Development Official Keeps Away From Iconic Building

Friday, May 9, 2008 | The head of San Diego’s Centre City Development Corp. has recused herself from negotiations with the developer of one of downtown’s most ambitious projects.

Nancy Graham, the president and COO of the agency that coordinates the city’s redevelopment efforts in the urban core, has not participated in discussions with the Related Companies of California, which is developing a $409-million, 41-story East Village condominium and hotel project.

Graham’s involvement with Related, as a one-time partner with a separate subsidiary of the company, led to a controversy in Florida that ended with her resignation from a similar redevelopment post in West Palm Beach. There is no evidence that her connection to the company is illegal, though the possibility of a conflict of interest proved controversial for Graham in Florida.

Graham said the Florida controversy was politically motivated, sparked by a rival’s effort to keep her from running for mayor. She said she severed ties with the company two years ago and recused herself from any involvement in negotiating the company’s development deal at Seventh and Market near Petco Park. The land there today is little more than vacant asphalt, save for a parking lot and a historic hotel.

Her past relationship with Related has raised questions here, as the company’s proposed downtown development has changed since it was first proposed in 2006. As the proposal has wound through design reviews, 11 affordable rental units and 20 public parking spaces have been cut and a police storefront office has been eliminated.

The company today aims to build a 41-story building, replete with hotel, condos and public parking. It will benefit from an $8.7 million subsidy from CCDC, the city’s downtown redevelopment arm. The high-rise will be LEED-certified, offer some affordable rental apartments and have a small space for police bicycle storage. Bill Witte, president of the Related Companies of California, envisions the building as an elegant skyscraper that will become an iconic part of San Diego’s downtown skyline.

The Related parent company is based in New York, with subsidiaries across the country. Its California-based affiliate is working on the San Diego project. Both its Florida- and New York-based companies worked with Graham previously.

While serving as mayor of West Palm Beach, Fla. from 1991 to 1999, Graham led efforts to redevelop the city’s downtown, which culminated with Related of New York constructing CityPlace, a $500 million revitalization project that built homes, restaurants and businesses in the city’s downtown.

After leaving office, Graham worked directly with Lennar Homes and the Related Group of Florida, jointly developing a $100 million waterfront condominium project in Lantana, a city 10 miles south of West Palm Beach. N-K Ventures, the development company she formed with her husband, shared in the profits from the condo construction. Graham said her company flipped the property to Lennar, which then brought in Related as a partner. A 2006 lawsuit filed against Graham’s company estimated its profit at $75,000.

Graham went back to public office in 2003, while the condo construction project moved forward, taking a job as executive director of West Palm Beach’s Downtown Development Authority.

Her continuing relationship with Related caused friction while Graham served as the authority’s director, leading to a well-publicized rift with current West Palm Beach Mayor Lois Frankel. The two were once political allies. But Frankel, who declined comment through a spokesman, told the Palm Beach Post in 2005 that she became uncomfortable with Graham’s ties to Related.

“I mainly felt that her role as a developer had the potential — it was either causing conflict or the appearance of a conflict,” Frankel told the newspaper.

Rob Samuel, a West Palm Beach jewelry shop owner, told the paper that Graham had approached him twice asking him to sell downtown land a block away from CityPlace to an undisclosed buyer. Samuel declined comment, but told the Post that the requests made him feel uncomfortable. Frankel subsequently ordered Graham to stop negotiating development deals, the newspaper reported.

In an interview, Graham said Frankel’s statement was politically motivated. Graham said she resigned and was not ordered to stop negotiating. The dispute — and Frankel’s comment to the newspaper — was an attempt to prevent Graham from challenging Frankel for mayor, Graham said.

“That was a total bullshit statement,” Graham said.

Graham said her financial connection to Related has ended. She sold her interest in N-K Ventures to her former husband, Kevin Lawler, when they divorced in 2006. State law prohibits public officials from making decisions for one year about any entity that has paid them more than $500.

“I have no interest in N-K or anything they do,” Graham said. “It is a bullshit argument by either sour grapes losers or other people. They were given no favoritism.”

Graham said she recused herself from all negotiating on the Seventh and Market project, noting that CCDC hired two outside consultants to handle negotiations. Fred Maas, CCDC’s chairman, confirmed Graham’s recusal.

“I did not bring Related to San Diego, I did not call Related,” Graham said. “I had nothing to do with Related being involved in this. Not a thing.”

CCDC’s effort to redevelop the land at Seventh and Market began in 2006, when the agency requested all interested developers to submit bids. Seven did, and the competition was ultimately narrowed to two companies: the Encinitas-based Robert Green Company and Related, which joined with CityLink Investment Corp., the development company led by William Jones, a former San Diego City Council member.

Related proposed a 42-story building with a 250-room hotel, condominiums, parking garage, police storefront and museum. Following CCDC guidelines, the proposal included 650 public parking spaces and a 1,250-square-foot police office. Twenty percent of its 418 condominiums were slated as affordable housing.

CCDC picked Related’s proposal in March 2007, entering into an exclusive agreement to negotiate with the company. When it was initially chosen, the project met all of CCDC’s suggested guidelines for the project. Within seven months, though, the project at Seventh and Market shrunk.

Twenty public parking spots were cut. The police office became a 370-square-foot police bicycle storage area with two public bathrooms. The number of condominiums decreased, and with it, so did the number of units of affordable housing that would be constructed. In all, 11 affordable units were eliminated.

As those revisions took place, the project began to more closely resemble the proposal made by Related’s competitor, the Robert Green Company. As it stands now, the project does not meet all the guidelines that CCDC spelled out in 2006. The project did not go back out to solicit bids to see if other competitors could offer a better development than the revised proposal now winding its way through the regulatory process.

John Collum, CCDC’s senior project manager who is overseeing the plan, said such a step was not necessary. The project did not change substantially, he said. The police office was eliminated because the San Diego Police Department did not want it, he said, and some public parking spots were cut because the building’s structural design changed.

“It’s just the simple evolution of a project as it goes through the review process,” Collum said. “This was a pretty ambitious project. For a developer to meet all the guidelines, it would’ve been shocking to us.”

Collum said he believed officials from the Robert Green Company have been trying to cast doubt on the process. Green, the company’s president, did not return calls for comment.

Bill Witte, president of Related Companies of California, the developer, said the project’s changes were insignificant.

“Have there been some changes? Yes,” he said. “But in the larger scheme of things they’re relatively minor for a project of this scope and complexity.”

Such changes are not unusual, said Peter Dennehy, senior vice president of the Sullivan Group Real Estate Advisors. “Developers are changing projects all the time to grapple with things,” Dennehy said. “It doesn’t surprise me that much. That’s the kind of thing that’s happening every day.”

The development deal must still be approved by the San Diego Redevelopment Agency, the group composed of San Diego City Council members. They are not expected to hear the proposal until July at the earliest.

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