A real estate financier who obsessed over the idea of a homeless navigation center is a central player in the city’s rapid, unprecedented purchase of a failed indoor skydiving facility that is set to become the homeless navigation center he wanted. Others wonder why the city’s spending millions for a homeless facility that won’t house any homeless residents.
By Lisa Halverstadt.
Earlier this year, the city rushed to buy a shuttered indoor skydiving center in East Village.
The purchase – and the city’s plan to turn the building into a facility serving homeless San Diegans – have drawn an avalanche of concerns ever since.
An East Village commercial real estate broker and others have said they believe the city paid too much for a building still outfitted with two 30-foot tall wind tunnels. Neighbors exhausted by overwhelming homelessness in their area have criticizedthe project and puzzled over exactly what the city plans to do. And homeless advocates have questioned whether the building can address the challenges the city aims to fix.
City officials describe the facility as a place where homeless San Diegans often overwhelmed and alienated by a confusing web of services can be guided to those that work best for them. They say that, though the building won’t provide a place for homeless people to actually sleep or live, it will house workers who can connect clients to programs and housing, as well as representatives from agencies such as the Department of Motor Vehicles.
Months after the city purchased the building, debates continue. Some argue the $7 million sunk into the building should have instead been invested in housing projects or outreach to guide homeless San Diegans to existing programs. Others contend that the city could have saved money and brought services closer to vulnerable people outside downtown by leasing several smaller properties citywide. Some experts have also pointed out that a building alone can’t correct overarching challenges with the region’s homeless-serving system and may not end up being the successful hub the city envisions.
But the city is proceeding.
The City Council is expected to vote later this month on a contract with Family Health Centers of San Diego, the nonprofit selected to operate the project.
The process has moved at an unprecedented pace, drawing more suspicions. And a downtown real estate financier’s obsession with the project and the history of the building he eventually helped deliver only add to the intrigue.
For more than a decade, Alpha Project CEO Bob McElroy floated the idea of a facility where homeless San Diegans could be assessed and linked with more help.
Two years ago, unsettled by a dramatic spike in homelessness downtown, a group of business leaders including real estate financier David Malcolm asked McElroy what they should do to address the problem.
McElroy said he mentioned the intake center concept and urged the group to take the lead on making the project a reality. His past efforts had gone nowhere. McElroy thought business leaders might have more luck.
Malcolm, an influential supporter of Mayor Kevin Faulconer, is well known for trying to get big deals done quickly, an approach that’s sometimes drawn scrutiny.
Malcolm grabbed McElroy’s idea and started hustling to make it happen.
The former port commissioner, state coastal commissioner and a Chula Vista city councilman started working his connections. He called meetings. He worked the phones and sent messages. He demanded that the mayor’s team pursue an intake center facility, often pressing them multiple times a week.
Malcolm and prominent developer Tom Sudberry also began pushing potential sites, including a city yard at 20th and B streets in Golden Hill. They even pledged to put up $3 million for the project, a sum they said they could raise or even cover themselves if necessary.
Malcolm was passionate about the idea, often getting emotional as he discussed the need for the city to quickly deliver the service center for a growing population of homeless San Diegans.
“We’re denying them the opportunity to get back into productive society without this intake facility that will have the services on site,” Malcolm once told me, choking up as he spoke.
Finally, in his 2017 State of the City address, Faulconer publicly agreed to pursue the concept Malcolm had become obsessed with delivering.
Since then, there have been competing visions for how that center might work. For a time, city officials envisioned the facility would house shelter beds. Now it won’t.
The differing concepts have been laid out in three separate city bidding processes, though city officials largely called on nonprofits, rather than the city, to suggest how the intake center should operate.
Initial bid requests released in 2017 asked nonprofit groups to commit to offering shelter beds and to propose a site, an ask that proved challenging.
Malcolm would soon have an answer for that.
In mid-2017, street homelessness was booming. Tents lined East Village streets and downtown businesses were in panic mode.
Faulconer was fumbling. His promises of big homelessness initiatives, including the navigation center, had stalled.
Meanwhile, an indoor skydiving facility in East Village was flailing.
