The city of San Diego is preparing to defend its civil lawsuit against a real estate agent who bought shares in a company that owned a hotel he recommended the city to buy.
Earlier this year, The San Diego Union-Tribune reported that two city-bought hotels to house the homeless appeared to cost taxpayers more than they should have paid.
Records showed that city officials approved the purchase of two Residence Inns based on property valuations computed prior to the COVID-19 pandemic.
The public health crisis and global lockdown caused hotels to plummet in value, but the Housing Commission paid one of the highest cost per room of any hotel sold in the county last year, the Union-Tribune reported in February.
Three months later, the online news organization released the Voice of San Diego disclosed that real estate agent Jim Neil personally invested in a company that sold one of the two properties he recommended for sale in town.
According to the Voice of San Diego, Neil made tens of thousands of dollars in profit in addition to the commissions he and his company collected from the Housing Commission.
City Attorney Mara Elliott had seen enough by August. She filed a lawsuit against Neil and his brokerage firm alleging they had fraudulently provided the Housing Commission with false information prior to purchasing two Residence Inn hotels.
She also accused the defendants of violating conflict of interest laws and of having a prohibited financial interest in either of the two contracts they were a party to.
“The facts of this case are appalling, and the city council is determined to investigate millions of dollars in public spending,” said Elliott when announcing the lawsuit.
The lawsuit was directed against Neil, Kidder Mathews Inc., RT San Diego LLC and Chatham RIMV, the former owners of the Residence Inn at Hotel Circle, as defendants. The Housing Commission also bought another Residence Inn in Kearny Mesa last year.
Following the announcement of the lawsuit, Neil said he had previously informed city officials that he had a personal stake in the company that is selling one of the two hotels.
“Mr. Neil informed the Housing Commission of his intention to buy the shares prior to the transaction and was told that these actions would not be a problem from senior Housing Commission officials,” his public relations firm said in a statement.
Chatham RIMV tries to dismiss the case. A hearing is scheduled for next month.
The city paid $ 67 million for the Residence Inn at Hotel Circle – a sale price of $ 349,000 for each of the 192 rooms. The deal also required the city to pay a brokerage fee of just over $ 500,000 – an arrangement that outside experts thought was unusual.
Only one other hotel that changed hands in San Diego last year came anywhere near that cost-per-room – a 15-room La Jolla boutique bed-and-breakfast that retails for $ 15.2 million or US $ 347,000 – dollars sold per room.
The other Residence Inn purchased by the city, a 144-room hotel in Kearny Mesa, was bought for $ 39.6 million. The sale was priced at $ 275,000 per room, the fifth highest cost per room of any hotel sold in San Diego in 2020.
Housing Commission officials defended the purchases earlier this year, citing the condition of the property, noting that each unit had a kitchenette and other amenities suitable for housing the homeless.
But a few months later, the public prosecutor sued the business. The case will next be heard in the San Diego Superior Court on January 28th.
