San Diego Beginning in 1927, the El Cortez Hotel was the most beautiful building in downtown San Diego as well as the watering hole of the Beautiful People. But it deteriorated and in 1978 was sold to an evangelist/faith healer named Morris Cerullo, who wanted it for his acolytes. The faith healer made it ugly by, among many things, installing cheap air-conditioning units in the windows. He sold it in 1981. Last year he was charged with avoiding $550,000 in income tax in a case that is still pending.
Now the El Cortez is a restored historic site, featuring upscale condos. But things have gotten ugly again -- literally and figuratively. The residents are bitterly complaining that the building developers' plans, revealed officially in January, to construct an adjacent seven-story residential structure at 777 Beech Street will destroy the beauty and historic ambiance of the El Cortez. They are suing the owners, calling them financial finaglers who misled them and didn't follow through on promised improvements. Peter L.P. Janopaul III, who with partner Anthony Block restored the old building, in turn calls the condo owners "self-interested luxury condo hypocrites who want to save their views."
Where is a faith healer to salve all these wounds on Cortez Hill?
The Centre City Development Corporation has been dealing with Janopaul and Block for years and will have to approve the new building, as will the Historical Resources Board and other government bodies. The final arbiter will be city council. So no one was surprised when Janopaul hired embattled former councilmember Michael Zucchet as vice president-real estate in May and lobbyists John Kern and Jennifer Tierney, former sidekicks of ex-mayor Dick Murphy, last year. "What a great team," enthuses Janopaul, a former port commissioner.
Yeah, great. The condo owners feel they are up against San Diego political insiders. "People feel helpless -- who are we compared to Peter Janopaul, the guy who has politicians on his side?" asks Parimah Spurlock, a condo resident.
"The way the City is behaving I don't know that it will deal with this reasonably," says Tina Dameron, a resident. Other condo owners share her opinion of the proposed new building: "It's horrible, hideous. I can't believe the Historical Resources Board will go for this." But Janopaul is on the board of the developer-friendly Save Our Heritage Organisation, which voted overwhelmingly to approve the new structure and often influences the Historical Resources Board. The board's staff has recommended the project be given the nod.
The residents do not feel they will get a fair hearing from Centre City. "CCDC will approve any building, anywhere, that will generate tax revenue," says Kathy Casey, who rented at the El Cortez but didn't buy a condo because she knew about the many plumbing, parking, and noise problems that have caused the homeowners' association to sue Janopaul, Block, and the contractors. Janopaul and Block are, in turn, suing the contractors, and the suits have been combined.
The block on which the El Cortez sits got its historical-site designation in 1990. In 1998, Janopaul and Block got a $5.85 million rehabilitation loan from the City. Then the developers got into financial trouble renting out the El Cortez units. They fell behind on monthly payments to Centre City. "The costs were greater than the income," laments Janopaul. "It was the proverbial cash cow that wasn't giving any milk in the first few years." So the developers asked Centre City's permission to switch to condos. Permission was granted in 2003.
"The ability to repay the loan was one of the factors considered in reviewing the proposed amendments to convert the building [to condos]," allows Centre City project manager Brad Richter.
The Agreement Affecting Real Property states that the rest of the block won't be developed until June 30, 2025. "Any further development...is prohibited until 2025 without the involvement and approval of each of the current condominium owners," says Everett L. DeLano, attorney representing the homeowners.
Janopaul and Centre City say that the Agreement Affecting Real Property can be changed. Janopaul's lawyer says in effect that the new building is none of the condo owners' business. Centre City and the city attorney's office agree that residents have no say in the matter. The developer says that the 2025 date is standard in Centre City contracts -- in effect, boilerplate.
But the condo owners have two documents showing that Centre City initially considered the 2025 promise more than boilerplate that could be erased at will. On September 19, 2002, Pam Hamilton, senior vice president of Centre City, said in a fax to Janopaul, "The community may have a problem with permitting additional development on the block once they realize that the current Agreement restricts the block [until June 30, 2025] to only the physical development they see today."
The next day, Janopaul wrote her back, claiming, "We welcome community input on any expansion plan we have."
The developers may hoot at the 2025 commitment, but they have used it as a condo sales pitch, say residents. "They were telling people that nothing would be built for a long time," says Rob Mills, who is a real estate salesman. He was telling his clients the same thing, "so I broke the law too. It caused a huge chain reaction. This is all about money and greed."
"Several people were told it wouldn't be developed until 2025," says Barry Bruins, president of the homeowners' association. "Block told me that it would be several years."
"My husband asked Anthony Block, and he said nothing had been developed, there were no plans for it [the proposed building], and he had told sales people to give the same message," says Spurlock.
"We were told that nobody would approve a building on an historical site," says Dameron. "They told us they had no plans to build. It was an out-and-out lie," as Janopaul's 2002 correspondence with Centre City shows, she says.
Max Coates is a homeowner involved in another suit against Janopaul/Block. "We were told by the sales and marketing team that there were no plans whatsoever for development until 2025," he says. The suit goes on to charge, as other residents do, that a big property tax reduction was promised because of the historical-site designation. Coates says the developer knew the tax deduction wouldn't come "but didn't pass it on." The suit also mentions a common complaint: that Janopaul/Block didn't properly fund the homeowners' association, which has had to raise its fees the maximum legal amount to cover repairs. "He [Janopaul] has taken value off the property. He reduced amenities that had been touted."
Janopaul denies the charges in the suit and insists that neither he nor Block ever said the building wouldn't be constructed soon. He produces documents showing that condo buyers were aware that the adjoining property might be developed. "They are in advanced denial," says Janopaul, slamming their alleged "wishful, revisionist behavior."
Bruins acknowledges that some people initialed documents noting that the adjoining property might be developed, but at the same time, Janopaul/Block and their sales people were talking out of the other sides of their mouths -- a common two-track deception in such deals.
Residents of El Cortez and the nearby Discovery at Cortez Hill residential building were annoyed when, without adequate notice, the block was split into separate parcels, thus permitting the 777 Beech Street building. "I had no idea that the historic block had been divided into two parcels until 2005," says Rita Collier of Discovery. She found that none of the 199 Discovery unit owners had been notified.
She sympathizes with her friends at the El Cortez who have so many plumbing problems. "It's incredible to see Janopaul drive in from Rancho Santa Fe in his new Porsche or Mercedes SUV when he won't fix a darn thing at the El Cortez," she says. Janopaul says he owns two homes in Rancho Santa Fe and has loved cars since his youth in Modesto.
Key question: are Janopaul and Block throwing good money after bad developing a new residential unit in overbuilt downtown? "The market for blah condos downtown is on life support, but the great stuff will always sell," Janopaul replies. He believes that he will get 777 Beech Street on the market in 2009 or 2010, which will be "decent enough timing." He has faith -- in the development-obsessed City bureaucracy.