The city of San Diego is preparing to defend its civil case against a real estate broker who bought shares of a company that owned a hotel he recommended the city buy.
Early this year, The San Diego Union-Tribune reported that two hotels purchased by the city to house homeless people appeared to cost taxpayers more than they should have paid.
Records showed that city officials agreed to buy two Residence Inns based on property valuations that were calculated prior to the COVID-19 pandemic.
The public-health crisis and worldwide lockdown drove the value of hotels down sharply, but the Housing Commission paid among the highest per-room costs of all hotels sold in the county last year, the Union-Tribune reported in February.
Three months later, the online news organization Voice of San Diego disclosed that real estate broker Jim Neil personally invested in a company that was selling one of the two properties he recommended the city purchase.
Neil made tens of thousands of dollars in profit on top of the commissions he and his firm collected from the Housing Commission, Voice of San Diego reported.
By August, City Attorney Mara Elliott had seen enough. She filed a lawsuit against Neil and his brokerage firm, claiming they had made fraudulent misrepresentations to the Housing Commission ahead of the purchase of two Residence Inn hotels.
She also accused the defendants of violating conflict-of-interest laws and having a prohibited financial interest in one of the two contracts in which they participated.
“The facts of this case are appalling, and the City Council is determined to get to the bottom of how millions of public dollars were spent,” Elliott said in announcing the lawsuit.
The legal complaint targeted Neil, Kidder Mathews Inc., RT San Diego LLC, and Chatham RIMV, the former owner of the Residence Inn on Hotel Circle, as defendants. The Housing Commission also bought another Residence Inn in Kearny Mesa last year.
After the lawsuit was announced, Neil said he had previously informed city officials that he held a personal investment in the company selling one of the two hotels.
“Mr. Neil informed the Housing Commission of his intention to purchase the stocks before the transaction and he was told there would be no issue with these actions by senior housing commission staff,” his public relations firm said in a statement.
Chatham RIMV is seeking to get the case dismissed. A hearing is scheduled next month.
The city paid $67 million for the Residence Inn on Hotel Circle — a sales price that came to $349,000 for each of 192 rooms. The deal also called for the city to pay a broker’s fee of just over $500,000 — an arrangement outside experts said was unusual.
Only one other hotel that changed hands in San Diego last year came close to that per-room cost — a boutique La Jolla bed-and-breakfast featuring 15 rooms that sold for $15.2 million, or $347,000 per room.
The other Residence Inn bought by the city, a 144-room hotel in Kearny Mesa, was purchased for $39.6 million. The sale cost $275,000 per room, the fifth-highest per-room cost of all hotels sold in San Diego in 2020.
Housing Commission officials defended the purchases earlier this year, citing the properties’ condition and noting that each unit had kitchenettes and other amenities suitable for housing homeless people.
But a few months later, the City Attorney’s Office sued over the deals. The case will next be heard in San Diego Superior Court on Jan. 28.