San Diego high-rise joins office-to-apartment conversion trend

The office-to-apartment conversion trend hasn't made much of an impact in San Diego, but now it's coming to one of downtown's highest-profile towers.

Catch up quick San Diego officials are in negotiations with the developer Reven Capital to turn the scandal-plagued office tower at 101 Ash St. into 400 apartments for low-income residents.

• The city purchased the tower in July for $132 million as part of a controversial legal settlement.

Why it matters: San Diego's office vacancy rate is well above its pre-pandemic level, before the work-from-home explosion, while the city's housing crisis continues to squeeze residents.

Flashback: 101 Ash has been a source of political and legal controversy since 2017, when the city entered into a lease-to-own deal, but only briefly occupied the building due to major asbestos problems.

• The tower has become a central piece of the city's dreams of revitalizing its Civic Center, while building a new City Hall. But those dreams are on the rocks after no one bid to redo the full five-block area, leaving the city to make do with Reven's narrow pitch.

What they're saying: Chad Carpenter, founder and CEO of Reven, said some of 101 Ash's problems made it ripe for apartment conversion.

• "Because of the asbestos, we'll have to gut the entire building, then bring in a team to make sure we got it all and certify that it's safe," he said. "We'll have a clean shell at that point, and we'll build apartments within that clean shell."
• Plumbing thwarts many office-to-residential conversions — unlike apartments, offices don't usually have individual bathrooms. But Carpenter said that's not a problem, since they can build plumbing from scratch after gutting the property.
• He said housing is the building's optimal use.
• "There is literally no office demand for that old building right now," Carpenter said. "And it's more efficient to replace it than to build from ground up – because to start from ground, you'd have to demolish it for $25 million to $30 million."

Details: Carpenter reiterated that his bid is for all 400 apartments to be reserved for low-income residents — he said Reven will look into tax credits and other options to make the project work.

What to watch: He said he doesn't think providing 100% affordable housing will be a problem, but acknowledged that percentage might come down as the deal comes together.

• Since the project is above the state's 25% affordable requirement, he hopes those extra affordable units could count for the obligations of the other four blocks the city wants to redevelop.
• "Maybe our property can take some of the affordability burden off of the rest of the project," Carpenter said.

Context: San Diego was not among the top 30 cities in office-to-apartment conversions last year, making 101 Ash a compelling experiment in the local market.