Column: Ash Street Real Estate Disaster Poses Growing Challenge for Faulconer



When the state announced the date for the recall of Governor Gavin Newsom last week, the raging controversy involving candidate Kevin Falconer escalated into a full-blown San Diego scandal.

In 2016, the former mayor pushed through a real estate deal that would provide the city with a high-rise building for much-needed office space, saving taxpayers tens of millions of dollars.

It turns out that the city agreed to pay much more than the assessed value of the building, Falconer and Donald Trump’s big sponsor left with a profit of $ 5 million, the real estate deal turned into a lawsuit, and the construction of the skyscraper continues. sit empty even if the city paid millions of dollars in rent.

The latest exposure: A volunteer consultant who helped Faulconer navigate the deal, and another like him received almost $ 10 million – not from the city, but from a company acting as an intermediary for the building owners.

At least one former city official has spoken to the FBI on multiple occasions about a deal to sell the 19-story building at 101 Ash St. in downtown San Diego.

The political and potential legal implications come at a particularly bad time for Falconer. The former mayor is considered the leading replacement candidate in the September 14 election if Newsom is removed from office. However, polls showed that California voters oppose the recall of the governor and approve of his work.

So far, the real estate fiasco has barely affected recall campaigns across the state. San Diego Union-Tribune investigative journalist Jeff MacDonald, who revealed details of a deal that fell through for over a year, recently wrote overview this was mentioned in Politico

In addition, the courts satisfied the taxpayer’s claim aimed at terminating the lease-purchase-sale agreement of the building and recovering the city’s money spent on rent. move forward… This means that even more horrific details could emerge about Falconer and other parties involved.

As a candidate for governor, Falconer raised questions about Newsom’s competence, primarily with regard to COVID-19 blackouts and massive fraud in state unemployment system… But this real estate deal, as well as others that went wrong, raise doubts about Falconer’s own abilities as head of government.

Falconer’s track record on another issue could have thwarted an earlier application for the governor’s office. Following his convincing re-election in 2016, San Diego’s mayor was considered the big hope of the GOP in deep blue California. He was a Republican who could win in a city with a high level of democratization, and he received a flattering national press as a rare GOP warrior in the fight against climate change.

Some early polls made it work second behind then-lieutenant. Governor Newsom with the 2018 elections approaching. San Diego then experienced an outbreak of hepatitis A in 2017, largely due to homeless camps and the resulting sanitation crisis. Twenty people died and hundreds were hospitalized.

For years, reports warned of such a catastrophe that was about to happen.

Talk of a governor’s ballot fizzled out when Falconer refocused his efforts on hepatitis and homelessness. As a result, the situation has improved. Falconer now regularly criticizes Newsom for the state’s seemingly intractable homelessness problem, pointing to some of the past decline in San Diego’s homelessness during his tenure as mayor.

It is difficult to say what impact the escalating scandal at 101 Ash Street might have on Falconer’s current governor’s ambitions.

First, there was no accusation that the former mayor personally profited from the city real estate contract. On the other hand, it is a complex mess, and as it develops, it seems that others within the government do not share responsibility to one degree or another.

But at the center of it all was his administration, and he is the one running for governor, so at this point, Falconer is definitely in the greatest political danger.

What’s more, the deal provides opponents with another link between Falconer and Trump, who, in addition to the main Republican base, is California’s political kryptonite. Falconer’s connection with the former president has been a problem from the outset in his campaign for governor.

During the 2016 elections, Falconer said, “I can never vote for Trump.” In 2019, he met Trump in the Oval Office – and critics of the former mayor continue to post photos from the meeting on social media almost daily. Falconer then said he voted for Trump in 2020.

Property developer Douglas Manchester, a longtime financial supporter of Faulconer and one of the most prominent Trump supporters in Southern California, was involved in the 101 Ash St. (From 2011 to 2015, Manchester was owned by The San Diego Union-Tribune.)

Manchester became a co-owner of the property with a $ 20 million investment.

When the deal was finalized, Manchester received $ 25 million. The nature of the building’s ownership and the structure of the lease-and-buy transaction obscured Manchester’s involvement, which became a topic of discussion when the lease agreement was disputed.

Early discussions about the city’s direct purchase of the building were unsuccessful because the asking price was too high for the city, creating borrowing problems. The city then turned to a lease-to-buy option.

The property was valued at $ 67 million, according to Union-Tribune’s McDonald’s, although the city has agreed to pay $ 128 million over a 20-year lease with ownership. In the end, it was determined that several tens of millions of dollars were required for unforeseen repairs.

Advised Faulconer on the deal with real estate broker Jason Hughes. They both described Hughes as a free volunteer for the city, a position Hughes held alongside Falconer’s predecessor, Bob Filner.

Falconer recently said through his representatives that he did not know that Hughes was paid millions of dollars by people on the other side of the negotiating table.

Hughes’ attorney showed reporters letters and emails from Hughes to Falconer administration officials, in which the broker said he expected to receive the money, although it was unclear by whom.

If the mayor had known about the payments to Hughes at the time, it would have meant that he would have deliberately misled the public that Hughes was a volunteer – not to mention that the broker would be seen as genuinely working for the business interests trying to beat city ​​in a multimillion dollar deal.

And they did it. The city’s independent budget analyst called the agreement “horribly one-way (in favor of the landlord) rental. … … “

So when the former mayor campaigns for governor of the state back in San Diego, we are in the “what and when did Falconer know” stage.


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