San Diego, CA
Is 600 B St. the first of many downtown office buildings to default?
One of downtown’s most visible office buildings is in the foreclosure process after years of lost revenue brought on by work-from-home trends.
The owner of the 24-story office tower at 600 B St. is on the brink of losing the building as the lender seeks to recoup more than $83 million in unpaid debt. It is likely the property will be sold at auction later this year or returned to its lender, Western Alliance Bank, property records show.
The building, whose anchor tenants once included the Union-Tribune, is the first major property downtown to begin the foreclosure process. Real estate tracker CoStar said downtown has a 30 percent office vacancy rate.
While downtown is struggling, San Diego County has one of the lower overall vacancy rates (around 14 percent) in the nation, said Tim Olson, a broker with San Diego-based real estate investment managers Jones Lang LaSalle.
Q: Is 600 B St. the first of many downtown office buildings to default?
Economists
Lynn Reaser, economist
YES: COVID sent people back to their homes to work remotely and they have still not returned to downtown San Diego. The newest space for biotech remains empty. Industry remains in the suburbs where housing is less expensive. Expect more keys to be returned to lenders with office space converted to housing, with more apartments for subsidized lower income households. Downtown will be more of a place for living and entertainment than working.
Alan Gin, University of San Diego
YES: Downtown San Diego experienced a renaissance after the opening of Petco Park, but that was mostly in residential housing and nightlife. Office employment has been moving to suburban locations for decades. The ability to work remotely has also reduced the demand for office space. Workers continue to seek that option, despite efforts by employers to get them to return to the office. That trend will likely continue in the future, which will jeopardize more downtown office buildings.
James Hamilton, UC San Diego
YES: A number of factors are coming together to put a lot of pressure on the bank loans that finance commercial office space. The post-COVID move to remote- and hybrid-work arrangements has proven to be an important long-term trend. Interest rates moved up higher and will stay high for longer than many people anticipated. And too much wishful thinking went into the construction of what was supposed to be a new life sciences hub for downtown San Diego.
Norm Miller, University of San Diego
YES: In markets like L.A. we might see 20 to 30 percent default before we hit the bottom in the office market. Loan modifications will also occur for those with significant equity after realistic write downs. Some office property will be converted to residential, but only at distressed prices. Note that these dire statistics only apply to the office market, with industrial and retail holding up well, and multifamily doing fine, if not over leveraged with variable rate debt.
Ray Major, SANDAG
YES: There are three factors affecting the San Diego commercial real estate market that will potentially lead to additional defaults: oversupply of more desirable new class A office space entering the downtown market, demand for office space in downtown has decreased due to changes in work/remote schedules, and growth of additional office jobs in the region has slowed. With vacancy rates exceeding 30 percent in the foreseeable future, older buildings like 600 B St will face a difficult time paying their financial obligations.
Kelly Cunningham, San Diego Institute for Economic Research
YES: The pandemic lockdown was not the sole reason for oversupply of office space, but significantly hastened trends of working from home with little to no need for gathering in offices. Such trends continue unless compelling reasons exist for office workers to gather in person. Office buildings may be repurposed into residential and retail uses or combinations for financial viability, otherwise many more buildings will default into bankruptcy as seen like other downtowns across the nation.
Executives
Bob Rauch, R.A. Rauch & Associates
YES: The B Street corridor will have a long way to go before returning to low vacancy numbers. The new normal of the hybrid work era has shifted the numbers dramatically, and these older buildings will be the last to recover. The wild card that could jump-start some of these buildings is artificial intelligence — it is growing at rates far beyond those of other technologies and already stimulating office demand in tech hub markets.
Austin Neudecker, Weave Growth
YES: The foreclosure rate of commercial office buildings across the country increased over the past four years. While San Diego residential buildings are in high demand, downtown offices have not fully recovered from the pandemic transition to work-at-home. For older buildings struggling to maintain occupancy, impending debt payments could make owners insolvent. Thus, I expect a turnover in ownership unless existing landlords can drive up occupancy quickly.
Chris Van Gorder, Scripps Health
YES: I think it’s certainly possible that more downtown office buildings will go into default. Remote and hybrid work is here to stay despite what some employers would prefer, so all that leasable space will not be needed. And downtown buildings will suffer the most given their size and location and all the issues that come with that location for their tenants and potential tenants — including traffic congestion, homelessness, a lack of convenient parking and more.
