Mayor Gloria inks expensive lease for San Diego's largest homeless shelter

Mayor Todd Gloria announced Thursday the city of San Diego plans to open its largest long-term homeless shelter, after acquiring a warehouse north of downtown.

Why it matters: If the City Council approves the long-term lease, the facility would add a significant number of beds to the shelter system — 1,000 — and be a major financial investment, costing millions.

• The city's current shelter system has 1,809 beds across 18 locations.

By the numbers: The city would pay $1.9 million in yearly rent, plus $18 million in improvements to the space, and an estimated $30 million to operate the facility annually, Gloria spokesperson Rachel Laing confirmed.

As for who's footing the bill for facility improvements, Laing said the city is trying to raise philanthropic funds, but has identified state and federal dollars if donations don't cover the cost.

• Operating costs will come from a combination of government sources, including the city's general fund.

Between the lines: The city is leasing the property from Douglas Hamm, CEO of development firm Creative House, who just completed his purchase of the property Tuesday for $13.25 million, the seller's broker Robert Brown confirmed to Axios.

• Brown also brokered his client's purchase of the property in 2015 for just $8.3 million.
• Hamm's purchase had been in escrow since October of 2022, Brown said.

The fine print: The city reached a 35-year lease agreement with Hamm.

• The property is a nearly-65,000-square-foot former print shop at the corner of Kettner and Vine, in Middletown near the airport.
• The long-term lease — which has two, five-year extension options — "enables the city to upgrade the facility based on the changing needs of unsheltered residents," said Sarah Jarman, director of the city's homelessness department.

Zoom out: The entire operating budget of the San Diego's homeless department this year is $44 million.

• The city is currently staring down a $167 million budget deficit.

Friction point: The city of San Diego has an extensive recent history of troubled real estate deals, as the city's independent budget analyst outlined in a 2020 memo.

• That includes a major scandal at the 101 Ash St, high rise, the lease of a vehicle maintenance yard that couldn't fit the fire trucks meant to be fixed there and the purchase of an indoor sky-diving facility to turn into a homeless services hub.

What they're saying: Brown was surprised to learn what the city planned to pay in rent, while also paying for the upgrades, saying to Axios, "They're going to do their own tenant improvements and then pay $1.9 million a year in rent?"

• He asked, sarcastically, "Do they want to rent any other property?"

What's next: The City Council needs to approve the city's acquisition, a process that could begin on April 18 with a hearing before the land use committee.