SAN DIEGO, CA — In a bold stride toward solving one of California’s most pressing urban challenges, the City of San Diego has signaled its strong support for a landmark $250.3 million adaptive reuse project that could redefine the region’s affordable housing future. At the heart of the proposal is the long-troubled 101 Ash Street office tower — a 21-story downtown building marred by asbestos, vacancy, and public controversy — now poised to be reborn as a beacon of community-focused innovation and inclusive urban renewal.
On Wednesday, the City Council’s Land Use and Housing Committee voted unanimously to recommend approval of a 60-year ground lease with development partners MRK Partners and Create Dev LLC. If approved by the full City Council later this month, the deal will greenlight the conversion of the obsolete skyscraper into 247 deed-restricted residential units designated for low-income families, along with additional commercial and childcare spaces designed to support working households.
A Vision for the Future: Transforming Blight into Hope
“This proposal does just what the city needs in a time of crisis — big, bold ideas and a tenacity to re-envision a vacant, underperforming skyscraper into an exciting adaptive reuse conversion,” said Christina Bibler, Director of San Diego’s Economic Development Department and lead negotiator on the deal. “This is more than a real estate transaction; it’s an opportunity to shape a brighter, more equitable future for San Diego.”
The proposed development would house individuals and families earning 30% to 80% of the area median income (AMI), addressing a deepening affordability gap that has left thousands of working-class residents without access to safe and stable housing. Additionally, the plan includes 25,000 square feet of retail space and a 4,000-square-foot childcare center, ensuring the mixed-use building serves as a vibrant, multifunctional community hub.
A Financially Strategic Approach
San Diego’s financial structure for the deal reflects innovation and restraint. The city is not contributing direct cash to the development but will instead loan the building’s assessed value — $45.6 million — to the development team via a seller’s note. Under the agreement, developers will begin repaying the loan after 15 years, including 4% simple interest, with profits eventually returning to the city’s general fund. The structure also includes a clause for the city to receive 50% of net rental income beginning in year 15.
The cost of conversion — estimated at more than $1 million per unit — includes $40.1 million for asbestos abatement and interior demolition, $67 million for the residential build-out, and $20 million in loan and interest charges. Moreover, MRK and Create Dev LLC have committed to a project labor agreement and prevailing wage construction, adding $18.5 million in labor costs.
Despite the high cost, officials maintain the investment is justified. “This is the best reuse program for that building,” said Create Dev founder and San Diego Planning Commissioner Kelly Modén. “We’re going to be able to house up to 800 people in this building and provide a lot of family units. And we are desperate for affordable housing.”
Leveraging Federal Financing to Make Housing Attainable
To bridge the project’s funding gap, MRK-Create will pursue $114.7 million in federal tax subsidies — $82.5 million in competitive low-income housing tax credits and $32.2 million in historic tax credits. While 101 Ash is not currently a historic building, developers plan to apply for designation to qualify for the incentives.
These tax credits are crucial. They allow developers to secure capital by selling credits to private investors, which reduces the need for debt and ensures units remain affordable over the long term. The ground lease gives the developer two years to secure financing, per the city staff’s report.
Reclaiming Civic Trust and Turning a Page on the Past
Once the former headquarters of Sempra Energy, the 101 Ash Street building has long been a source of civic tension. A 2017 lease-to-own deal collapsed after a failed remodel revealed serious asbestos contamination. In 2022, the city formally bought out the lease for $86 million — a settlement that sparked public outcry and legal scrutiny.
Councilmember Kent Lee emphasized the importance of rewriting this painful chapter: “This project is an opportunity to turn what has been part of a dark chapter in our past into something that serves the public in a meaningful way.”
Although the proposal has been met with optimism, some caution remains. Independent Budget Analyst Noah Fleishman praised the deal’s policy merits but noted the reliance on historic tax credits poses risk, as the building has not yet been granted official historic status. Furthermore, legal objections have emerged. Former City Attorney Michael Aguirre warned against approving the plan without fully vetted documentation, citing potential legal vulnerabilities.
A Deadline with Purpose
City officials aim to finalize documents and present them for full Council approval by the end of July, ensuring the project qualifies for the upcoming September round of low-income housing tax credits. Should the financing align, construction and abatement could begin within the next two years — a timeline that aligns with the city’s urgent need to relieve housing shortages while reducing costly maintenance expenses for a currently uninhabitable asset.
San Diego has already spent $7.2 million between FY 2023 and FY 2025 on the building’s upkeep and has earmarked an additional $2.5 million for the current fiscal year. Until escrow closes, those costs will continue to accrue — heightening urgency to act.
Reinventing the Urban Landscape — One Tower at a Time
This development signals a transformative shift in how San Diego repurposes neglected public assets. By merging financial creativity with community vision, the 101 Ash project represents the future of equitable urban redevelopment.
MRK Partners and Create Dev LLC bring a record of success to the table. MRK, a Los Angeles-based investment company founded by Sydne Garchik in 2015, specializes in affordable housing and adaptive reuse. Create Dev, led by the seasoned planner Kelly Modén, brings intimate local knowledge and a track record of impact-driven design. Their partnership, now formalized through a new LLC, MKAFF Housing LLC, positions the venture for long-term success.
For city leaders, developers, and residents alike, 101 Ash Street is no longer a symbol of missteps — it’s becoming a story of progress, vision, and inclusive growth.