The developers who turned the historic El Cortez hotel into condos have settled for $6.4 million a five-year-long construction flaws lawsuit brought by the homeowners, the Union-Tribune reported today:

The settlement, reached earlier this month, will net the homeowners association just over $3 million, some of which will be used to repay a $200,000 loan taken out earlier to fix the worst problems.

The litigation, and the trouble in the building, dragged the values of the condos there down dramatically. Many condos in the building originally sold for more than $600,000. Currently, the three units on the market are asking for just more than $200,000, the U-T said.

The building caught my eye in early 2008 because prices for the condos there were plummeting. I soon found out it was because homeowners had been fighting the developer in numerous lawsuits about pipes, flooding, the building’s heating and cooling systems and property tax exemptions. And if hearing that word didn’t scare buyers off, lenders — already skittish in the housing slump — wouldn’t give out mortgages to buy condos in a building under litigation. Without the chance of selling, some owners walked away, contributing to the downward spiral for prices there.

From my story in 2008:

The building is distinctive, its architecture different from the throng of downtown condo towers that sprung up in the city’s core in recent years. But a look at the trouble in one of the region’s most well-known buildings — and the fight over the one to come next door — yields some universal truths about real estate here: the fallibility of real estate investment and the tension between planners, developers, homeowners and neighbors.

“We want our building fixed, to what it was supposed to be,” said Joe Roth, vice president of the homeowners’ association. “It looked real nice, but they didn’t go deep enough.”

I found the drama at El Cortez compelling, and I followed it in several stories during 2008:

• The homeowners alleged in several suits the construction was faulty, that the developers hadn’t disclosed their plans to build a sister tower next door and that the developers hadn’t put enough money in the homeowners association reserves to begin with.

• A group of homeowners bought their condos at El Cortez on the false assumption that they’d qualify for property tax savings of up to 70 percent because the building was historic. City officials discovered the tax breaks to the developer had been granted in error, but didn’t catch the mistake in time to alert all of the homebuyers that their taxes would increase. The error allowed the developers to benefit from two overlapping public subsidies: an unprecedented loan from the downtown redevelopment agency and two years of tax breaks for historic properties.

• It got weirder: The developers tried to force one of the most outspoken homeowners to sell their unit back to the developer for a loss. A judge ruled that “unconscionable.”

Now it appears some of the drama has subsided. The U-T doesn’t quote a representative of the developer, but here’s what the homeowners association attorney, Andrew Berman, said in the U-T story today:

“It’s a shame. I feel terrible for the people who bought into this project. … A lot have suffered in the last five years of the project. Hopefully, they have turned the corner.”

I’m the arts editor for VOSD. Please contact me directly at or 619.325.0531 and follow me on Twitter: @kellyrbennett.

Kelly Bennett

Kelly Bennett is a former staff writer for Voice of San Diego.

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