On the eve of the Mercado project’s planned renaissance, the city of San Diego remains locked in a dispute with its former developer of choice over the basic question of who owns the Barrio Logan land.
The San Diego City Council is scheduled Tuesday to enter into an agreement with new developer Shea Properties on a project that would build a brand new retail and affordable housing development in the heart of one of the city’s poorest neighborhoods east of downtown.
But developer Sam Marasco of LandGrant Development continues to maintain that he holds the title to the land after a years-long legal dispute that, despite numerous court decisions, still hasn’t produced a crystal clear resolution between the two parties on who owns the land.
The city of San Diego says it owns the land free and clear and can transfer it to Shea Properties on Tuesday. It filed suit this month against Marasco demanding that he cease telling reporters and prospective tenants that he continues to own the land.
“If they think they really own it, they would not be going into court, as they are now attempting to do,” Marasco said.
He points to a May 2008 ruling in which a judge declined to grant the city the title and a report from a title insurance company that identifies him as the rightful owner. The city says the same judge’s ruling and records at the County Assessor’s Office prove it is, in fact, the owner.
“He’s doing everything in his power to confuse and cloud these issues because it makes the developer nervous that there’s potential litigation still in the works,” Deputy City Attorney Glenn Spitzer said.
Supporters of the long-delayed project have been hopeful that the Tuesday vote would mean they would finally realize their dream of developing the 6.8 acre plot at the corner of Cesar Chavez Parkway and Newton Avenue.
But the dispute shows that the contentious battle isn’t over yet and it may require at least one more court intervention before the city can turn its full attention to its new developer and turn the page on its former partner.
The two sides have been involved in legal maneuvering for years after the deal unraveled.
In 2006, after years of inactivity on the project, the city terminated Marasco’s right to develop the Mercado del Barrio development, which has been planned as a catalyst for revitalizing blighted Barrio Logan since the 1980s. At that point, it says, it invoked a clause in its contract that allowed it to take back ownership of the land.
A Superior Court judge ruled a year later that the city had properly terminated Marasco’s development rights, but Marasco has argued that ruling did not mean the city automatically assumed ownership of the land.
It may have ended his right to develop it, but he still held the title, he said.
But the county assessor doesn’t think so. Its records indicate the land was transferred back to the city in early 2007.
Marasco, who’s best known for developing Las Americas outlet mall in San Ysidro, said that should not have happened because he and the city were involved in a legal fight.
That legal fight continued on into 2008. The city asked a Superior Court judge to grant it title to the land.
“If they were so sure they owned the land after the 2007 ruling, why would they ask the court to give it to them in 2008?” Marasco said.
The court did not grant the title like the city asked.
But Spitzer said that didn’t mean the city didn’t own it.
“We set out to make things just completely absolutely crystal clear,” Spitzer said. “It still is what it is, but it’s just not as clear.”
For years, Marasco has been trying to recoup the more than $5 million he says he invested in the Mercado project before the city pulled the plug on him.
He presented the city with a new business opportunity this spring: He would sell the land to the Target Corp. for $10 million and he and the city could share in the proceeds. Even though he claims he owns the land, he says he offered the city a share in order to avoid lawsuits in the future.
“I believe in peace with honor,” Marasco said.
Marasco has been showing Target and prospective tenants a report by the First American Title Insurance Co. stating that he is the rightful owner of the land. It appears to have been enough to gain Target’s assurance.
He also argues that the project he’s presenting creates more jobs and tax growth than the Shea project while not relying on subsidies.
The city has shown no interest in negotiating.
Robert Chavez, the Redevelopment Agency’s project manager for the Mercado, said the Barrio Logan community has long opposed a big box retailer like Target in their community.
Spitzer said the city does not owe Marasco for his personal losses and had not seriously considered his proposal.
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