San Diego City Council to consider settlement with Hughes over 101 Ash Street deal

SAN DIEGO (CNS) – The San Diego City Council Wednesday will discuss a proposed settlement with the real estate broker who helped the city negotiate lease-to-own agreements for the 101 Ash Street and Civic Center Plaza buildings and earned more than $9.4 million for doing so.

A possible settlement from San Diego Superior Court Judge Kenneth So was offered on March 16 that would see broker Jason Hughes return the $9,433,872.30 he earned from Cisterra Development for facilitating the sale in exchange for the city dismissing with prejudice its lawsuits against the Hughes defendants (Hughes himself and his company, Hughes Marino).

Mayor Todd Gloria and Council President Sean Elo-Rivera said the settlement was fair and encouraged the other members of the council to accept it.

“The proposed settlement offers an opportunity to hold Jason Hughes accountable and reclaim every dollar he wrongfully took from San Diegans,” they wrote in a joint statement. “We continue to believe he should be held accountable by the justice system for his actions, but we are glad to take this positive step forward as we continue to correct for the mistakes of the past.

“We thank the City Attorney’s Office for their hard work in ensuring the city recoups money that can be invested back into our community,” they wrote.

In civil litigation, the San Diego City Attorney’s Office sued Hughes and the two companies and sought to void the city’s lease-to-own agreements for the buildings. City Attorney Mara Elliott’s office argued there was a conflict of interest because Jason Hughes allegedly represented himself as a volunteer adviser on both deals, but unbeknownst to the city, collected the $9.4 million from Cisterra.

Hughes’ attorneys have maintained that he disclosed his intent to receive compensation to several city officials.

In July 2022, the San Diego City Council accepted a much-debated settlement with Cisterra Development and lender CGA over the 101 Ash Street and Civic Center Plaza real estate deals.

The settlement transferred ownership of the properties to the city for around $132 million — $86 million for 101 Ash and $46 million for CCP — and refunds the city $7.5 million in profits Cisterra made in its lease-to-own deal with the city on the 101 Ash property. The deal allows Cisterra to keep its $6.2 million in profits from a similar deal with Civic Center Plaza. That refund will come in two payments this fiscal year.

Elliott urged the City Council to reject the settlement. A report from the office states that the settlement proposal “presents several significant disadvantages to the city and does not adequately protect the city’s legal and financial interests.”

Elliott said the settlement does not serve the city residents and that she had hoped “Cisterra’s building will be Cisterra’s problem,” while hoping to shift focus and energy toward an upcoming court case in the matter this winter.

The settlement passed 6-3, with several council members saying it gave too much to the companies after what they described as a bad business deal. Councilwoman Vivian Moreno derided the city paying more than $80 million for a building that she said — factoring in true valuation and remediation costs — is worth next to nothing.

“This is not a settlement, this is a capitulation — an admission of defeat,” Moreno said. “Long after this council and mayor are gone, San Diego taxpayers will be paying for this decision.”

When employees began moving into the 101 Ash building following a 2017 lease-to-own deal, it was discovered that the property was unsafe for human occupation due to asbestos. Initially, city staff during Mayor Kevin Faulconer’s administration described the building as needing $5 million worth of repairs and retrofitting. The bill had already exceeded $26 million by 2020, and an independent review conducted after the deal was inked estimates $115 million more will be necessary — $136 million more than staff presented to council.

Under the settlement, the city is responsible for all remediation fees to get the building habitable but would be entitled to all insurance or third-party reimbursement related to previously botched remediation of 101 Ash under the settlement and would “be able to determine the best course of action to garner the most value from building.”

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