In 2017, Coronado resident Alan “Buzz” Fink opened Airborne San Diego, a site he hoped could be the first of as many as 10 facilities like it across the country.
Fink had designed his 26,500-square foot building at 14th Street and Imperial Avenue to accommodate two massive three-story glass wind tunnels. Floors of office and gathering spaces encircled the wind tunnels. The aerospace-inspired building sat next door to Father Joe’s Village East Village campus, an area packed with homeless San Diegans.
By September 2017, as San Diego faced a hail of international news coverage for its hepatitis A crisis, Fink’s dream had crumbled.
That month, county records show Fink handed over the property to Malcolm’s mortgage company Suncoast Financial Mortgage Corp. to avoid a foreclosure.
Malcolm’s company had helped loan the Airborne San Diego project $19 million.
Public filings and a security contract obtained by Voice of San Diego show Malcolm’s son Evan Malcolm was a manager of the company.
Dmitriy Todorov, CEO of National City-based Bald Eagle Security, said one of his security guards working at the facility called him one day in late September to report that workers were walking out of Airborne San Diego.
Those workers left behind dozens of bright red and blue flight suits and helmets and stacks of documents, including U.S. Bank deposit sheets. Months later, a marked-up August 2017 calendar sat open, as did a mostly emptied pack of bottled water.
Alarmed, Todorov immediately called the younger Malcolm, who had signed the company’s security contract. Malcolm told Todorov to stop sending guards to patrol there. Todorov said he has unsuccessfully sought $82,000 in unpaid security bills from David and Evan Malcolm, who he said handled his previous security charges.
Todorov also provided a copy of a March 2017 check signed by David Malcolm for past security work at the skydiving business, showing that Malcolm’s mortgage company also helped handle at least one of the company’s non-real estate bills.
David Malcolm told VOSD earlier this year that his son was never paid for his work at the skydiving facility and did not have an ownership interest in the building or the company. Evan Malcolm declined to comment.
Court documents reveal the skydiving business faced a series of setbacks before it closed in September.
First, in December 2016, one of the building’s two 30-foot-tall wind tunnels failed, according to filings in an ongoing lawsuit between Fink, Malcolm’s mortgage company and the company that constructed the wind tunnels.
Six months later, a multi-ton fiberglass piece flew off and damaged one of the tunnels. Maryland-based Aerolab claims skydiving instructors who operated the wind tunnel at rates far above the recommended speed, not shoddy design work, caused the accident.
By August 2017, both tunnels were closed.
Fink had already sunk $30 million into the business and learned fixes would cost millions more.
The business had also racked up several liens from companies that said Airborne owed them money. One, a $330,000 bill from the wind tunnel company it’s now battling in court, remains on the books.
“(Fink and Airborne) were ruined,” Fink’s attorney Bryan Vess wrote in a February court filing. “In the end, (they) were foreclosed upon by their lender, losing everything – their ownership interests, their investment. Even their homes. Everything.”
That left Malcolm with a building – at least on paper.
County records show Fink signed the property over to Malcolm’s mortgage company that September at a value of $10 million.
A month later, Malcolm updated county records to clarify that his company hadn’t put up the money for the skydiving facility.
In an Oct. 20 filing, he said his company had simply processed a loan for the trust of deceased developer and Burger King franchisee John Tworoger. He also transferred the ownership of the building to a new company.
Encinitas attorney Jon Rodrigue, who has partnered with Tworoger and Malcolm on past real estate deals, had three days earlier created a holding company for the property, 1401 Imperial Holding Company LLC.
In the Oct. 20 filing, Malcolm said 1401 Imperial Holding Company LLC was now the owner of the facility.
By this point, the mayor’s approach to homelessness had radically shifted. Faulconer faced an onslaught of criticism amid the hepatitis A outbreak and was eager to show he was on top of it.
As Faulconer raced to respond, Malcolm voiced his frustrations with the city’s pace on the intake center.
In late September, Malcolm told The Union-Tribune that Faulconer’s office had agreed to announce plans to allow Alpha Project to proceed with an intake center at 20th and B streets without a formal bidding process and then delayed those plans. Faulconer’s office has said there was no such deal.
