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San Diego stops lease payments on 101 Ash Street building

Posted at 7:19 PM, Sep 02, 2020
and last updated 2020-09-02 22:19:18-04

SAN DIEGO (KGTV) — In a move to help shed the mounting costs of a real estate deal gone wrong, the City of San Diego says it is stopping lease payments on the sharply criticized 101 Ash Street building.

The city sent a letter to Cisterra Development, which brokered the real estate deal, that it will be "suspending further lease payments for the 1010 Ash Street building," starting with the Sept. 1 payment. The letter adds that the city will not be making any lease payments "until these issues are fairly resolved."

"The City has lost use of the building due, in part, to direct physical loss and damage to the premises, including widespread and negligent disturbance of asbestos," the city's letter reads.

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The property at 101 Ash St. has sat vacant in downtown San Diego for most of the last four years. As it remains empty and unused, taxpayers are paying a daily bill to the tune of $18,000.

The city intended to move 1,100 city employees into the building, but officials soon discovered problem after problem to the site's 19 floors. In December 2019, the city finally moved workers in, only to vacate them a month later when the county detected traces of asbestos.

The building was purchased by the city in 2016 in an approved lease-to-own agreement valued at $72 million.

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Last month, a letter obtained by ABC 10News showed the city was considering proposals for additional services including bare requirements to reoccupy the building, fire/life/safety recommendations, and potentially demolishing and replacing the existing building. Those services were estimated to cost hundreds of thousands of dollars.

A spokesperson for the city told ABC 10News, "Many documents, including this letter, may not be final. It appears you have documents that are not final and should not be treated as such."

In August, City Council leaders voted 5-4 to request monthly updates on the status of the building and costs for several next steps options by Mayor Kevin Faulconer's office, including putting millions of dollars more into the building for the needed repairs, buying out the lease, pursuing a new landlord, trying to renegotiate its lease, or walking away entirely. The last option could risk litigation and credit damage.