Group Announces $105-Million Gaslamp Renovation Plan

A private development partnership announced plans Friday to invest as much as $105 million in the historic Gaslamp Quarter to refurbish buildings and provide low-income housing in a fast-moving plan designed to take advantage of substantial tax credits.

The partnership already has arranged to buy 12 buildings in the district and is taking aim at another dozen, said tax lawyer James E. Schneider, a principal in the project.

Schneider told the city’s redevelopment arm, the Centre City Development Corp., that his firm, Schooner Bay Inc., is negotiating for undisclosed buildings between 4th and 6th avenues, E Street and Island Avenue, and working with the national law firm Rogers & Wells to attract investors.

He promised to return with more details next month, but said the ambitious effort needs a fast track because of uncertainty about the amount of tax breaks available for historical reconstruction after the end of the year.

‘Could Be Very Exciting’

“They feel they need a critical number of buildings for the project to work, and I don’t know if it will come together. The ball is still in their court,” said Pamela Hamilton, acting executive vice president of the CCDC.

“It could be very exciting. We’ll see if they’re real,” said CCDC President John Davies.

Schneider told the CCDC that the deal would involve 500 to 700 residential units, with about 150,000 square feet of commercial space and 200,000 square feet of residential space. Half the residential space would be for low-income tenants, he said.

In an interview, Schneider said the deal would hinge on extensive tax credits for historic rehabilitation and low-income housing, which would combine to make even a low rate of occupancy profitable for institutional investors.

Schooner Bay’s two other local partners, Cambio Investments of Los Angeles and Winners Circle, a Gaslamp property owner and developer, will all play roles in the unfinanced, cash-only venture, Schneider said. Much of the property may be resold in 7 to 10 years, he added.

‘Westwood Village Atmosphere’

“We want to create a theater and restaurant district around the intersection of 5th and G streets. We want to convert the X-rated theater there and put in three or four new (general audience theaters). We’re hoping for a Westwood Village atmosphere,” he said. Most of the housing would be on upper floors of the buildings, and a new condominium project may be built later, he said.

If some long-term building owners refuse to sell, Schneider said, he may ask the city to condemn the structures to force a sale. Hamilton, of the CCDC, said many of the buildings do not meet city upkeep and occupancy requirements and some could be condemned if their owners did not act.

“I’ve been working on owners to upgrade their property for years,” Hamilton said. But she added that the costs related to condemning the buildings could be prohibitive.

Schneider also said he may be willing to donate $4 million to $4.5 million to the city for a revived trolley line down 5th Avenue to the harbor.

Although other tax and real estate specialists said some kind of large-scale rehabilitation effort might be the most effective way to improve the run-down area, they were generally reserved about Schneider’s prospects.

“It’s a very ambitious project that will require substantial sophistication and experience to accomplish,” said Richard Kintz, the managing partner of Brobeck, Phleger & Harrison.

A smaller attempt by Schneider at historical rehabilitation in the area met with failure several years ago when the local business climate did not improve quickly enough and he couldn’t meet loan payments, the lawyers said. The new proposal involves no loans.

Schneider and Schooner Bay attorney William Sauls defended the venture. “It’s a window od opportunity. Wall Street thinks it’s sexy,” Sauls said.

Four investment banks are among the probable limited partners, Schneider said.

The plan marks the return to San Diego of the prominent Rogers & Wells law firm, which Schneider said is working on a prospectus for investors.

The New York-based legal powerhouse closed its San Diego office in 1986, shortly after distributing $40 million in an unprecedented out-of-court settlement with defrauded investors who had put money in the bankrupt J. David & Co., which the law firm had represented.

Investors in the La Jolla company alleged that the local Rogers & Wells office continued to work for J. David after learning that its so-called interbank foreign currency fund was running afoul of federal securities laws.