Months before the city of San Diego purchased a failed indoor skydiving center in East Village for $7 million in cash, city officials determined that they needed to secure a use permit before completing the sale.
But the approval process would have taken months and the seller was in a hurry. So officials changed their mind and bought the property without a permit to operate the place as a homeless-services center, according to emails obtained by The San Diego Union-Tribune.
The city also relied on the seller’s agent to determine how much the building was worth, the emails show.
“Do you have any appraisal you can provide as that will likely be the largest hurdle time-wise,” Cybele Thompson, the city’s real estate assets director, wrote to the agent Nov. 27. “Can you please clarify the price you are asking and what time constraints you are dealing with? Thanks so much!”
The building at 14th Street and Imperial Avenue is scheduled to open later this year as a “housing navigation center” — an intake facility to guide homeless people into services and housing.
More than 50 pages of internal emails obtained by the newspaper show city officials making numerous concessions to acquire the 26,000-square-foot building, which still has two three-story wind turbines dominating an atrium and taking up much of the interior floor space.
Some of the emails show the seller’s agent saying the property was worth more than $20 million, but that his client would let the property go for half that amount — then rebate the city $3 million.
“The price we are asking is $10M. However … they agreed to accept $7M net ($10M sales price and make a $3M charitable contribution,” agent Jon Rodrigue of Aspen Growth Properties wrote to Thompson in November. “The beneficiaries were OK selling well below appraisal value because of a year-end closing.”
Thompson said in December that the purchase would not be completed without a conditional use permit.
“We will make it contingent on upon both City Council and CUP approval prior to closing,” she wrote.
On Friday, city spokesman Arian Collins said the city has not changed its mind about the requirement to obtain a permit.
“The city will address any land use questions as part of the upcoming council hearing regarding the operating agreement, arrangement between the City and SDHC (San Diego Housing Commission) for administration of the program and related issues,” he said.
City leaders have said for months that the housing navigation center will improve the quality of life downtown by directing homeless people into housing, job-training, mental-health treatment and other services.
“The biggest flaw in our regional care network is that San Diego doesn’t have a universal entrance point to access homeless services and start the journey to permanent housing,” Mayor Kevin Faulconer said in a February statement. “The housing navigation center will change that and serve as a model for the rest of the region.”
The mayor and others at City Hall have previously said this year’s sale price was well below a 2016 appraisal and a broker’s opinion of value that estimated the property value at between $15 million and $22 million.
“The fact that we are buying it for less than half of what experts say it would cost on the open market makes this deal a no-brainer,” Faulconer said.
At the time of sale, the Imperial Avenue property was assessed by the county for tax purposes at $5.8 million. It was reassessed at $7 million after the sale.
Rodrigue was asked in a telephone call Friday whether he would recommend that one of his clients buy a property for $7 million without a current appraisal, but said he could not hear the question. He asked to be sent the questions by email but did not respond.
Besides forsaking an independent appraisal, city officials agreed to a speedy escrow. They took title to the property in early February, barely a week after winning approval from the San Diego City Council.
“The seller insisted on a close date not later than Feb. 6, 2018,” Collins said.
A section of the San Diego Municipal Code prohibits social-services centers within one mile of other such facilities, emails show. Father Joe’s Villages has been serving homeless people at its complex one block east of the former skydiving center for decades.
Officials did not explain how the housing navigation center will get around the ordinance prohibiting similar social-services facilities within one miles.
The city’s acquisition of the indoor skydiving center was controversial from the start.
Nearby residents complained that it was an inappropriate location and two real estate professionals told the Union-Tribune that the property was worth barely $3 million because of the turbines and other skydiving-related equipment.
“I’m going to say it’s worth $325 a square foot — the dirt on that lot — or $3.25 million,” real estate broker Sam Patella told the paper in April. “The building is basically not worth anything.”
In June, dozens of residents attended a workshop at the Central Library to describe the proposed center — and many were upset with the city for opening the navigation center in their neighborhood.
“East Village shoulders the burden of caring for a large percentage of the city’s homeless and mentally ill citizens due to the concentration of social service facilities and supportive housing in the community’s footprint,” they wrote in a letter to elected officials.
In addition to Father Joe’s, the neighborhood also features the Neil Good Day Center and a pair of massive tents serving as temporary shelters for homeless people.
The email exchanges between city officials ahead of the purchase show that they were well aware of community concerns about the prevalence of social services clustered in the East Village.
“We understand there will likely be community resistance to this new center and the escrow closing will be contingent on obtaining a (use permit) for this purpose,” Thompson wrote to the Civic San Diego executive overseeing the permit process in early December.
By January, city officials hired a mapping service to determine everyone that had to be legally notified about the navigation center.
“I could provide the radius maps you need with owner and occupant list and labels and delivery for a fee of $475,” Michael Higgerson of DataPro Mapping Solutions wrote to the city Jan. 5. “As far as timing, I believe I could get to you tue or wed at latest if ordered today. You said you were in a hurry, let me know if that meets your needs.”
The city accepted the offer 25 minutes later.
“This looks great,” Thompson’s assistant replied. “Please proceed with the work right away.”
By the middle of January, city officials decided to outsource the permitting process and use federal community-development grants to pay for the work and the real estate. Critics began complaining that the city could rent an office for much less and use the balance of the funds for direct services.
At the same time, Rodrigue alerted city officials that his client was running out of patience and would walk away if a deal was not reached soon.
The owner “has been receiving BOV’s (broker’s opinions of value) from between $10-$15 M and is willing to wait for the additional cash,” Thompson’s aide told the city real estate assets chief in a Jan. 11 email.
Rodrigue “believes the only way she would reconsider delaying the close until a (use permit) is issued is if we increase the sale price,” the aide added. “Her interest in selling to the city for a good cause has changed. She’s now basing her decisions on price and timing.”
Thompson replied a short time later. “Thanks for the heads up — I will advise (chief operating officer) Kris Michell.”
Within days, the real estate assets team and others presented the arrangement to the City Council, which quickly approved the purchase.
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