Downtown office tower sold to buyer planning to convert vacant floors into residential units

A local real estate developer plans to turn the 58-year-old office tower it just bought in downtown San Diego’s financial district into a mixed-use building with more than 100 residential units.

Encinitas-based Ambient Communities purchased the office building at 530 B St. for $27.5 million — or $110 per square foot — on Oct. 25, property records show.

The developer intends to convert the building’s current and soon-to-be vacant floors into residential units, targeting between 130 and 180 total units, said Robert Anselmo, a principal with the firm. Over time the entire building will likely be converted into residential units, he said.

“Our units are going to amazing. The fact that we were able to buy a building at an attractive price hopefully gives us an advantage to be able to provide an amazing product at a reasonable price,” Anselmo said. “And we’re hopeful that with other office buildings re-trading at a lower basis that they will generate some new users in the downtown area.”

The conversion effort, which will start with a year or more of design and permitting work, marks the first substantial office-to-residential conversion project in the downtown market in the current real estate cycle.

The project is possible, in part, because Ambient paid less than half of what the seller, San Francisco-based Swift Real Estate Partners, paid for the property in August 2017, or $57.7 million. The building’s distinct floor configuration also made it a strong candidate for housing.

“The building has the right size floor plate and bay depths, from the elevators to the edge of each wall, to allow for the proper light and sun into bedrooms, kitchens and living areas. It has uniquely high ceiling height for each floor, which wasn’t common for buildings built during in that era,” Anselmo said. “It also has floor-to-ceiling windows, which makes for very attractive living spaces. And the previous owner spent a lot of time and money in keeping (the building) well maintained.”

Opened in 1966 as the headquarters of the First National Bank Building, the 24-story skyscraper at 530 B St. is emblematic of downtown’s once booming B Street corridor, where post-pandemic workplace trends have led to record vacancy rates and plummeting values.

The 250,000 square-foot building that faces B Street, in between Fifth and Sixth Ave., was 76.8% leased at the time of its sale. Many of the floors will be completely vacant when leases expire next year, Anselmo said. Anchor tenants include National Conflict Resolution Center, Rivo Holdings LLC and U.S. Bank.

Ambient, which is working with architect Carrier Johnson + Culture, intends to convert floors into housing as they become available. The developer said it envisions creating one-, two- and three-bedroom units. The firm also plans to deed restrict an undisclosed number of the units for low-income families.

The developer, Anselmo said, also plans to introduce new amenities, including a gym, and upgrade the outdoor terrace on the third floor into a “pretty special space.”

Founded in 2011 by former Corky McMillin executives, Ambient Communities has experience in master planning communities, housing development and commercial real estate. The company specializes in single- and multi-family housing projects, including several spread across the county. Its portfolio includes the master-planned community Righetti Ranch in San Luis Obispo. Ambient Communities also built and later sold the San Elijo Town Center in San Marcos.

The developer is on the right track with its plans for 530 B, said real estate analyst Gary London, a principal of local firm London Moeder Advisors.

“I like the idea of a partial conversion, because essentially what they’re doing is testing the market, and that’s exactly what I would be doing,” London said. “(Ambient Communities) paid so much less for the building than it was formally valued at, that they have some wiggle room to try new things.”

London added the downtown office market will continue on its current path, with tenants downsizing and moving out of the older stock of B Street buildings and into newer spaces on the west side of downtown, closer to Holland Partner Group’s West project.

The real estate expert previously predicted that the foreclosure of the office building at 600 B St., across the street from 530 B, would be the first of a, “domino of failure along the B Street corridor.”

In the ensuing months, San Diego’s biggest office landlord sold Symphony Towers for cheap — or $84 per square foot. The landlord, Orange County-based Irvine Company, also put two more of its downtown office buildings on the market last month.

Although the conversion of failing downtown office buildings into residential buildings has been openly discussed by industry professionals, nothing substantial has materialized in the current real estate cycle. That’s because the popular opinion among architects is that only a certain type of building, one with the right space configurations, is ripe for conversion, said London, who disagrees with that logic.

“The office market is so moribund right now, so down, that it’s important to try new things,” he said.

The Tower 180 office tower at 180 Broadway Ave., which was purchased by hotel developer J Street Space in late 2023, is expected to be converted in some fashion, although with a focus on hotel rooms. Two affordable housing developers are in preliminary talks with the city of San Diego to convert the empty 101 Ash St. office building into residences for low-income families.

CBRE’s Matt Carlson, Hunter Rowe, Camille Doan, Matt Pourcho and Anthony DeLorenzo represented the seller in the 530 B Street transaction. Mickey Morera of Kidder Mathews represented Ambient Communities in the deal. Ambient Communities borrowed $16.5 million to finance the transaction.