tax credit buyers on the deal because if the deal doesn’t work, the people who bought the tax credits would lose their tax credits in the future,” Carpenter said.
Low-income housing projects are usually not as large as the 21-story 101 Ash St. project, Carpenter said, referring to tax credits.
Carpenter said Reven Capital’s project proposed 393 units with a budget of $502,000 a unit.
New information on the project may surface before the city council reviews the proposal as research is being done to find out if the city’s decision to work with Create Dev LCC, a development company solely owned by current San Diego Planning Commissioner Kelly Moden, involved a conflict of interest.
