ASH ST. • Monthly expenses for March 2023 totaled $187,602
A1 the Office of the Independent Budget Analyst reported.
“The property management contract costs total $2.4 million in FY 2024, an increase of approximately $208,000 from FY 2023,” the report said.
The Ash Street building is part of a six-block area included in a notice of availability the city issued this month to developers, who were invited to reimagine uses for the property with a focus on a new city hall and affordable housing.
Proposals are due at city hall by July 5.
San Diego officials say the Ash Street costs in the new budget are unavoidable.
“The City has an obligation to maintain the 101 Ash site for safety, security and compliance purposes,” spokesperson Tara Lewis said in a statement.
“As detailed in the proposed fiscal year 2024 operating budget for the building, the increases are primarily due to increases in utilities, security fire/ life safety inspections, as well as plumbing and gate repairs,” she wrote.
In the early months of the Gloria administration, the city sought bids for property-management services for the 101 Ash St. building and the nearby Civic Center Plaza and King-Chavez school property, Lewis said.
The job was awarded to Meissner, the commercial real-estate services firm.
The Murphy Canyonbased company collects a flat fee of $6,000 per month, plus staffing costs. The firm also tracks and reports the expenses incurred by dozens of outside vendors.
Over the past two years, the city has spent millions of dollars to maintain and manage the properties. Under the contract, Meissner is required to write a monthly report that lays out ongoing costs and any other building-related issues.
The March 2023 analysis, the most recent review provided by the Mayor’s Office, includes a management report, work-order log and financial snapshot that compares actual and budgeted costs.
According to the monthly report, total costs in March came to $187,064. Through the current fiscal year to date, the city spent $1.5 million against a $2.2 million
budget.
Some of the biggest expenses for the month included security, which came to $50,098; utilities, which cost $31,172; and maintaining the heating, ventilation and air-conditioning system — $52,188 in March alone.
The city is not currently running the HVAC network, but the contract carries a minimum charge for the building’s chilled water system, Lewis said.
The statement also identified just over $40,000 in repairs and other maintenance during the month, some $11,000 in propertymanagement fees, almost $1,300 in landscaping and $166 in taxes and insurance.
San Diego taxpayers also are spending some $500 per month for telephone service to the building and $170 a month on pest control, the records show.
Among other activities, Messier reported completing 80 separate projects, inspections and work orders in March. The property manager also oversaw repairs to fire extinguishers and responded to fallen ceiling tiles on the second floor.
Twice in March, inspectors found evidence that unidentified people had worked their way into the
building.
“Minimal damage was found,” the Meissner report says about the March 6 intrusion. “Engineers secured the expected access point. The trespassing incident was reported to SDPD.”
It happened again nine days later, prompting engineers to conduct another detailed inspection of the entire building.
“They checked all garage and 1st floor entrances and exit points for vulnerabilities and performed maintenance and added additional security devices to some of the doors,” the Meissner report said.
The report also details a February leak in the building’s chilled water-piping system, which helps control temperatures inside the property, that has yet to be repaired.
“The physical pipe will need to be replaced or lined from above the leak area,” it says.
The report also includes a commercial rent roll for each of the 19 floors of the mid-century high-rise. However, no monthly or annual revenue is reflected in the document.
Former Mayor Kevin Faulconer recommended the city acquire the Ash
Street building in 2016, after Sempra Energy moved into a new building.
Even though the property had been appraised for $67 million, Faulconer proposed a lease-to-own arrangement that would cost the city $128 million over two decades, or almost $18,000 a day.
But after the City Council approved the “as-is” contract, the building could not be safely occupied due to asbestos, aging mechanical systems, the lack of a firesuppression system and a lack of compliance with the Americans with Disabilities Act.
San Diego County regulators issued a series of asbestos violations, and at one point issued a mandatory stop-work order.
After tens of millions of dollars in upgrades and repairs, the city moved some 1,000 employees into the building in December 2019, but they were evacuated weeks later after county officials found more exposed asbestos in the building.
By 2020, the city sued landlord Cisterra Development and its lender, CGA Capital of Maryland, alleging the contract was unconstitutional even though the City Attorney’s Office had signed off on the agreement.
The following year, city officials learned through the legal process of discovery that real estate broker and mayoral adviser Jason Hughes had collected $9.4 million in fees for his work on the Ash Street and Civic Center Plaza leases.
Hughes said he had told at least six city officials that he intended to seek compensation for his consultation, but the city amended its litigation over the leases and added him as a defendant.
“From the beginning, the public and the members of the then-City Council, including myself, were deceived,” Gloria said in June 2021. “We are seeking justice to void this transaction, hold those bad actors accountable and recoup taxpayer dollars.”
By last June, however, months before the first trial was scheduled to begin, Gloria proposed a settlement that called for buying out the Ash Street and Civic Center Plaza leases for $86 million and $46 million, respectively.
His administration acknowledged in one report that the Ash Street building was worth “virtually zero” due to its condition. But the deal was quickly approved by the City Council.
Earlier this year, the council agreed to issue bonds to pay for the Ash Street and Civic Center Plaza lease buyouts — new debt that will cost the city up to $350 million to repay over 30 years.
City officials also agreed to settle their legal dispute with Hughes. He ultimately pleaded guilty to a single misdemeanor, was fined $400, was sentenced to one year of summary probation and agreed to repay the $9.4 million he had collected from the two deals.
District Attorney Summer Stephan closed the related criminal investigation, saying she had secured the best outcome she could.
The civil and criminal settlements came after San Diego had already spent more than $60 million in rent, upgrades, maintenance and other costs on the 101 Ash St. building.