City Auditor’s Report: Housing Commission Overpaid for Hotel

The San Diego Housing Commission likely paid about $6.7 million more than it should have for a Mission Valley Hotel it purchased in 2020 to convert to housing for homeless people. That’s according to a report released Tuesday by San Diego’s Office of the City Auditor on the agency’s scandal-plagued acquisition of the Hotel Circle Residence Inn. 

That overpayment came because, despite purchasing the Hotel Circle Residence Inn in August 2020, the Housing Commission based the price on a valuation from February 2020, a month before the Covid pandemic sent hotel prices into decline, as former Managing Editor Andrew Keatts revealed in 2021.

Background: Longtime Voice readers will remember this scandal we uncovered. Keatts revealed that the Housing Commission hired a broker, Jim Neil, to help it buy two hotels. The broker then invested in the company that owned one of the hotels he later recommended the Commission purchase. Then the Housing Commission paid what the auditor now confirms was a price inflated by the decision to appraise it by its status before the pandemic. 

It was a good bet: In the months after the commission’s purchase of the Residence Inn, the trust’s stock price shot up, nearly tripling. In a memo, the agency’s legal counsel wrote Neil had likely netted between $230,000 and $353,000 from his timely investment – that’s on top of $502,000 the Housing Commission had already paid him as part of the acquisition deal. That last sum was nearly double the fee the limit the commission had initially agreed to.

City Attorney Mara Elliott sued the broker and the city agreed to settle with him. However, Elliott never explored or figured out why the hotel was appraised by its value as a hotel before the pandemic rather than a hotel during the pandemic. And some people raised objections. 

The counter: Housing Commission CEO Lisa Jones told Voice her staff fully accepted the recommendations of the audit and pointed out that the hotel was purchased and quickly transformed into 190 units people moved into and it is worth more now than when it was purchased. It’s a place she’s proud to operate now. 

More: The report went on to state that although the commission followed best practices for property acquisition in five of the six hotel purchases it made during that time, the agency “lacks a formal property acquisition strategy and does not commit to an annual acquisition goal.”