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Nash May Have Votes to Bail Out His Project

Times Staff Writer

Two months after losing a battle to build a six-story office building on a site widely considered to be downtown’s premier block, developer Terry Nash may yet win the war because there apparently are not enough votes on the San Diego City Council to condemn his property.

At least four of the nine council members say they oppose the notion of spending public funds to condemn and purchase a 10,000-square-foot parcel that Nash owns at Front and F streets, adjacent to the Horton Plaza retail and entertainment center. Those four votes would be sufficient to block any attempt to condemn Nash’s property, because condemnation actions require a two-thirds vote of the council, or six votes.

“It’s a new ballgame--anything can happen now,” said Councilman Ed Struiksma, one of the four opposed to the possible condemnation plan. Councilmen Bill Mitchell and Bill Cleator also have consistently sided with Nash, while Councilman Mike Gotch, who originally voted against Nash’s office building proposal, indicated Tuesday that he plans to oppose condemnation because he now believes that Nash “didn’t get a fair shake” when the council rejected his proposal in April.

Even before Gotch’s conversion, the possibility of the council condemning Nash’s tract appeared doubtful, largely due to the impending resignation of Councilman Dick Murphy, who will assume a Municipal Court judgeship next month.

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Because Murphy’s seat is up for election this fall, the council is expected to leave his position vacant so as not to give an appointed incumbent a political edge over other contenders in the 7th District. However, Gotch’s shift appears to insure that the two-thirds vote needed to condemn Nash’s property could not be attained regardless of whether Murphy’s seat is immediately filled or left vacant.

Nash, who last month began excavation on the site despite the council’s April 23 rejection of his proposal, concedes that blocking condemnation represents only a tentative victory, because he still lacks city approval to construct the $6.3-million office building. Indeed, the current lack of sufficient council votes to either condemn Nash’s property or approve his proposed development conceivably could leave the fate of the prime downtown block in limbo for a prolonged period.

“But this at least gives us some maneuvering room,” Nash said in an interview Tuesday. “If the city realizes it can’t condemn this land, the council might reconsider our project. My feeling is that reason is finally beginning to prevail, because we now see more council members saying they’re not so eager to spend public money to stop a private developer from developing his own property.”

The controversy surrounding Nash’s proposal has become a microcosm of the disparate philosophies and increasingly high stakes involved in downtown redevelopment. Moreover, the dispute has come to be viewed as a David-versus-Goliath saga that pits Nash, a relatively small-scale developer, against two of the city’s major development powers--Ernest W. Hahn Inc., the firm building the $140-million Horton Plaza project, and Walt Smyk, developer of the Meridian, a $71-million, 27-story luxury condominium tower. Both of those projects, between which Nash’s property is sandwiched, are scheduled to open this summer.

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During more than a half dozen public meetings on Nash’s proposal this spring, numerous city officials and private developers described the block on which it is located as downtown’s premier undeveloped block. The block, bounded by 1st Avenue and F, G and Front streets, has been envisioned as a future expansion area for the Horton Plaza project or a potential site for another residential development similar to the Meridian.

On April 5, the board of directors of the Centre City Development Corp., the city’s redevelopment arm, recommended approval of Nash’s proposed project, despite some directors’ reservations about whether a small office building represented the most ambitious use of such a choicely situated block.

However, Gerald M. Trimble, CCDC’s executive vice president, argued that Nash’s project would not preclude a major development on the block’s remaining 45,000 square feet--a contention that Smyk challenges. Of that land, Smyk’s firm owns 32,500 square feet and the city owns 12,500 square feet. The Senator Hotel building, which Nash renovated, also covers 5,000 square feet of the block.

City Council members expressed general support for Nash’s office building project at an April 9 meeting, but delayed a decision for two weeks because of uncertainty over the Hahn company’s possible interest and legal rights to the block.

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Hahn’s Horton Plaza contract with the city gives the firm 60 days to offer its own development plan if another developer issues a proposal for any part of the block. That right of first refusal seemingly had been waived when Hahn’s chief executive officer, John Gilchrist, wrote a letter to the CCDC this spring stating that the firm had no current interest in developing the site.

