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The city’s ex-real estate chief says the city’s 101 Ash St. landlord at least twice denied paying a real estate guru who volunteered for the city.
It turned out that city landlord Cisterra Development paid commercial real estate broker Jason Hughes $9.4 million for his work on city leases at 101 Ash and Civic Center Plaza a few years after Hughes publicly said he’d advise the city for free.
During an April 28 deposition, former city real estate director Cybele Thompson testified under oath that she directly asked Cisterra Development principal Jason Wood at least twice whether his company had paid Hughes, after questions from fellow city officials about fees tied to the $127 million 101 Ash lease-to-own deal that went forward in January 2017.
“He told me that he had not,” Thompson said, according to a draft transcript obtained by Voice of San Diego.
Thompson said she did not recall specifically when those conversations happened.
The first time Thompson asked Wood she said she recalled trying to better understand expenses listed in a line-by-line breakdown of the 101 Ash deal. The breakdown included no mention of a payment to Hughes, but there were items for “Cisterra profit” and “underwriting and investment banking fees.”
Thompson couldn’t recall specifically when the second conversation occurred either, but knew it was after the City Council had approved the 101 Ash deal, and that she asked specifically about both 101 Ash and Civic Center Plaza. Again, she said, Wood told her that Cisterra had never paid Hughes for either deal.
But Thompson said she never confronted Hughes about the issue.
“I expected to get a straighter answer from Cisterra,” Thompson said.
At her April 28 deposition, Hughes’ attorney Michael Attanasio pressed Thompson further on why she didn’t question Hughes.
“When Jason Wood told me that they had not paid Jason Hughes, I believed him and took him at his word,” Thompson said.
Wood disputed Thompson’s recollections through a spokesman.
“Mr. Wood has nothing but respect for Ms. Thompson, but her recollection is not accurate,” Cisterra spokesman Eric Rose wrote in a statement. “Mr. Wood never told Ms. Thompson or anyone at the city that Mr. Hughes was not being paid for his work on the Civic Center Plaza and 101 Ash St. transactions.”
Rose noted that Hughes in 2014 told multiple city officials, including Thompson, that he wanted to be compensated for his work on complex lease-to-own deals that required securing a loan and then executing a purchase deal and a lease with the city. Cisterra has said it relied on Hughes to tell city officials and get their approval as the city and Hughes hustled to cut a deal with the company to avoid losing access to the Civic Center building. At the time, the city feared it might lose the building housing hundreds of city employees.
Hughes has claimed Thompson signed a November 2014 letter giving him the go-ahead to be paid, a document his attorney has also shared with Voice. Thompson has said she doesn’t recall signing the letter but has testified that the signature on it appears to be hers.
The payouts to Hughes didn’t become public until last summer as the city pursued legal action alleging that the payments – which city attorneys say they confirmed following subpoenas tied to city litigation – constituted illegal conflicts of interest that should void both deals.
That’s when Hughes and Cisterra first publicly acknowledged that the broker got paid. The bombshell also followed questions from Voice that had until then gone unanswered.
While some former city officials have testified under oath that they knew Hughes wanted to be paid, City Attorney’s Office spokeswoman Leslie Wolf Branscomb argued that the city’s case has only been strengthened by recent depositions.
“The evidence is irrefutable that at the time the 101 Ash contract was made, the city’s volunteer real estate broker, Jason Hughes, was secretly being compensated by Cisterra and so had an illegal financial interest in the city’s approval of the acquisition,” Wolf Branscomb wrote.
But attorneys for Hughes, Cisterra and most recently, investors behind the Civic Center and Ash leases, argue that the city failed to act after learning of Hughes’ intent to be paid, thus setting the stage for arguments about whether a four-year statute of limitations applies.
“They could have simply told Mr. Hughes that he could not be paid on city transactions as long as he had any role with the city,” Attanasio wrote in an email.
Attorneys for the city, however, have argued that Hughes’ communications constituted less than full disclosure and the city did not know of the payments until discovery tied to its 101 Ash litigation.
Text messages obtained by and previously reported by Voice reveal Hughes and Wood were discussing a potential $10 million profit on the Civic Center Plaza deal and a $4.5 million check to Hughes’ company, Hughes Marino, in mid-October 2014. At the time, Hughes asked the city’s landlord not to include his payment in a financial breakdown of the transaction they were preparing to share with the city.
The fact that fees were going to Hughes was never specified in any breakdowns provided to the city.
But Wood and Cisterra Chairman Steven Black have testified under oath in recent months that they understood Hughes had shared his plans to get paid with the city.
Hughes testified under oath in his own deposition that he’d already gotten “explicit approval” from then-Mayor Kevin Faulconer and his chief of staff by mid-October 2014, but he wanted to explain the plan to other city officials.
At the time, Thompson was just weeks into her role as the city’s real estate director.
In her deposition, she recalled Hughes commenting within a couple months of her arrival at the city that “he may seek compensation from some party in the future related to (Civic Center Plaza), but it wouldn’t cost the city anything and it wouldn’t affect their lease rate.”
“I was surprised because my understanding was that he was representing the city for no compensation from anyone,” Thompson recalled. “So I just let him know that I would advise (Thompson’s boss and then-Deputy Chief Operating Officer Ron Villa) and I really didn’t know what else to say to his information.”
Then, Thompson said, she followed up with Villa.
“He really didn’t provide direction at that time,” Thompson said. “He just was surprised by the information and said, ‘Thanks for letting me know.’”
“I think my response was something to the effect of, ‘good luck,’” Villa recalled in his March deposition. “That was it.”
The City Council later took its first vote to approve the Civic Center Plaza deal in January 2015 – nearly two weeks after Hughes and Cisterra executed a services and fee contract documenting the developer’s commitment to pay Hughes 45 percent of net profits – and putting him on the hook for 45 percent of upfront costs if the deal didn’t come together. The City Attorney’s Office has said the city didn’t know about the contract.
Hughes was ultimately paid just over $5 million for his work on the deal.
After the City Council approved the Civic Center Plaza lease, city officials’ focus turned to another downtown high rise, 101 Ash.
Cisterra came back into the picture in 2016 after city talks with then-building owners Sandy Shapery and Doug Manchester halted.
Cisterra once again pitched a lease-to-own deal as one of the options for the city.
On July 13, 2016, Wood emailed Thompson a line-item breakdown of a potential Ash lease that he wrote totaled $17.7 million and explained would be baked into a roughly $90 million loan.
Among the nine line items sent without dollar figures were “Cisterra profit” and “underwriting and investment banking fees.”
Thompson recalled wanting to better understand those line items in her recent deposition. At some point, she said, she asked if Hughes would be paid for his work on 101 Ash as she and Wood discussed other deal points. She said Wood said no.
Months later, the City Council approved the Ash lease deal after hearing from Thompson that the lease rates at 101 Ash would save the city substantial cash over renting at the higher rates the city expected elsewhere. Cisterra eventually paid Hughes $4.4 million, applying the terms of their 2015 contract to the Ash transaction.
Thompson said fellow city officials still had questions after the city moved forward.
Indeed, an attorney hired by the city in 2020 to investigate what had become a debacle surrounding the Ash building, which the city rushed to evacuate the building after a series of asbestos violations, flagged $14.4 million in unexplained costs.
At some point, Thompson recalled calling Wood again with questions.
“In the second conversation, I was more specific and included (Civic Center Plaza) as well,” Thompson recalled. “I said, ‘So you never paid him on (Civic Center Plaza) or 101 Ash?’ And he said, ‘No, [Cisterra] did not.’”