La Jolla-based real estate firm Reven Capital is proposing converting the city's troubled office building at 101 Ash St. into nearly 400 units of affordable housing.
The proposal came in response to the city's call to developers for ideas on how to reimagine five blocks of public land in downtown's Civic Core. A memo to Mayor Todd Gloria this week said Reven Capital's proposal was the only one that met the city's criteria.
The firm's CEO, Chad Carpenter, said the glut of office space in downtown San Diego and the acute need for more affordable housing there sparked his interest.
"Any time you have an empty office building, it's a good target for a potential residential conversion if … the economics make sense," Carpenter said.
Carpenter added the building's rectangular shape lent itself well to an office-to-housing conversion, and that he worked with the architecture firm Gensler to study potential floor plans for studios and one- and two-bedroom apartments.
101 Ash has become synonymous in San Diego with political scandals and bad real estate deals. The city overpaid for the property by tens of millions of dollars in 2016. It then botched renovations and eventually discovered its own real estate broker had also been working for the building's seller.
The city will soon enter a 90-day negotiating period with Reven Capital to try and strike a deal that can win approval from the City Council. Mayor Todd Gloria's office said in a statement that the negotiations would help realize his goal of using the city's downtown land holdings to address the housing crisis.
Gloria hopes to use the City Operations Building at 1222 First Ave. to build a new City Hall, and to sell or lease the five other blocks of adjacent city-owned property, including 101 Ash, the City Administration Building, Golden Hall and the Civic Theatre, to help pay for it.
"With respect to the remaining properties, we will work with the state Department of Housing and Community Development to ensure the Surplus Land Act process has been fulfilled and evaluate next steps to encourage proposals from developers to energize our civic core with housing, arts and culture, vibrant public spaces, nightlife and new economic opportunities," the statement said.
The Surplus Land Act requires the city to prioritize affordable housing when offering up its real estate for lease or sale. Because the city received no responsive bids for the rest of the properties, it can now lower the affordable housing requirements to try and attract more bidders.
Stephen Russell, executive director of the nonprofit San Diego Housing Federation, said he was excited about the prospect of preserving 101 Ash St. because of its architectural significance and the environmental benefits of reusing an existing high-rise building for housing rather than tearing it down and building something from scratch.
"Notwithstanding the fact that it's got a bad reputation because of the politics surrounding it, it is actually an extraordinary building with great bones, a very dignified facade," Russell said. "And it's representative of a very particular era in San Diego's history in the mid-60s when we were really striving to really be something more."
Interest in office-to-housing conversions has grown since the recent surge in remote working has left many companies reevaluating their need for physical office space. But Russell said the cost of new plumbing, HVAC, electrical and elevator systems — and the need to remove asbestos — can sometimes make such projects financially infeasible.
Questions that will have to be resolved during negotiations include whether the city would sell or lease the property to Reven Capital and at what cost. The city could offer the firm a discount that would help the project compete for affordable housing tax credits, but such a move would work against the city's plan to use the property to help finance a new city hall.
