The fallout from a newly released forensic investigation into the city of San Diego’s purchase of a downtown high-rise continues with the Director of the Real Estate Assets Department announcing that she has resigned.
Cybelle Thompson, who did not return a request for comment, announced her resignation two days before a scheduled special city council meeting to discuss a number of issues with 101 Ash since the city purchased the building in December 2016. The Real Estate Assets Department director’s departure was first reported by Voice of San Diego.
In September 2016, Thompson oversaw the 101 Ash Street purchase in conjunction with former Assistant Chief Operating Officer Ronald Villa - who resigned in February due to his involvement with 101 Ash. In their initial pitch, according to council documents and video of the meeting reviewed by NBC 7, Thompson and Villa told City Council members that entering into the agreement would save taxpayers millions in lease payments.
Thompson also told councilmembers that 101 Ash Street only needed $10,000 in pressure washing, as well as a few beads of caulk, to be move-in ready.
Thompson’s estimate was off by more than $145 million.
Since acquiring the building through third-party Cisterra Partners, the city has spent more than $30 million to renovate the building and remove what was found to be a substantial amount of asbestos inside. A new estimate, released by the mayor’s office, shows that an additional $115 million is needed in order to get the building ready for employees to move in.
NBC 7 Investigates released a comprehensive look at the history behind the 101 Ash Street purchase. Click here to read.
The city, according to the forensic investigation, cannot refinance the property and avoid “the likelihood of incurring a huge financial penalty…”
Last week, NBC 7 Investigates obtained the entire forensic investigation into the city’s $127 million lease-to-own agreement for the former Sempra headquarter building in downtown San Diego.
As reported by NBC 7, outside investigators commissioned by Mayor Kevin Faulconer found that the acquisition of 101 Ash was wrought with issues long before the city signed on the dotted line.
In their reports, outside investigators found that the city failed to conduct an independent review of the building before purchasing it, stating that the city “deviated” from its normal practice by “failing to conduct (a) city-commissioner analysis” to determine what obstacles the asbestos inside would have on any large-scale renovation projects.
Adding to the lack of review, Thompson and other city leaders failed to conduct an inspection to determine how much money in tenant improvements that seller Cisterra would allow during negotiations.
In the lease-to-own agreement, the city negotiated to receive $5 million in tenant improvements for 101 Ash.
But emails from Thompson show that even that estimate was done with little to no research.
“The $5M was simply an assumption based upon new paint and carpet throughout the building and minimal (tenant improvements) otherwise,” wrote Thompson in a February 2018 email obtained by NBC 7 Investigates through a public records request.
“The $5M was simply an assumption..."
Cybelle Thompson on $5 million in tenant improvements that the city negotiated.
“At the time we signed this agreement, we had no plans drawn up by (architect Gensler) and no meetings had taken place with individual departments to know what their programming needs might be…”
On July 30, Mayor Kevin Faulconer disclosed one of the three reviews of 101 Ash. Faulconer also hinted at the possibility that that city will be filing lawsuits against the contractors it hired to conduct the large-scale renovation of 101 Ash.
"The City will pursue all legal and financial options to recoup costs, hold accountable the contractors who worsened the building’s condition, and implement new levels of accountability throughout internal operations," Faulconer said.
He did not mention, however, that the investigation found little can be done to hold the sellers accountable for the condition of the building.
In the reports obtained by NBC 7 Investigates, those conducting the forensic review found that language in the sellers’ contract “likely prevent” the city from pursuing any legal action against Cisterra or former owner Sandor Shapery.
“In the event the city were to contemplate legal action against Cisterra regarding the accuracy of the disclosures made by it prior to the lease agreement, these exculpatory provisions would likely preclude such action given their strong terms,” reads a portion of the forensic investigation from Burke Williams Sorensen.
Among the “exculpatory provisions”, the law firm found that the city gave “full release and waiver of any right to sue,” according to the report.
NBC 7 reached out to City Attorney Mara Elliott’s Office for a response on the office’s review of the contract, including the release of liability.
A spokesperson for Elliott said the 101 Ash Street deal had been done in the months prior to Elliott becoming city attorney and despite her role as Chief Deputy City Attorney for Public Services, and managing the Purchasing and Contracts Department, Elliott did not review the 101 Ash contract.
“Mara Elliott was not City Attorney when the lease transaction was approved,” the city attorney spokesperson told NBC 7. “Nor was she involved in any aspect of this real estate acquisition.”
“Mara Elliott was not City Attorney when the lease transaction was approved,”
City Attorney Spokesperson
The spokesperson added that Elliott is “profoundly disappointed in this transaction and concerned about the costs involved to remedy the issue. She has invited outside counsel to review all elements of this transaction, including our own Office's involvement, and is looking forward to the final forensic report.”
Elliott’s office, however, did not stop there. On July 30, hours after NBC 7 Investigates sent Elliott and her spokesperson questions regarding some of the contract issues in the forensic report, Elliott’s Assistant City Attorney, John Hemmerling sent a letter stating the office was launching a criminal investigation into the release of the report.
The following day, Elliott retracted the letter and issued a public apology to NBC 7. Elliott also sent a memo to city councilmembers and the mayor about the unauthorized release.
“The City Attorney’s Office takes very seriously our ethical responsibility to maintain the confidentiality of attorney-client communications and our work product. When a City official or City staff discloses confidential communications, it not only compromises the City’s position but also makes it difficult for our Office to provide thorough and candid advice.”
The strong language from the City Attorney widened her office’s rift with some city councilmembers. Elliott’s attempt to control the number of methods that city council members can view confidential memos and reports backfired when the majority of San Diego’s city council members refused to show up to the August 4, 2020, closed session meeting.
Council’s refusal to appear prompted Elliott’s office to accuse councilmembers of a political stunt.
“We have serious work to do on important cases to protect taxpayer dollars and to keep our City moving forward, but we will not be able to accomplish anything meaningful for this City if Councilmembers continue to skip work and shut down government operations for no legitimate reason,” reads a statement from Elliott’s Office.
NBC 7 Investigates also sent Mayor Kevin Faulconer questions regarding any role his office played in the negotiations for 101 Ash Street.
A spokesperson for the Mayor said all negotiations for 101 Ash Street were “handled by the Real Estate Assets Department and other city staff.”
In addition, mayoral spokesperson Craig Gustafson also stated that Cisterra came to the city with the lease-to-own offer and that reviews were conducted. As for the language in the contract, Gustafson directed any questions to the City Attorney’s office.
“There were also independent reviews of this entire transaction by the City Attorney’s Office (independently elected) and the Independent Budget Analyst (which works on behalf of the City Council). I would direct any questions you have about the 'exculpatory provisions' to the City Attorney’s Office as that office reviewed the lease from a legal standpoint.”
The mayor and city council will hold a special meeting on Thursday, August 6 to discuss the next steps moving forward with 101 Ash.
Meanwhile councilmember and mayoral candidate Barbara Bry says the timing of Thompson’s resignation is problematic.
“It’s no coincidence that the Director of Real Estate Assets resigned just before Thursday’s public hearing, nor is it a coincidence that neither Ms. Thompson nor former Deputy Chief Operating Officer Ron Villa will be present to answer questions at Thursday’s council hearing. I am today asking City Attorney Mara Elliott to be present at that hearing to answer questions from the council in person,” said Bry in a statement.
Added the council member, “My intention is to ensure all information related to this transaction is made public, and then to propose solutions to relieve city taxpayers of the enormous costs resulting from it.”
