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Thursday, Feb 07, 2013 - Last Blog on Earth | News

San Diego Square sale moves forward, slowly

By Kelly Davis
IMG_1761 Empty parking lot at San Diego Square
- Photo by Kelly Davis
It's been more than a year since nonprofit Housing Development Partners (HDP) said it wanted to buy San Diego Square, the Downtown high-rise for low-income seniors. For tenants, many of whom had long complained about how the building was being run, HDP was a godsend.

HDP Executive Director Marco Vakili said he expected escrow would last about a year; he hoped the sale would be finalized by September 2012. But, now it'll be another year before HDP owns the building. Getting financing to purchase and rehab San Diego Square—which hasn't been improved since it was built 30 years ago—takes time, Vakili said. HDP hopes to secure Federal Housing Administration low-interest loans—among other sources—which can take up to 10 months. 

And this is where the sale gets complicated. The city owns the land under San Diego Square and leases it to Kind Corp., which currently owns the building. For HDP to obtain the financing it needs, the city had to draw up a new lease. The original lease with Kind Corp., whose president, Mauvorneen O'Connor, is the twin sister of former San Diego Mayor Maureen O'Connor, was a sweet deal: Kind Corp. was able to lease the land, a full city block, for only $50—$1 a year for 50 years.

Under the terms of the new lease, which will take effect once the sale's completed, HDP will pay the city $4 million in rent, a portion of the income generated from the commercial space that's part of the property and a portion of annual rent from the residential part of the building. 

To the layperson, that sounds pretty steep for a low-income housing project. At the City Council's Land Use & Housing committee meeting yesterday, Jim Barwick, director of the city's Real Estate Assets Department, explained that Kind Corp.'s $1 a year rent was "an incentive to provide low-income housing." 

"[The city's] pledging their land for 65 years for below-market value," Vakili told me in an interview. "They're essentially taking their land, which is a full city block, and saying, 'Hey, we're going to leave it like this for the next 65 years and for this we're getting four million bucks and we're getting some cash flow.

"They would make a lot more money if they did a market-rate building with it," Vakili noted. 

At yesterday's meeting, Council President Todd Gloria asked if the $4 million could be earmarked for future affordable housing projects. When the state put an end to redevelopment last year, with it went local governments' most significant source of affordable-housing funding. 

"It becomes general fund money," Barwick told him. "How it’s spent is up to mayor and council."

The new agreement with HDP also memorializes the requirement that whomever leases the land must provide on-site services to San Diego Square's tenants. This requirement is in Kind Corp.'s lease, too, and Senior Community Centers once served that role, but Kind Corp. inexplicably ousted the nonprofit three years ago, putting them in violation of the lease.

Kind Corp. also shut San Diego Square tenants out of the building's parking lot, forcing residents to either give up their cars or park blocks from the building. For awhile, HDP was paying for 10 parking spaces across the street, but stopped when there was a snag in sale negotiations with Kind Corp. Vakili said he'll rent the 10 spaces again once the City Council approves the new ground lease, which will hopefully happen last this month. 

Chuck Miller, a San Diego Square tenant and president of the residents association, asked at yesterday's  committee meeting whether the city has any say over installing an interim management team while San Diego Square's in escrow.

"Right now we are the only [senior] apartment complex in the San Diego area that does not have a social area to meet. We don’t have a room to go have a potluck in, or a get-together at any time," he said. "There was one, but they locked the doors on it eight years ago. 

"They don’t feel like it’s their home," Miller said of the tenants. "They rent an apartment, but they can’t seem to live in it like it’s their apartment. There’s too many restrictions."

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