“We certainly think 20th and B can house 600-plus people and the (hepatitis A) outbreak would have been averted,” Malcolm told the U-T. “But there are a number of things that could have been addressed; 20th and B wasn’t the only thing that people brought forward.”
Indeed, Malcolm had another property for the city to look at.
Malcolm told the mayor, Faulconer Chief of Staff Aimee Faucett and Chief Operating Officer Kris Michell about the shuttered indoor skydiving facility in mid-November.
Faulconer had just hired Michell, previously the CEO of the Downtown San Diego Partnership, to get things done.
Michell asked the city’s real estate assets department to check out the building.
Around the same time, Alpha Project COO Amy Gonyeau said Malcolm gave her keys to the indoor skydiving facility so she and others could tour it. She said she didn’t recall Malcolm making any commitments but said she assumed his intake center push had some momentum.
“I think he was putting pressure on to get something done,” Gonyeau said.
Malcolm, eager to unload the property, also discussed giving it away.
He approached Father Joe’s Villages, which operates the St. Vincent de Paul campus next door, about potentially donating the skydiving center to the nonprofit.
Deacon Jim Vargas, the nonprofit’s CEO, and Bill Bolstad, who leads the agency’s development efforts, said they toured the building with Malcolm that month.
After the tour, Vargas and Bolstad said they thought about multiple possibilities for the unique building. They briefly discussed whether it could serve as a parking garage, offices or a shelter.
They also immediately recognized the challenges the facility posed.
“My reaction was, wow, this is gonna take a lot of work to convert to anything that we can use,” Vargas said. “It has two gigantic silos in the middle of the first floor. It was made to be a skydiving center.”
The conversations soon dropped off.
Malcolm said in an April email to VOSD that he wished it had worked out.
“I would have liked very much the owner to donate the property to St. Vincent,” Malcolm wrote.
But a powerful buyer would soon go public.
Faulconer and his team were eager for a win in the wake of the hepatitis A outbreak. They pounced on the indoor skydiving facility.
Faulconer announced at his January State of the City address that the city planned to buy the building and make it a homeless navigation center.
By mid-January, details of the city’s plan started to emerge.
Faulconer’s team wanted to use $7.3 million in federal Community Development Block grant funds to buy and upgrade the building – and quickly.
The holding company led by Rodrigue was willing to offer the property for $7 million, which it pitched as a discount, if the city could close the deal by early February.
Rodrigue told VOSD that Malcolm’s mortgage company had requested that the Tworoger trust consider a $7 million asking price, down from the $10 million value recorded when Fink handed over the building in September.
“Given its proposed use to help address the homeless issues in San Diego, (Tworoger’s widow Brenda Tworoger) agreed to that request,” Rodrigue wrote in an email to VOSD.
City officials touted it as a good deal they didn’t want to miss. Purchasing the building right away would allow them to open the navigation center a year earlier than planned, a point the mayor’s office has often highlighted.
The city rushed to make it happen, deciding against conducting its own appraisal.
In January reports to the City Council, city real estate officials described an appraisalof the property that concluded it was worth $15 million to $22 million. They didn’t mention they were summarizing two reviews passed along by the seller, or that at least one of those analyses had factored in furniture and equipment at the skydiving center.
City spokeswoman Katie Keach has said the city’s principal appraiser looked at the past reviews and found them reasonable.
The city purchased the shuttered skydiving center within days of the Jan. 29 City Council vote. The sale included furniture and equipment that still remains in the building.
Nonprofits considering whether to submit bids to operate the property soon had their own questions about the facility.
The Housing Commission issued a reworked request for proposals in late February incorporating the new building and axing an earlier call for nonprofits to include shelter beds in their plans. The city and the Housing Commission have said the city’s decision to open three temporary tents for hundreds of homeless San Diegans eliminated the need for more beds.
As the bidding process continued in mid-April, the Housing Commission produced a list of responses to questions raised by unidentified nonprofits as they considered next steps.
