The San Diego City Council on Tuesday voted to amend the city's deal to convert the troubled 101 Ash office tower into affordable housing for low-income renters.
The changes include extending the ground lease from 60 to 65 years, increasing the number of units from 250 to 252 and increasing the interest rate the developer will pay the city from 4% simple interest to 5% compound interest.
The 21-story high-rise, which first opened in 1968, also has a new name and address — 107 Ash Street.
City staffers said the changes to the ground lease disposition agreement are favorable to the city and were required by the developer's lenders, which include the San Diego Foundation and the U.S. Department of Housing and Urban Development.
Councilmember Stephen Whitburn, whose District 3 includes downtown San Diego, said the development team led by Kelly Moden had shown creativity, and that office-to-residential conversion projects are extremely complicated and difficult to finance.
"Office buildings do not have kitchens or bathrooms in every office, but apartments do," Whitburn said. "Converting offices to apartments requires a complete rework of the building structure and plumbing system."
The city's involvement with the property began a decade ago. Officials working under then-Mayor Kevin Faulconer negotiated a lease-to-own agreement with the property's sellers, which the City Council approved in October 2016.
City employees occupied the building for only a few weeks in late 2019 and early 2020 before construction work dislodged asbestos, forcing the city to evacuate it and leave it vacant for more than six years.
The scandal intensified when it was revealed that the deal's architect, real estate broker Jason Hughes, was not working pro bono but rather had earned a commission from the building's sellers. Hughes pleaded guilty to a misdemeanor conflict-of-interest charge in 2023 and agreed to repay his $9.4 million commission to the city.
San Diego settled lawsuits surrounding the transaction in 2022, which resulted in the city taking ownership of the building. The council approved the lease agreement to convert the building into affordable housing last year.
The redevelopment project will feature 69 studios, 55 one-bedroom apartments, 73 two-bedroom apartments and 55 three-bedroom apartments. Three units will be reserved for on-site property managers, while the remaining 249 will be affordable to individuals and families earning between 30% and 80% of the county's median income.
The project also includes 138 parking spaces, 25,000 square feet of retail space and a 4,000-square-foot childcare facility.
"I do believe that the project continues to be a unique opportunity when it comes to adaptive reuse, especially as we're looking to turn this into more affordable housing while also offering childcare opportunities," said Councilmember Kent Lee. "We all know the history (of 101 Ash), and this is an opportunity for us to move past that."