Other Hahn officials, however, tried to rescind the letter, contending that at the time the letter was written they did not understand that the proposed office building, combined with the Senator, would leave the block’s remaining 45,000 square feet in an irregular configuration that would complicate, and perhaps rule out, any future large-scale development.

Although Mayor Roger Hedgecock complained that the city was being “jerked around” by the Hahn company, the council approved the two-week delay to clear up the questions.

Gilchrist subsequently reiterated his firm’s disinterest, but the two-week delay gave Smyk and other opponents of Nash’s plan additional time to lobby council members, a factor that figured heavily in the council’s 5-2 rejection of the proposal on April 23.

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“The old-boy network went to work . . . and just squashed our project,” Nash lamented.

During the council’s lengthy debate, opponents characterized Nash’s project as an inferior use of the prime block.

“In . . . 20 years, people are going to look back and wonder what a six-story office building is doing flanked by a major, multi-million-dollar retail complex and a high-rise luxury residential tower,” Gotch said on April 23. “It doesn’t fit.”

As a follow-up to its April action, the council earlier this month voted to spend $1 million to buy Nash’s property, the same price he paid for the site last year. Nash, however, has rejected that offer, and noted that the $1-million offer “wouldn’t come close to covering” the additional several hundred thousand dollars that he says he has spent on legal and design fees and interest on a construction loan.

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Nash’s rejection of the city’s offer set the stage for a potentially bitter condemnation battle. However, unwilling to “just roll over, play dead and give in to” the city’s power of condemnation, Nash proceeded to defy the council by securing a city permit and beginning excavation on his site over a weekend in early May. Nash later halted the excavation work, pending the council’s final action.

“I knew that bringing out the bulldozers was going to make some people angry, but we had to do something to protect our investment,” Nash said. “I also wanted to prove how committed I am to going ahead with this project.”

After tempers cooled over Nash’s bulldozer gambit, the developer began quietly meeting with council members “to reopen the dialogue to try to put things back together.” And, at least in terms of blocking condemnation of his property, Nash’s lobbying appears to have accomplished that purpose.

Nash’s supporters on the council argue that perhaps the strongest argument in his favor is that the city should encourage, not discourage, private developers to use their own money, rather than seek public subsidies, to revitalize downtown.

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“Here’s a guy who wants to do exactly what we’ve been saying we want private enterprise to do, and we’re trying to stop him from doing it,” Mitchell said. “That doesn’t make sense.”

Gotch, meanwhile, argues that “all the facts weren’t on the table” when the council rejected Nash’s plan in April. The councilman added that there was confusion over the project’s design, and that he was unaware that Nash had originally proposed a mixed-use residential development for the entire block but had been directed by CCDC officials to limit his proposal to the 10,000-square-foot tract.

“I’ve become acquainted with the project in much greater detail. Unfortunately, that occurred after the vote,” Gotch said. “It’s better to say ‘I was wrong’ than to . . . continue a mistake. And I’m believe that condemnation would be a mistake in this case.” Gotch added, however, that he will press “Terry Nash or anyone else” for the inclusion of some residential development in any project approved on the block.

Although Nash has made it clear that he has no intentions of accepting the city’s offer to buy his property, Trimble said Tuesday that city officials will not seek an “official response” until probably later this week. At that point, the city would be required to advertise its intention to condemn the site for two weeks, meaning that the council’s condemnation hearing could not be held until at least mid-July.

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The council’s failure to condemn Nash’s property “wouldn’t give him an automatic go-ahead, but would put him in a position where he conceivably could go forward” with his proposed office project, Trimble said.

“If the city doesn’t condemn and he’s in conformance (with building and design codes), it would be difficult to continue” to block the project, Trimble explained.

“But until the council votes, this is all just speculation,” the CCDC official added.

Nash said that he hopes to use the four council members’ opposition to condemnation as bargaining leverage to push for reconsideration of his office building proposal or to negotiate with the city on a possible development covering the entire block.

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“It’s in everyone’s best interests to talk about how to best develop that block,” Nash said. “Whether that means the whole block or just my portion of it, I don’t care. I just want to get back to real estate development and get out of the political arena that I’ve been in for the past two months.

“This thing has been a real roller-coaster ride. I’ll be glad when the ride’s over. I don’t know exactly where things will be when it’s over, but at least I’m pretty confident now that there’s no way it’s going to end with condemnation.”


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