Los Angeles-based MRK is a privately held real estate investment company singularly focused on affordable housing development, including hotel- and motel-to-residential conversion projects. The company was started by President Sydne Garchik in 2015. Create is a one-person company run by Kelly Mod\u00e9n, a San Diego planning commissioner, specializing in multifamily housing. Last week, Mod\u00e9n set up a distinct limited liability company, MKAFF Housing LLC, for the 101 Ash St. transaction. Mod\u00e9n and Garchik have previously worked together on affordable housing projects.<\/p>\n
The partners have put forward a costly conversion plan that requires $40.1 million for asbestos abatement and interior demolition work, and $67 million for the residential remodel. The team is also estimating $20 million in loan and interest charges. In addition, MRK-Create has agreed to enter into a project labor agreement and will pay prevailing wage rates for construction work, adding $18.5 million to the total cost. The partners will eventually pocket $24.5 million as a developer fee that is also baked into the project cost.<\/p>\n
![\"An](\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2025\/07\/SUT-L-101ASH-RETAIL-01.jpg\")
An artistic rendering, by Gensler, of a CoStar image that shows 101 Ash\u2019s plaza area activated with retail. (Kelly Moden\/cREate)<\/p>\n
The high cost to convert the building into affordable housing \u2014 estimated at more than $1 million per unit \u2014 is a worthwhile endeavor because it is unusable in any other capacity, Mod\u00e9n told the Union-Tribune.<\/p>\n
\u201cThis is the best reuse program for that building \u2014 to convert it to affordable housing and leverage federal financing through tax credits,\u201d Mod\u00e9n said. \u201cWe\u2019re going to be able to house up to 800 people in this building and provide a lot of family units. And we are desperate for affordable housing.\u201d<\/p>\n
Affordable housing projects are subsidized by a combination of local, state and federal subsidies to offset construction costs. The subsides, which allow for units to be rented at below market rates to income-qualified tenants, come with government oversight. Rental rates are set by the U.S. Department of Housing and Urban Development each year and are specific to each renter\u2019s family size and annual income.<\/p>\n
The MRK-Create team\u2019s financing plan calls for two federal subsidies \u2014 low-income housing tax credits and historic tax credits \u2014.that will contribute $114.7 million to the $250.3 million conversion project.<\/p>\n
The team will seek $82.5 million in low-income housing tax credits, which are highly competitive and doled out on a rolling basis by the California Tax Credit Allocation Committee. If the developer is awarded the tax credits, it would sell them to private investors to secure project funding. The group is also banking on receiving $32.2 million in tax credits associated with historic properties even though 101 Ash St. is not a historic property.<\/p>\n
The\u00a0ground lease gives the developer a two-year window to secure financing, according to a staff report prepared for the committee meeting.<\/p>\n
San Diego is not providing a cash subsidy, but it will underwrite the project through the aforementioned seller\u2019s note, which closes the project\u2019s financing gap. As proposed, the developer will start to repay the $46.5 million loan around year 15, when the project is refinanced. The city will then receive annual payments equal to 50% of the project\u2019s rental proceeds, minus expenses, with money deposited in the city\u2019s general fund.<\/p>\n
\u201cOur office believes that the proposal before you today is sound on its fiscal, economic and policy merits,\u201d Noah Fleishman, a fiscal and policy analyst in the Office of the Independent Budget Analyst, told committee members.<\/p>\n
Fleishman also noted that the city spent $7.2 million between fiscal years 2023 and 2025 on the maintenance of the unusable building. The city recently budgeted an additional $2.5 million for property management costs in the fiscal year that started Tuesday.<\/p>\n
As such, committee members are anxious to get the building off the city\u2019s books. Campillo was disappointed to learn that the deal, as proposed, would require the city to continue paying for building expenses until the close of escrow, which could take up to two years.<\/p>\n
Despite a favorable assessment, Fleishman flagged one concern.<\/p>\n
\u201cOur office would like to note that the pro forma relies on the project being awarded a federal historic tax credit. Historic tax credits are not guaranteed because the building is not currently registered as a historic building or contributing to a historic district,\u201d he said.<\/p>\n