Details emerge about dueling bids for 101 Ash St. ahead of potential decision

Two development teams are angling to convert San Diego’s 101 Ash St. office tower into subsidized residential units and share similar visions for the asbestos-ridden building.

Monday, city of San Diego real estate negotiators will present the dueling proposals — from a team led by Affirmed Housing and a team led by Create Dev LLC and MRK Partners Inc. — to the San Diego City Council in closed session. The behind-closed-doors discussion may culminate with council members selecting a winning bidder.

The decision would mark an important milestone, launching a more formal, monthslong negotiation process that could see San Diego offload the financial burden of a property that has plagued the city for years.

The competitors both believe they can tie a bow on the city’s, high-profile real estate blunder by creating 250 or more apartments for low-income families. But they’re leaning on key differences in their team makeups and financing packages to give them a leg up with council members.

“We pride ourselves on our ability to deliver the project on time and on budget. With 101 Ash, that’s a key aspect to really converting this into a key housing asset for the city, as well as for taxpayers,” Jimmy Silverwood, president of Affirmed Housing, told the Union-Tribune. “We’ve been delivering for taxpayers in the city of San Diego for the past 30 years.”

Kelly Modén, who is president of Create Development and is also a San Diego Planning Commissioner, said her team brings a unique perspective to the project because the partner development firms are both run by women.

“I have deep roots to San Diego. San Diego is very important to me, and I want to see us do something with this building,” she said. “I think it’s a beautiful building … and the street activation is really important to me.”

Built in 1967, the 21-story office tower at 101 Ash St. has been mostly vacant since mid-2015, when Sempra Energy moved out. In early 2017, the city entered into a 20-year, lease-to-own agreement with Cisterra Development, expecting to house a portion of its downtown workforce in the 314,544 square-foot building. However, the city, after completing a larger-than-anticipated remodel, aborted the plan because the building could not be occupied due to asbestos and other issues, and lawsuits followed.

The city purchased the empty tower for $86 million in a controversial settlement agreement in 2022, and soon thereafter decided to sell it.

Initially, in 2023, the Ash Street real estate was put on the market alongside San Diego’s four-block, civic complex in the heart of downtown. At the time, the city engaged in preliminary talks with a developer proposing to convert the office tower into subsidized housing, but negotiations reached an impasse last year. After those talks fizzled, three separate entities stepped forward with unsolicited bids for the Ash Street property. One of the proposals, which was focused on housing for homeless people, was rejected in October.

The two remaining proposals have since remained mostly under wraps as city negotiators worked alongside consultant Keyser Marston Associates to vet the offers. Friday, the teams offered the Union-Tribune a glimpse at what’s on the table, although both declined to share proposed deal terms or specifics related to project financing.

The proposal from San Diego-based Affirmed Housing features a 30,000 square-foot childcare facility on the first floor. There are 263 residential units deed restricted for people earning between 30% and 70% of the area median income, with apartments spread across floors two through 19.

The area median income for a family of four in San Diego County is $119,500.

The Affirmed plan includes space for resident services on the second floor, as well as a community room on the 19th floor. Roughly 35 percent of the units are designed as two- and three-bedroom units that can accommodate families.

The developer, which has to date secured $2.9 billion in financing to build 75 affordable housing projects, is working alongside non-profit affordable housing service provider Compass. Affirmed has tapped frequent partner HA Builder Group as its general contractor. The team also includes two architects, Carrier Johnson + Culture and Basis Architecture and Consulting.

Affirmed has also signed a letter of intent with Children’s Paradise to operate a childcare facility with infant-care, daycare, transitional kindergarten, and before- and after-school programs.

The proposal estimates a nine-month period for abatement of asbestos and interior demolition followed by 16 months of construction, HA Builder Group President Micah Spano said.

The plan’s kicker is that the city “will be paid in full” in 40 years, meaning San Diego would recoup the $86 million it spent to buy out the building’s lease, Silverwood said without elaborating further.

The Create Dev LLC and MRK Partners Inc. bid is similar in that the San Diego- and Los Angeles-based real estate companies are proposing 250 residential units, with apartments spread across floors two through 19 and deed restricted for people earning between 30% and 80% of the area median income.

The proposal, however, includes a larger percentage of family sized units — more than half of the units are two- and three-bedroom units — and it calls for 25,000 square feet of retail space on the first floor. Also of note, the development team said it will seek to give income-qualified city staffers and other civic workers first dibs on a portion of the units.

The Create-MRK plan also features a childcare facility, but it’s smaller than the competition’s at 4,000 square feet and designed primarily for infants and toddlers.

The team includes the two lead developers as co-general partners. Create is a single-person firm run by Modén, who specializes in market-rate and subsidized multifamily projects. Started in 2015 by President Sydne Garchik, MRK is a privately held real estate investment company singularly focused on affordable housing development, including hotel- and motel-to-residential conversion projects. The two women have been working together for four years on projects such as the Vista Woods Apartments project in Pinole. The project in Northern California was a ground-up construction project and includes 179 affordable units for seniors.

Gensler is the project architect and Swinerton is the general contractor. The team has tapped non-profit SAY San Diego, which operates before- and after-school programs at many San Diego schools, to run the childcare facility.

The Create-MRK proposal envisions a six-month period for abatement of asbestos followed by 16 months of construction, Modén said.

The team is also proposing to create a revenue stream for the city.

“Our proposal and the option to return an asset to the city that has cash flow in perpetuity provides ongoing value and exceeds the city’s investment for current and future generations of San Diegans, truly changing the story of this building,” Modén said.

The teams, which do not get to participate in Monday’s closed session hearing, are pointing to their respective experience and areas of expertise to buoy their bids.

Council members will also need to weigh the developers’ ability to secure state and federal subsidies, or what’s known as low-income housing tax credits. The subsidies are issued on a rolling basis by the California Tax Credit Allocation Committee and can be highly competitive.

Modén said that MRK Partners is an expert at affordable housing finance. She said the developer was recently awarded $100 million in tax credit allocations for a new construction project in San Francisco.

Silverwood, the Affirmed executive, noted his company’s three decades of experience and pointed to the $38 million Connections Housing project in downtown San Diego as a direct comparable to the 101 Ash project. In 2013, the developer finished the conversion of the historic, 12-story building at 1250 Sixth Ave., turning the office building into a homeless-shelter-plus-permanent-housing facility operated by PATH. The former San Diego Athletic Club, built in 1928, needed asbestos remediation, seismic retrofits and structural fixes.

The city’s negotiating team is presenting the proposals to council members in closed session, as opposed to showcasing the dueling bids in a public forum, to project San Diego’s negotiating power, said Rachel Laing, a spokesperson for San Diego Mayor Todd Gloria.

“Ongoing real estate negotiations are discussed in closed session for the same reason you wouldn’t invite a seller’s real estate agent and lawyer to discussions with your own agent and lawyer about your plan to make an offer on a house,” Laing said. “It disadvantages the city, and therefore the taxpayers, to let the other party to a negotiation be privy to your position.”