Residence Inn by Marriott at Kearny Mesa was one of the hotels purchased to house homeless. Image via Google Maps

A real estate broker hired by the San Diego Housing Commission to locate housing for the homeless during the COVID-19 pandemic was sued by the city Tuesday for allegedly violating conflict-of-interest disclosure laws in the acquisition of two hotels in Mission Valley and Kearny Mesa.

The lawsuit alleges real estate brokerage Kidder Mathews Inc. and agent Jim Neil did not disclose the alleged conflicts when advising the San Diego Housing Commission to acquire two Residence Inn hotels as part of the city’s Operation Shelter to Home program to temporarily shelter homeless people amid the pandemic.

Neither Neil or a representative of Kidder Mathews immediately replied to requests for comment on the lawsuit, which was authorized this morning by the San Diego City Council.

The city alleges Neil bought 40,000 shares of stock of Chatham Lodging Trust, the former corporate owner of the Mission Valley hotel, before negotiating a $67 million deal for the Housing Commission to purchase the 192-unit property. The $349,000 per-room cost for the Residence Inn Mission Valley was the highest per-room cost for any hotel sold in the county last year, according to a San Diego Union-Tribune report published earlier this year on the deals.

The San Diego City Attorney’s Office alleges Neil’s stock may have increased by much as much as $250,000 since the sale.

Kidder Mathews and Neil also allegedly breached their broker agreement with the Housing Commission when Neil earned commissions on both deals that exceeded the $250,000 limit set forth in the agreement. He received $592,500 in the Kearny Mesa deal and $502,500 in the Mission Valley deal, according to the City Attorney’s Office.

In addition to damages, the city seeks a judgment voiding the Mission Valley transaction, though it said the lawsuit would not return the Mission Valley property to its previous owner or disrupt homelessness services at either property.

“The facts in this case are appalling, and the City Council is determined to get to the bottom of how millions of public dollars were spent,” City Attorney Mara W. Elliott said. “The Housing Commission’s brokers engineered a stock-market windfall on top of more than $1 million in commissions while their client was trying to protect hundreds of unsheltered people from a devastating pandemic.”

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