As Mayor Bob Filner’s special assistant for real estate services, Jason Hughes saved San Diego City Hall roughly $20 million by renegotiating leases for its downtown offices -- as well as more than half a million dollars by refusing to take any fees for his work.
Although Filner -- who appointed Hughes despite complaints from other downtown real estate brokers -- has since left office, it seems likely that Hughes will have the chance to remain on the job through the near future.
Interim Mayor Todd Gloria said this week that he appreciates the work Hughes has voluntarily done to save taxpayer money and that he plans to meet with him soon to discuss his future with the city.
“Whenever we can save money, that’s a good thing,” Gloria said in June, the last time the City Council reviewed one of Hughes’ leases.
On the other hand, despite the high marks he has received from city officials, there is no guarantee he will keep his job once a new mayor is elected.
As a City Councilmember, for instance, Kevin Faulconer praised Hughes as “a great example of the power of volunteers working for the city, although at a vastly different level than what we’re used to seeing.”
But as a mayoral candidate, Faulconer says if he is elected he will review all appointments and pending nominations, making no commitments until it is appropriate to do so.
Hughes, who heads the Hughes Marino real estate consultancy downtown, declined requests for comments.
Previously, Hughes has said his volunteer work for City Hall -- the county’s second-largest property owner after Qualcomm (Nasdaq: QCOM) -- dovetails with his professional work as an advocate for tenants.
“I look at this as not only a civic duty, but also a way to protect the rest of my clients downtown ...,” he told reporters in May, as he and Filner announced his first transaction for the city. “It’s looking at all of my clients for the next five to 10 years and making sure that we set the bottom [for real estate prices] where it should be and not to be inflated where everybody ends up spending a lot more money.”
In that transaction, less than a month after his appointment, Hughes arranged for the city’s public utilities and engineering capital projects departments to move out of their quarters at 600 B St. and relocate a block away at 525 B St., saving between $2.9 million and $3.2 million per year, or a total savings of roughly $15 million over the five-year term of the lease.
In a downtown office market still struggling with over-supply, Hughes was able to reduce the price per square foot from $2.62 to $1.25. And in cooperation with city officials, he pared down the office space from 138,964 square feet to 77,621 square feet, with an option for an additional 25,000 square feet if needed.
“He put this leasing thing into a whole bigger context about how to use our building more efficiently,” Filner said at the time.
In July, Hughes renegotiated the city’s lease at 1010 Second Ave. for a projected savings of $4.84 million over six years, or an average of more than $800,000 per year. Instead of the former flat rate of $1.74 per square foot, Hughes negotiated a sliding rate that began at $1.17 for the first year and will rise at 3 percent per year until hitting a peak of $1.36 in the final year.
Before Filner became mired in the scandal that led to his resignation, Hughes was said to be looking at potential transactions regarding city-owned space in the Civic Center Plaza.
Prior to Hughes' appointment, the city hired private consultancies to conduct its real estate negotiations on a commission basis, meaning that the higher the pricetag on the property, the more money they made.
Critics on the City Council sometimes questioned the fees, such as in March 2011, when the city paid the real estate firm Cassidy Turley a 0.98 percent commission, amounting to roughly $80,000, when the city’s Real Estate Assets Department sold the World Trade Center on Sixth Avenue to the city Redevelopment Agency for $8.2 million, so it could be used as a homeless shelter.
“Since this is the city working with itself, why are we paying a real estate commission?” asked then-Councilman Carl DeMaio. “This should be a real easy sale because you have a motivated buyer and a motivated seller who are essentially the same person. ... (The broker) didn’t make the sale. We bought our own building.”
James Barwick, who then headed the Real Estate Assets Department, responded that Cassidy Turley had tried to market the building to 50 potential buyers over the previous four years and therefore deserved the commission even though they were unsuccessful.
Five months later, Hughes offered to work as a real estate consultant for a token $1 per year. But then-Mayor Jerry Sanders rejected the offer and instead kept Cassidy Turley.
“The city gladly welcomes volunteers to help out at our libraries and recreation centers, but we don’t use them to conduct multimillion-dollar transactions involving taxpayer money,” Sanders spokesman Darren Pudgil said at the time.
When Filner became mayor he rejected the Sanders administration’s recommendation to retain Cassidy Turley and -- after four months of inaction -- instead picked Hughes.