Broker directed Housing Commission’s controversial hotel appraisal, audit finds
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The San Diego Housing Commission likely overpaid by millions when it purchased a Mission Valley hotel in the middle of the pandemic, relying on an appraisal that valued the property from before COVID-19 devastated the tourism industry, a new city audit concludes.
Why it matters: The audit revealed for the first time that a broker — who was hired to help the agency buy hotels to convert into housing for people experiencing homelessness — instructed the appraiser to only appraise the hotel at its pre-COVID value.
The fine print: Jim Neil, the broker, bought 40,000 shares in the parent company of the Mission Valley hotel's owner before he recommended the city buy the hotel from the company.
- The Housing Commission's legal counsel estimated Neil earned $230,000 to $353,000 on his investment after the hotel purchase he facilitated.
Flashback: Months after news of the investment broke, city attorney Mara Elliott sued Neil and his employer, alleging violations of state anti-corruption laws.
- A year later, in 2022, Elliott settled that suita year later in 2022, with Neil agreeing to pay $1 million in damages, including returned broker fees from the deal.
- That settlement upset some Housing Commission board members who wanted to know why the agency relied on the pre-COVID appraisal.
The intrigue: Buried in one of its appendices, the new audit finally answers that question.
- CBRE, the appraisal firm, provided auditors with an email from Neil saying the commission's legal counsel "only wanted a pre-COVID appraisal valuation." None of the agency's staff or legal counsel received the email.
- CBRE told Neil that an "as-is" appraisal that accounted for the pandemic would value the property lower than the $67 million purchase price.
- The Housing Commission had previously asked for pre- and post-COVID valuations, but staff did not object when they received only the out-of-date report.
What they're saying: Lisa Jones, Housing Commission president and CEO, said she does not believe the agency overpaid for the hotel.
- "We do agree that an error was made in the contract monitoring and oversight of the appraisal process," she said. "We believe the property was a good value for the city and the commission then, and is a good value now."
Friction point: Axios asked the city attorney's office if it was aware of Neil's email to CBRE when it negotiated the settlement.
- "Although settlement discussions are confidential and cannot be disclosed, it is important to note that the client ... determines whether to settle a case," a spokesman responded.
The other side: Ryan Clumpner, a Housing Commission board member, praised the auditor for determining who directed the appraisal.
- "It's unfortunate that we only received these answers a year and a half after the case against Neil was settled, when we have no recourse."
The bottom line: The audit concludes that the Housing Commission overpaid by as much as $6.7 million, because hotel values dropped 10 percent in the six months between the appraisal date and purchase.