Jamie Moraga, Franklin Revere
YES: Post pandemic, there hasn’t been an influx of employees returning to office buildings, especially downtown. The area continues to face higher office vacancies than the rest of the region, and with more supply expected to become available this year it will contribute to the likelihood of more defaults. That said, there could be opportunity for some of the vacant office spaces to be converted or repurposed as demand for downtown residential, retail and mixed-use continues to remain positive.
Haney Hong, San Diego County Taxpayers Association
YES: Our region’s center of gravity for economic activity is near and around UC San Diego — just think about traffic patterns. It’s in La Jolla and Del Mar where new medicines and other technologies are envisioned, and it’s there you have the co-location of intellectual firepower, venture capital money, and the networks that mix together to create the innovation we get excited about. Downtown doesn’t have that magic potion unfortunately, so unless offices become housing, defaults may become more prevalent.
Phil Blair, Manpower
YES: The trend is not good. While a major number of downtown office buildings are owned by one company, Irvine, it is reassuring that the firm has very deep pockets. They should be able to ride out even a multiyear slump in office leasing. Many other building owners do not. Unfortunately, conversions of office space to badly needed residential has been a nonstarter.
Gary London, London Moeder Advisors
YES: The downtown office market is experiencing historically high vacancy rates, now exasperated by the completion of new office space elsewhere downtown. Tenants are also downsizing, and there will be a flight to quality. The older buildings are on B Street, while the quality buildings are to the west and south. Many of these assets are saddled with nonrecourse, variable rate loans in a high-interest rate market. This is a perfect recipe for failure.
Not participating this week:
David Ely, San Diego State University
Caroline Freund, UC San Diego School of Global Policy and Strategy
Have an idea for an Econometer question? Email me at phillip.molnar@sduniontribune.com. Follow me on Threads: @phillip020
By CHRISTOPHER WEBER and BIANCA VÁZQUEZ TONESS
LOS ANGELES (AP) — The superintendent of Los Angeles public schools has resigned four months after he was put on paid leave during a federal investigation, saying he wants students to learn “without distraction.”
Alberto Carvalho ‘s resignation letter dated Sunday made no direct mention of the FBI’s Feb. 25 search of his home and the LA Unified School District’s headquarters. Two days after the FBI served the search warrants, the district’s Board of Education voted unanimously to place Carvalho on leave pending the outcome of the investigation.
Authorities have not provided details of the nature of the investigation involving the district, which serves more than 500,000 students. The investigation appears to relate to a contract the school district had with an education technology company whose leader was later indicted for fraud. The company, AllHere, had a contract with the district to create an AI chatbot.
Before becoming the Los Angeles superintendent in 2022, Carvalho had spent his entire education career in Miami-Dade County Public Schools, where he drew national praise for improving graduation rates and academic achievement among Black and Hispanic students. While advocating for Miami’s immigrant students, he spoke openly about his own struggles as a young recent arrival from Portugal working in restaurants and construction while homeless at times.
Under Carvalho, the Los Angeles district had been making strides. Students’ academic growth has outpaced the state average in recent years and students have bounced back from pandemic learning loss. Voters overwhelmingly passed a $9 billion construction and modernization bond, the school system’s largest ever.
Carvalho has denied wrongdoing
Authorities have not accused Carvalho of any crimes. He denied any wrongdoing earlier this year and had asked to be reinstated as head of the nation’s second-largest district. On Sunday he resigned via a letter addressed to “students, families, teachers, staff, and community.”
“Placing students first has always guided my work,” Carvalho wrote. “Because I believe our schools must remain focused on students and learning without distraction, I am resigning as Superintendent of LAUSD effective today, June 21, 2026.”
In its statement released early Monday, the Board acknowledged it received the letter of resignation.
“The Board remains steadfast in its commitment to ensuring stability, continuity, and continued progress through strong leadership. Our focus remains unchanged: providing every student with a high-quality education, supporting our dedicated workforce, and maintaining the trust of the communities we serve,” it said. in the statement.
It said that Andrés Chait, who has been acting superintendent, will remain in that position until a permanent decision is made.
The FBI investigation has been linked to the maker of a school chatbot
In February, the FBI also searched a third location near Miami. The Miami Herald reported the Florida property belonged to Debra Kerr, who previously worked with AllHere.
In 2024, Carvalho heavily touted a deal with AllHere for an AI chatbot named “Ed” designed to help students. But about three months after unveiling the technology and paying the company $3 million, the district dropped its dealings with AllHere, which collapsed into bankruptcy. Months later, founder Joanna Smith-Griffin was charged with securities and wire fraud, along with identity theft.
At the time, Carvalho denied personal involvement in the selection of AllHere, according to the Los Angeles Times.
