Name: Federal housing officials review San Diego's purchase of failed indoor skydiving facility
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Federal housing officials review San Diego's purchase of failed indoor skydiving facility

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Copyright © 2022, The San Diego Union-Tribune | | AdvertisementAdvertisement Federal housing officials are reviewing a 2018 real estate purchase by the city of San Diego that relied on millions of dollars in community development block grants to pay for a failed indoor skydiving center.The review was sparked by Rich Riel, a former candidate for mayor. In a letter to a U.S. Housing and Urban Development official, Riel accused Mayor Kevin Faulconer and City Attorney Mara Elliott of relying on a questionable report to determine the value of the property, which the city paid $7 million for without the benefit of an independent appraisal by the buyer.Advertisement“Municipal, state and federal laws require when the mayor and city attorney use federal funds to purchase real property for the city they must demonstrate that the purchase is ‘not a gift of public funds’,” Riel wrote to the federal housing official.“Mayor Faulconer and City Attorney Elliott used a fraudulent appraisal on a property clearly worth less than $7 million to violate the law,” Riel added.The HUD official responded last Thursday thanking Riel for the information and stating that his concerns were under review.“As we discussed, it will be reviewed and handled by the appropriate entities within HUD,” wrote Rufus Washington, a regional HUD director in Los Angeles.The Mayor’s Office issued a statement Monday saying it communicates with HUD regularly and has no reason to believe the federal agency is concerned about the purchase.“HUD reviews the city’s CDBG (community development block grant) expenditures on an ongoing basis and reviews expenditures through the city’s audit process,” spokeswoman Christina Chadwick said by email. “Both of these practices are designed to ensure the city remains in compliance with federal regulations.”The City Attorney’s Office did not respond to questions about the validity of the broker’s opinion. Instead, spokeswoman Leslie Wolf Branscomb issued a statement that said: “HUD plays an important role in ensuring the correct use of CDBG funds.”Most of the funds used to pay for the building came from Community Development Block Grants, a HUD program that according to the government generally pays for new infrastructure, economic development, community centers, housing rehabilitation and other projects.Faulconer asked the City Council in January 2018 to purchase the three-story building at the corner of 14th Street and Imperial Avenue for $7 million. The city never performed its own independent appraisal for the property.The plan was to convert the 26,000-square-foot building into a —a one-stop shop where homeless people could be interviewed about their personal situations and provided public services to steer them off the streets.Critics at the time said the city did not need to spend $7 million on a building to sign homeless people up for services. The same thing could be accomplished by renting a vacant storefront somewhere else in East Village, the critics said.To justify the sale price of the indoor skydiving center—which went out of business in 2017 just months after its opening — the city relied on what’s called a broker’s opinion of value, a less formal evaluation that concluded the building was worth $15 million.The Dec. 1, 2017 opinion was written by a company called ECP Commercial, which last year merged with a firm called SVN Vanguard Commercial Advisors. The two-page analysis lists no address and no California Department of Real Estate license number for ECP Commercial.The two brokers who signed the opinion -- Mike Conger and Brian Jenkins -- left ECP Commercial after the city purchase and in 2018 co-founded a new venture called Commercial Asset Advisors.Neither Conger nor Jenkins returned calls and emails seeking comment on the opinion they wrote about the indoor skydiving facility for ECP Commercial.According to the California Department of Real Estate, a valid broker’s opinion is required to include the license numbers of the brokers who produce the assessment.Assistant Commissioner Shelly Wilson called the oversight a “technical violation” that generally would not result in disciplinary action. She said she referred the matter to the enforcement program. Chadwick, the mayor’s spokeswoman, called the broker’s opinion “supplementary documentation” supporting the purchase price.She said Faulconer also relied on an appraisal performed on behalf of the previous owner in 2016, when the downtown real estate market was influenced by negotiations to build a new stadium for the San Diego Chargers, who moved to Los Angeles a few months later.That appraisal estimated the property value at up to $22 million, including some $11 million worth of furniture, fixtures and other equipment directly related to the skydiving venture.The Mayor’s Office said at the time that no new appraisal was required to justify the purchase price. It did not provide the City Council copies of the 2016 appraisal nor the 2017 broker’s opinion when it sought approval to buy the property.Council members unanimously approved the recommended purchase in January 2018 and escrow closed the following month, days after The San Diego Union-Tribune disclosed the proposed transaction.The 26,000-square-foot complex was built on two vacant parcels purchased by Alan “Buzz” Fink, a San Diego businessman with a passion for skydiving.The planned entertainment venue ran into problems with its financing and its mechanical systems. Fink ended up borrowing millions of dollars from well known San Diego financier David Malcolm to salvage the project and landed in court over design issues with a turbine manufacturer.In September 2017, Malcolm’s Suncoast Financial Corp. foreclosed on the property, as well as on Fink’s home in Coronado, county records show.The following day, the skydiving property was transferred to 1401 Imperial Holding Co. LLC, an entity owned by the John M. Tworoger trust. The city’s deal, which was contingent on a very short escrow, was reached with the family trust.The housing navigation center was supposed to open by the summer of 2018, but various delays pushed the opening back by a year and a half. The center opened in December 2019.Riel, a former construction company executive who received more than 8,000 votes in the March mayoral election, also sent his concerns to the FBI and to San Diego police. He said he has not heard back from either agency. Get our essential investigative journalism Sign up for the weekly Watchdog newsletter for investigations, data journalism and more. You may occasionally receive promotional content from the San Diego Union-Tribune. Show Comments Load More Advertisement Get our essential investigative journalism Sign up for the weekly Watchdog newsletter for investigations, data journalism and more. 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Copyright © 2022, The San Diego Union-Tribune | | AdvertisementAdvertisement Federal housing officials are reviewing a 2018 real estate purchase by the city of San Diego that relied on millions of dollars in community development block grants to pay for a failed indoor skydiving center.The review was sparked by Rich Riel, a former candidate for mayor. In a letter to a U.S. Housing and Urban Development official, Riel accused Mayor Kevin Faulconer and City Attorney Mara Elliott of relying on a questionable report to determine the value of the property, which the city paid $7 million for...

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Federal housing officials review San Diego's purchase of failed indoor skydiving facility

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