San Diego - condo conversion help

[Chad Hart]

I'm looking at an 8 unit complex in San Diego that I am researching converting to condos to sell individually. I've read the info bulletin 539 from the city and looks mostly straight forward but can't tell if it's a guarantee. Anyone have an attorney or engineer who does this? It is outside of the coastal commission also.

[Matt Devincenzo]

To get right to your initial question; is it a guarantee to be approved? Absolutely not...this is what we call "discretionary" e.g. those permits/approvals which someone holds the 'discretion' over approving or denying them. Ministerial would be your building permits and maps etc...things that you just get a permit as long as you implement the standards. Now that said...it's been a long time since I can recall a 'small' project like this being denied...my boss has stories of that being the case in the 70s and 80s when development wasn't yet too onerous and so denying someone or revising their approval at the final hearing wasn't 'that bad'. Now small projects typically don't get denied once they make a final hearing...they more often die after spending too much money and not knowing what they signed up for...so now that I've given the doom and gloom...

@Dan H. is correct a TIC/Coop structure is another option. It is not a subdivision and therefor doesn't trigger the req's. That said in CA they seem to have been more common in the bay area, but not as much elsewhere. I've seen a couple lenders that will lend on these fractional interests, but they can be a bit more expensive on the rate and the sale price may take a bit of a hit. I've never actually worked on one myself, but it is an option that a land use atty could draft the TIC agreement and implement for you. This would be 100% private and no City review or involvement would be required.

@Caroline Gerardo is correct on the issues these projects typically face...neighborhood opposition which can be an annoyance but won't stop a project (most complaints aren't based in the substance of the approval) and parking are the big ones...in 2007/2008 ish the City revised the requirement for a conversion to bring the site into current parking standards. Before then you had to meet the standards in place at the time of construction. That is why you'll see condos throughout Mission Beach with one space, but today many existing buildings are unable to convert.

A few other big gotchas, affordable conversion fees are running ~$25/SF converted. This is adding a considerable cost since an 8 unit project will easily hit multiple six figures. For building condition report repairs, electrical panels can get pricey if they are located in closets or other areas they need to be relocated from. The other is the water meter...older meters may be undersized for today, or for the proposed demands to achieve a saleable product (adding in unit dishwasher, washer and dryer etc). If that's the case then plumbing revisions and water demand fees add up fairly quickly. The city can also ask for you to upgrade sub-standard items like if you're on a corner and the curb return doesn't have a ped-ramp...you can so no, but obviously that doesn't garner staff support for the project. A ped ramp can run $15-20K, so these requests get pricey quickly. I've had full width alley replacements ($60K+), replacing driveway aprons ($20K+), 50' of curb, gutter and sidewalk ($50K+)...

What will this cost from a consultant standpoint? Consultant fees to get in the door will likely be $30K, plus City submittal fees ~$15K. These will both be initial, and then as time is spent on the review and processing you'll add funds for meetings etc. I tell clients estimate 2-3 times this for the process...three times being if things get controversial or if you have more issues like Coastal etc. You should expect this process to take 18-36 months. 

Once you have a 'discretionary' approval, then you need to proceed with ministerial. Final engineering depending on the scope determined above will run another $40K for your final map, condo plans and engineering permits. It's also possible you need building permits for any of the items I mentioned above that need replacing, upgrade or relocation. You also have City fees and at this point would need an attorney to draft your CC&Rs etc.