The Morning Report
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A little-known deed restriction limiting the ways the old Central Library property can be used has halted already long-delayed plans to redevelop the building.
The shuttered library at 820 E St. has sat vacant for more than six years since the city moved its downtown library in 2013.
After two bidding processes and a formal November 2018 recommendation that the city pursue an exclusive negotiating agreement with Lincoln Property Company to revamp the old library, the developer says it made an unexpected discovery last spring: an 1899 deed signed by civic leader George Marston that seems to mandate that the property house a public library and reading room.
Marston, a department store owner known for his contributions to Balboa Park and institutions including the local YMCA and the San Diego History Center, sold the land to the city in 1899 after steel magnate Andrew Carnegie gave the city a $50,000 to build a library. The original library, often called the Carnegie library, remained until the 1950s when the city built the existing facility.
Now the city and Lincoln, which has yet to ink the negotiating agreement with the city, are grappling with what to do next. The city attorney’s office maintains that the deed does not bar the city from using the property for something other than a library.
It’s the latest real estate headache to emerge following a series of high-profile acquisitions that have not gone as planned. They include setbacks at 101 Ash St., a high-rise the city evacuated in January after repeated asbestos violations amid costly renovation work following a lease, the controversial purchase of a shuttered skydiving facility it took two years to turn into a homeless service center and an industrial property in Kearny Mesa that has also seen delays and ballooning renovation costs.
This time, the city is facing a predicament with a rundown building it already owns that has sat empty for years and that a developer wants to buy and revitalize.
Lincoln has proposed transforming the old library into an office campus dubbed The Stacks aimed at drawing innovation and tech companies with a rooftop deck and ground floor amenities including a café and small museum documenting the history of the old library. Lincoln had hoped to preserve the 1954 building’s historic façade and to break ground on the project late last year.
Brig Black, Lincoln’s executive vice president for Southern California, said the company’s attorney advised the developer that the Marston deed complicated those plans and couldn’t be addressed by simply incorporating a public reading room into the project.
Black said two title companies also said they wouldn’t be willing to insure the building.
Since then, Black said Lincoln has been waiting for City Attorney Mara Elliott’s office to propose a solution. It’s unclear when the matter could go to the City Council, which would need to approve the sale and the negotiating agreement with Lincoln.
“Nothing’s happened,” Black said. “We really have been waiting around for the city attorney’s office to act on this matter and it’s important because the city library is sitting there in a dilapidated condition today.”
Black said Lincoln remains committed to the project and is eager to work with the city to move it forward.
Hilary Nemchik, a spokeswoman for Elliott’s office, said the city is working with outside legal counsel on next steps that could allow a future buyer to secure title insurance for the old library. She noted that the city does not have a formal agreement with Lincoln but has stayed in contact with the developer.
Nemchik shared a 2014 legal analysis by a deputy city attorney that found that the city was not bound by Marston’s directive and even if it were, the property he sold to the city for $17,000 had housed a library for more than 100 years.
“The city’s position is that the deed language does not prohibit use of the former Central Library site for something other than a library,” Nemchik wrote in an email to Voice of San Diego. “Nevertheless, the city understands that title insurance companies are reluctant to provide title insurance to a purchaser when there is any potential cloud on the title.”
Few seemed to know about that potential cloud until recently.
Civic San Diego board members Phil Rath and Stephen Russell, who signed off on the recommendation that the City Council approve an exclusive negotiating agreement with Lincoln, said they weren’t aware of the deed restriction until I told them about it.
“That would have totally changed the discussion,” Russell said.
Rath, who chaired the former downtown development agency’s board at the time of the vote, said he was also surprised it hadn’t come up sooner.
“You don’t have to be super sophisticated person to know that a deed restriction that says it can only be used for a library is a problem,” Rath said.
Nemchik and city spokesman Arian Collins separately said the city had expected to address the deed restriction with a potential buyer before the property was sold. Indeed, the Civic site created for the old Central Library bid includes a link to a preliminary title report that discloses the deed restriction. Civic’s 2016 and 2017 requests for bids did not explicitly mention it.
“Examining and resolving title issues is a standard part of the due diligence process for a real estate transaction,” Collins wrote in an email to VOSD. “Staff involved in the transaction were aware that the text in the deed was something that would need to be resolved during that period, which is the typical and appropriate time for the parties to work out such issues.”
Black said Lincoln had either not seen the preliminary title report or not understood the details of the deed and that it did not come up in the initial title report that Lincoln requested. He said Lincoln learned of the restriction last spring after ordering a second title report.
The issue also had not come up – at least publicly – when Bosa Development walked away from its plan to pursue the 42-story mixed-use apartment project initially selected by the panel evaluating bids to redevelop the old library.
Marston’s 1899 deed somehow flew under the radar for years as various ideas for the old Central Library property were floated.
Among the most persistent has been from power-brokers who have urged the city to consider opening a homeless shelter there.
Restaurateur Dan Shea, a board member of the homelessness-focused Lucky Duck Foundation, said he pressed Mayor Kevin Faulconer on whether he would consider a shelter at the property during a meeting last month. Shea and the foundation earlier this year launched a campaign urging the city to consider using other city facilities including the old library to house homeless San Diegans.
“The mayor told me just last month that that’s on the table,” said Shea, who was skeptical that the mayor would pursue a shelter at the library.
Shea said he had also been unaware of the deed restriction despite years of discussions with city officials about the property.
For years, city officials have cited reasons they say the building would not make an ideal shelter site.
Ashley Bailey, a spokeswoman for Faulconer, said the city has evaluated many city properties for that purpose and found the old Central Library to be among the least optimal, leading it to focus on other locations.
“The building has various serious suitability issues of varying complexity including plumbing and heating and cooling system problems, making preparation of the property for habitation time-consuming and costly,” Bailey wrote in an email to VOSD.
Black said Lincoln has also documented significant environmental issues with the old Central Library, namely asbestos and lead paint, that will require costly remediation.
“It is not inexpensive,” Black said. “It is millions of dollars that we have in our capital budget to renovate and remediate.”
Black is hopeful his company will eventually get the go-ahead to do that work.