Saturday, October 1 2022

Illustration by Adriana Heldiz

Appraisals of two properties acquired by the Housing Commission to house homeless residents contradict the agency’s attempt to dismiss public criticism of the price it paid for the properties.

After the Union-Tribune questioned the price paid by the Housing Commission for two hotels it planned to convert into housing for the homeless, the agency president sent the newspaper and some members from the board of directors of the commission a letter in hard wording defending the transaction.

The document’s analysis was flawed, Housing Commission chairman Rick Gentry argued, as it compared the agency’s purchase to other hotel purchases. Since the agency planned to operate the properties as apartments, the newspaper should instead have compared to recent apartment complex sales, Gentry argued.

“The San Diego Union-Tribune article compared apples to oranges,” Gentry wrote in a letter to the newspaper’s editor, Jeff Light.

But the Housing Commission itself relied on a comparison between apples and oranges to justify the purchase.

In fact, the whole argument of the commission to defend the transactions is directly contradicted by the appreciations on which it relied. One of those deals is now under much closer scrutiny, after lawyers for the agency concluded that the broker he hired to help buy hotels had committed a potentially criminal offense in buying 50,000 shares from the owner of the Mission Valley hotel after signing a contract with the agency, but before negotiating the acquisition.

The Union-Tribune story argued that by spending about $ 300,000 per room for each, the commission was overpaid for the hotels. The Mission Valley hotel, according to the newspaper, was the most expensive selling in the county last year, at $ 349,000 per room.

In the letter, however, the Housing Commission made two arguments in defense of the acquisition, and both are contradicted by assessments which the agency says show it paid a fair price.

Real estate and development professionals often refer to the “highest and best use” of a property, meaning the use of the property that offers the best value while being physically possible and legal.

Multi-family housing, argued Gentry, is the “higher and better use” of the two properties acquired by the commission.

“Permanent rental housing is the highest and best use for these properties, and the SDHC operates them as affordable housing for people who have experienced homelessness,” he wrote to the Union. -Tribune.

This is not what the assessments commissioned by the agency determined.

Of the Mission Valley property, the assessment – conducted by commercial real estate agency CBRE – concluded that it was legal to operate a hotel, continuing to use it as a hotel would be the most physically convenient option and that ‘a hotel would be financially feasible long into the future. None of the other similar hotels recently sold were intended to be converted into apartments, the reviewers found.

“Based on the above, the highest and best use of the property, as improved, is consistent with the existing use as a hotel development,” the assessment found. The appraisal of the Kearny Mesa property concluded the same. Both assessments indicated that if the land was vacant, the most likely person to buy the property would be a speculative developer, pursuing some sort of commercial use. But with the buildings – as the commission bought them – the best use was as a hotel.

Scott Marshall, vice president of communications for the Housing Commission, did not respond to requests for comment.

Gentry not only argued that the property’s most valuable use was apartments, he said the Union-Tribune’s analysis was incorrect as it only compared hotel purchases to hotels. other hotel purchases.

“The prices paid by SDHC for these properties are justified by comparable multi-family housing properties at the time SDHC finalized the purchases,” wrote Gentry.

But neither did the appraisers hired by the commission to assess the properties do what Gentry said the newspaper should have done.

“Our initial research focused on sales of similar Residence Inn by Marriott extended stay hotels in the San Diego market that have occurred since January 2019,” CBRE wrote in its Mission Valley review. “We then broadened our search to include sales from other franchised national properties for extended stays, limited services, selected services and full service hotels in the San Diego market, to appropriately reflect the conditions. from the market in San Diego. “

The company relied on eight long-term hotels sold in Southern California to appraise the properties.

He did not compare the hotel properties to recently sold apartment properties in the area. He did not mention the need to do so.

“The sales used represent the best data available for comparison to the subject,” wrote CBRE.

There was a difference between the analysis of the paper and that of the evaluation. CBRE compared the properties to other extended stay hotels in Southern California, while the newspaper relied on sales of all kinds of hotels in San Diego County. Gentry did not refer to this distinction in his letter.


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