Among them: Could the city offer up more cash for upgrades, namely to address the “wasted square footage” associated with the facility’s massive wind tunnels? How would the city handle the lack of parking for workers at the center? Would the city do anything about low balcony walls on the upper two floors of the building that could “pose a risk to the safety and security of clients?”
Five nonprofits eventually submitted bids.
The Housing Commission picked Family Health Centers of San Diego, which operates health clinics across the county, to run the center.
Family Health Centers would not share its plans for the center or the proposal it submitted to the city with VOSD, citing its ongoing contract negotiations with the Housing Commission.
“We will be happy to be more definitive once that contract and scope is clearly defined,” Family Health Centers spokesman Anthony White wrote in an email. “Out of respect for the process, and the San Diego Housing Commission, we are not yet ready to discuss the scope.”
A handful of the region’s leading homeless providers decided not to not to pursue bids or expressed reservations about the city’s vision for the project.
Alpha Project, the group Malcolm had wanted to run the center, has said it decided to focus on other projects it’s taken on in the past year.
Vargas of Father Joe’s Villages said his group pitched an alternative approach. They advocated programming centered on outreach workers with computer tablets rather than on the building itself.
They expected to use the building for some meetings with clients, Vargas said, but they didn’t want to make it a bustling hub. It was a reflection of their conclusion that East Village has already taken on an inordinate share of homeless-serving programs and that many homeless clients may not have the wherewithal to make it to the center.
“Our point is that we can use that building selectively and smartly. We would make use of the building,” Vargas said before the Housing Commission announced it had selected Family Health Centers to operate the facility. “It’s just, for the most part, we think that the outreach workers will be the most effective aspect of this whole approach.”
Some homeless advocates expressed more skepticism.
Martha Ranson, who recently retired after years managing efforts to serve homeless women at Catholic Charities, argued the city could get more bang for its buck with investments in existing programs, permanent housing and homeless outreach than with the $7 million navigation center building. Catholic Charities opted not to submit a bid to operate the facility.
“I just think it’s an expensive thing that’s not gonna work,” Ranson said.
After all, Ranson said, the new building alone won’t translate into more housing or long-term solutions for homeless San Diegans. It won’t house any homeless San Diegans – temporarily or permanently.
In a June letter to Faulconer, a coalition of East Village business and resident groups urged his team to focus more on outreach and on services elsewhere in the city. They want the mayor to commit to transport clients coming from other neighborhoods to and from the center and to hash out plans to open similar facilities in other parts of the city over the next year, among other demands.
In the months since the purchase, real-estate pros and neighbors have also continued to ask why the city chose to purchase a building rather than lease multiple properties across the city or outside East Village.
Developer Jason Wood, who until recently lived in East Village, and East Village real estate broker Sam Patella both suggested the city could have saved substantially by leasing smaller properties in multiple San Diego neighborhoods – and served more homeless San Diegans across the city.
“They didn’t need to spend $7 million on a piece of property,” said Patella, who also believes the city paid too much for the facility.
City officials have stood by the decision to buy the building but say they may look at additional properties to house smaller navigation centers elsewhere in the city.
For now, Humphrey has said, the city plans to incorporate outreach into its plans and won’t require homeless clients to come to the facility to get help, though it will offer a suite of services.
“It is not the goal to start to pick people up all over the city of San Diego and bring them into the navigation center,” Humphrey said at a meeting at the Central Library last month. “It’s actually contrary to some of the best practices where you want to bring the outreach and the services where they are and start to build that connection.”
Yet the city’s now got a $7 million, 26,500-square foot building that Faulconer and others sold by saying San Diego needed a physical entry point for homeless San Diegans.
In his January State of the City address, Faulconer said the downtown facility would be an anchor of the city’s care network for homeless San Diegans.
“It will be the starting point for each person’s journey to permanent housing,” the mayor said.
Now the city is moving forward with the project and hopes it will be open by this fall.
Malcolm, once an outspoken advocate, has largely fallen silent in the months since Faulconer’s announcement. He declined to comment for this story, citing the ongoing legal battle that Fink and his mortgage company remain embroiled in.