FOR IMMEDIATE RELEASE
Tuesday, July 26, 2022

CONTACT:
MayorPress@sandiego.gov

SAN DIEGO The City Council today approved the settlement agreement in the dispute over 101 Ash Street and Civic Center Plaza, fulfilling Mayor Todd Glorias commitment to resolve the issue in the best interest of taxpayers and the City. The settlement agreement minimizes the potentially substantial financial risks to taxpayers and the City consisting of years of costly litigation with an uncertain legal outcome. It also enables the City to move forward on future uses for the nearly six Downtown blocks in the Civic Core, where nearly 2,500 office employees work most of them in substandard buildings that need hundreds of millions of dollars in repairs and upgrades.

This was not a decision my administration took lightly, but we came to this resolution after years of audits and investigations made it very clear that continuing litigation could never result in a perfect outcome for the City or its taxpayers, Mayor Todd Gloria said. This settlement was the product of 18 months of mediation that enables us to fully exit an unfortunate business deal and gives us the certainty we need to plan the future of our Downtown Civic Core.

Under the agreement, the City will directly purchase both the Ash Street and Civic Center Plaza (CCP) buildings, and lender CGA will waive the make-whole penalty contained in the current lease agreement. Loans will be restructured at a more favorable tax-exempt interest rate, which will save taxpayers $15 million over the current lease-to-own arrangement and financing.

As part of the settlement, Cisterra will return to the City the $7.5 million profit it made from the 101 Ash St. Transaction.

This settlement agreement is the culmination of years of careful consideration of the facts, diligent analysis, and figuring out what is best for the taxpayers," said Councilmember Cate. To be absolutely clear, the proposed settlement doesnt mean that a criminal investigation ends, and we are committed to making sure the bad actors are held accountable. But today, in this instance with lessons learned, it's time to move forward and put this saga behind us.

The City will be entitled to all insurance or third-party reimbursement related to the botched remediation of 101 Ash that took place during the prior mayoral administration and will be able to determine the best course of action to garner the most value from building, which occupies a full block downtown adjacent to the Civic Center.

The deal ensures the 800 City workers officed at CCP can remain in the office building without disruption and provides maximum flexibility as to what to do with the nearly six city blocks that comprise our Civic Center and the Ash Street building.

With this settlement agreement a maddening and unacceptable chapter of San Diego history ends, and new chapter begins. We must ensure that chapter is one that proves San Diego can get out of its own way and be the great City we know we should be, said Council President Sean Elo-Rivera. That starts with meeting the needs of our residents and the work to achieve that goal must begin now. The real estate weve acquired must be utilized to ensure San Diegans can access the services they deserve and that we meet the housing needs of our residents. I pledge to work with the mayor and my Council colleagues to move forward expediently and with purpose towards these goals.

Importantly, the settlement excludes real estate broker Jason Hughes, whose potentially criminal conflict of interest was unknown to City Councilmembers when they approved the lease-to-own transactions of the buildings in 2014 (CCP) and 2016 (101 Ash). The settlement does not shield anyone who might have conspired with Hughes from criminal liability and will have no bearing on law enforcement investigations or prosecutions.

Negotiations to reach the settlement took place over 18 months with the guidance of retired Federal Magistrate Judge Jan Adler. The City was represented by outside legal counsel Dick Semerdjian and John Schena of the Schwartz Semerdjian law firm.

Chief Operating Officer Jay Goldstone led the Citys negotiating team, which acted on direction from the City Council as to terms and conditions of a settlement.

The transactions to purchase the buildings are expected to close by Aug. 8. The Citys Department of Real Estate and Airport Management will immediately begin short- and long-term planning for the buildings and land they occupy.

Todays City Council approval of the Settlement Agreement provides the City with certainty needed about our real estate holdings in the Civic Core, said Penny Maus, Director of the Citys Department of Real Estate and Airport Management. Now we can set our sights on reimagining these nearly six blocks to better serve the public and the more than 2,000 City employees who work Downtown.

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