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CCDC News: Appellate Court Decides In Favor of Redevelopment Agency in Mesdaq Case

APPELLATE COURT DECIDES IN FAVOR OF REDEVELOPMENT AGENCY APPEAL IN MESDAQ CASE

Agency Will Take Next Legal Steps to Ensure Fair and Appropriate Compensation

SAN DIEGO, CA— The Fourth District Court of Appeals today released its findings in support of the appeal submitted by the San Diego Redevelopment Agency involving property owned by Ahmad Mesdaq.

“CCDC is pleased the appellate court agreed with our determination of the issues appealed from the October 2005 condemnation trial,” said CCDC president Nancy Graham.  “CCDC’s goal has always been to ensure Mr. Mesdaq was fairly compensated through the appropriate process.”

The suit is related to property Mesdaq purchased in the Gaslamp Quarter for $1.25 million in January 2001, knowing the property was in an area zoned for redevelopment.  He spent approximately $450,000 to remodel and open the cigar store in April 2003. 

In April 2004, CCDC deposited over $3 million with the court for the property. To date, approximately $1 million has been withdrawn by Mesdaq and his lender.

A jury awarded Mesdaq $7.8 million for the property and goodwill, plus the court awarded $1.2 million for court costs and attorney’s fees. The Redevelopment Agency appealed this award and the appellate court ruled in its favor.  Details about the appeal can be found below.

“In light of this court ruling, we will now go back to Superior Court and try to resolve the settlement amount,” said Graham. “Again, CCDC is committed to ensuring that Mr. Mesdaq receives a fair and legal settlement, but we believe there were inappropriate factors that led to the $7.8 million settlement. CCDC believes Mr. Mesdaq is entitled to (and he has been offered) $4 million – well over two hundred percent what he spent to purchase and remodel the property.”

Formerly a blighted adult entertainment area, the Gaslamp Quarter’s 97 Victorian-style turn-of-the-century structures have been redeveloped and the area is now listed on the National Register of Historic Places.  This 5,000 square-foot site is a portion of one of last blocks with potential for new development to complete the neighborhood’s redevelopment and complement the 16.5-block historic Gaslamp Quarter. 

“The development planned since 2004 has been delayed due to the lengthy legal process involved with the Mesdaq case,” added Graham.  “Proceeding with the project continues to be the Agency’s primary goal.  With this court ruling, we will now go back to Superior Court and try to resolve the settlement amount.”

Background information on the Appeal: CCDC appealed the settlement based on the following:

• Hypothetical Income – Mesdaq argued he was entitled to lost income from a hypothetical restaurant he planned to open, but the only business he ever operated on the property was a cigar store.  Lost goodwill is an important compensation issue to the Agency and business owner.  However, according to state law, goodwill cannot be based on a hypothetical business and non-existing income, as was the case here.

• Date of Value – The trial court changed the property’s date of value from the date probable compensation was deposited (April 2004) to the trial date (October 2005).  Changing the date of value after probable compensation has been deposited with the court is contrary to state law.

• Polanco Notice – The trial court ruled that sending an official Polanco Notice requesting the property owner investigate and remediate contamination on his property was unreasonable.  However, State law requires a written notice be sent to the property owner to investigate what, if any, contamination is on the site in question.  If written notice is not sent, the agency can be held responsible for costs to mitigate pre-existing  contamination.

About CCDC
Centre City Development Corporation (CCDC) is a public, nonprofit corporation established in 1975 by the City of San Diego to plan and facilitate the redevelopment of downtown’s 1,500 acres. To learn more, visit: www.ccdc.com

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