Hours after the San Diego City Council discussed settling lawsuits over two lease-to-own real estate deals, a top aide to Mayor Todd Gloria ordered title searches for the properties, the abandoned 101 Ash St. high rise and nearby Civic Center Plaza.
According to an email obtained by The San Diego Union-Tribune, the Real Estate and Airport Management leader directed her staff to order title reports on the two buildings that netted a “volunteer” adviser to the former mayor nearly $10 million in secret payments.
“Please order a preliminary title report for both 101 Ash Street and CCP,” city real estate chief Penny Maus wrote to her supervising agent for acquisitions at 6 p.m. on May 17, the day council members last met to discuss the lawsuits.
“Please request these be expedited and advise as to when we expect to receive this,” Maus wrote to Ken Anderssohn. “When they come in, please send to Kevin and I and conduct an initial review for us.”
The one-paragraph email was labeled “confidential” and a matter of “high” importance.
Title reports are typically conducted in advance of any real estate acquisition as a way to identify specific owners and any liens or claims recorded against a property.
The order may indicate that the city is preparing to short-circuit its existing lease-to-own deals and acquire the properties outright as part of a settlement plan aimed at resolving three lawsuits.
The email from Maus was copied to Lucy Contreras, the deputy director of real estate assets, and to Kevin Reisch, a deputy city attorney.
The Mayor’s Office said the city’s plan to resolve the legal disputes over the leases is well known but details cannot be discussed because it is illegal to publicly discuss closed-session issues.
“Your other questions (about the title searches) also relate to what may or may not have been discussed in a closed session meeting of the City Council,” spokeswoman Rachel Laing said by email,
The searches were ordered on the same day the council met for almost five hours to review settlement proposals for three lawsuits over the lease-to-own acquisitions.
So far this year, council members have convened in closed session for nearly 20 hours over four meetings to discuss the litigation.
Two lawsuits were brought by the city against companies set up by Cisterra Development, its lender in both deals, and real estate broker Jason Hughes, who collected $9.4 million in fees even though he claimed to be advising former Mayor Kevin Faulconer for free.
Cisterra, its lender and Hughes have all denied any wrongdoing.
The council agreed to acquire the Ash Street building in 2016 for $128 million to be paid over 20 years, even though the property was appraised at $67 million.
The property has been unusable for all but a few weeks over the past five-plus years due to multiple asbestos contaminations and problems with its infrastructure.
The city suspended its $535,000 monthly lease payments in 2020 after consultants determined that it would cost at least $115 million to make the building safe to occupy.
City employees have occupied the Civic Center Plaza for decades.
The other legal complaint was filed by San Diego taxpayer John Gordon, who claims the Ash Street lease violates the state constitution because it indebted the city without a public vote.
All three cases are scheduled for trial early next year.
The City Council publicly announced that no action had been taken during the May 17 closed-session meeting.
But four days later, La Prensa San Diego reported that a majority of council members in fact agreed to use taxpayer money to buy both properties as part of a settlement proposal to resolve the lawsuits.
Citing unnamed sources, La Prensa said six of nine council members agreed to a deal that would end the litigation.
According to La Prensa, Council President Sean Elo-Rivera joined Councilmembers Raul Campillo, Steven Whitburn, Joe La Cava, Chris Cate and Jen Campbell agreed to the proposal. Councilmembers Vivian Moreno, Monica Montgomery Steppe and Marni Von Wilpert opposed the plan.
The report, which could not be confirmed by the Union-Tribune, said an announcement of the decision was being withheld until after the primary election last Tuesday in order to benefit Campbell, who previously opposed the settlement plan.
It also said the proposal appears to focus on eventually transferring ownership of the buildings to the regional planning agency SANDAG for use as a proposed “grand mobility hub.”
The SANDAG plan calls for a central transit center to serve bus, trolley and even subway commuters on city-owned properties that include the main city administration building, the Civic Theater, 101 Ash St. and Civic Center Plaza, among others.
Gloria told the Union-Tribune in April that the concept could accommodate SANDAG’s needs and the city’s desire for a new civic center even though some of the properties were “legally encumbered.”
“But the point is that we have the need for new space here,” the mayor said. “They have a need for a mobility hub and this seems like it could be a good, two-birds-one-stone approach.”
Meanwhile, a private development company is negotiating with the California Department of General Services for two state-owned blocks on Front Street, just north of the current city hall complex.
The Michaels Organization plan would include over 1,000 residential units, a new San Diego fire station, more than 400,000 square feet of city office space and new council chambers.
If agreements are reached, the company would lease space to the city of San Diego at market-rate rents for years to come.
“The city will be meeting with the state in the coming weeks to explore what level of participation, if any, it will have with The Michaels Organization’s proposed project,” Maus told the Union-Tribune last month.
Despite continuing settlement discussions, the Ash Street litigation is pushing forward.
At a court hearing last Thursday, a judge approved a request for additional testimony and documents by lawyers representing Gordon, the taxpayer suing the city of San Diego.
During the same appearance, lawyers for the defendants said they filed a motion to consolidate all three cases into a single proceeding, even though the city is the plaintiff in two cases and a defendant in the third.
A hearing on that request is scheduled before another judge next month.
And, according to a public agenda posted Friday, the council will meet in closed session again this Tuesday to discuss the city’s pair of lawsuits.
The public is invited to speak on the issues at 10 a.m. The taxpayer case is not listed as part of that discussion.