“Mr. Carvalho respects the rule of law and the investigative process and has always acted in the best interests of students and within the bounds of the law,” Holland & Knight, the law firm representing him, previously said in a statement. “While the government’s investigation remains ongoing, no evidence has been presented by prosecutors supporting any allegation that Mr. Carvalho violated federal law.”
Following the search of school headquarters, LA Unified said it was cooperating with investigators and had no further information.
Carvalho became superintendent of LA schools in 2022 on a four-year contract with an annual salary of $440,000. He began a new four-year contract in February, just weeks before the raid, for the same salary, according to school board meeting documents.
In Miami, Carvalho began his education career as a high school physics teacher in the 1980s and climbed the administrative ranks. He led the district for nearly 14 years.
In 2020, a nonprofit he founded to support Miami schools drew scrutiny after it solicited a $1.57 million donation from an online education company doing business with the district. The district’s inspector general later determined the donation didn’t violate state or district ethics policies but did create the “appearance of impropriety” and should be returned, according to The Miami Herald. Instead of returning the funds, the foundation distributed the money to Miami-Dade teachers in the form of $100 gift cards.
Toness reported from Boston.
On Wednesday evening, the culinary stars will collide in downtown San Diego. That’s when The Michelin Guide will bring its California restaurant awards ceremony to San Diego for the very first time.
At the invitation-only event, Guide officials will unveil the California restaurants that are receiving new Michelin stars for 2026 or retaining the stars they’ve earned in years past. San Diego County restaurants have only been eligible for Michelin recognition since 2019, so luring the awards ceremony here has been a top priority for local restaurant and tourism officials ever since.
Nobody is more proud to be hosting the event in San Diego than William Bradley, the chef-director of Addison by William Bradley. The Chula Vista native opened his restaurant in San Diego’s Carmel Valley 20 years ago, and it is now one of just 14 Michelin three-star restaurants in the United States.
“To get the ceremony in San Diego was something I really dreamed of and pushed for,” said Bradley. “What an opportunity to have so many great chefs here in our hometown and in our own backyard to celebrate as a group all of the great restaurants in the state. We’re so ready to shine in San Diego. We’ve been waiting for this for a long time.”
The Michelin effect
Born in France in 1900, the Michelin Guide was created to boost sales of the company’s car tires. The guide booklet, which recommended restaurants and other spots to visit during cross-country road trips, was a hit (for tire sales and the restaurants). In the 1920s, Michelin stars were introduced and over time they became the international standard for excellence.
In 2005, the Michelin Guide arrived in the U.S., starting in New York City, followed by the San Francisco Bay Area in 2007 and Chicago in 2011.
In 2019, the Guide finally expanded its coverage throughout California, thanks to a $600,000 investment in the program by the Visit California tourism organization. Michelin spent the money recruiting and training inspectors with at least 10 years of hospitality industry experience to dine anonymously at restaurants around the state year-round.
In the first year of statewide eligibility in 2019, Addison by William Bradley earned Southern California’s first Michelin star. Seven years later, San Diego County is now home to 43 Michelin Guide-honored restaurants, including five with Michelin stars, nine with Bib Gourmand awards, which recognize great cooking at great value, and 29 with selection honors, recognizing high-quality food.
For these local restaurants, Michelin awards have put them on the international map, brought in more business and helped them recruit investors and motivated workers. For local tourism officials, the awards have raised the profile of San Diego as an international culinary destination.
San Diego Tourism Authority Chief Operating Officer Kerri Kapich said restaurant awards from Michelin, as well as from the James Beard Foundation and Eater.com, give travelers another reason to visit San Diego, stay longer and spend their dollars eating out.
About $1.6 billion of San Diego’s $14.8 billion visitor economy in 2025 was spent on dining, and most of that was driven by overnight guests, she said.
“I love how fresh our food is here and the quality and diversity of our restaurants,” said Kapich, who has worked in local tourism for more than 20 years. “When we talk to travelers about why San Diego is a great place to visit, they’ll talk about our unique local cuisine and the quality of our cuisine.”
In its 2025 “Beyond the Michelin Stars” study, the accounting firm Ernst & Young found that 60% of international travelers under the age of 34 use the Michelin Guide when choosing a restaurant, and 74% of travelers consider Michelin’s presence in a city as a reason for choosing a destination.
The study also found that 82% of chefs surveyed reported an increase is overall sales after receiving a Michelin award.
Chef and restaurateur Roberto Alcocer, whose 4 1/2-year-old contemporary Mexican restaurant Valle in Oceanside earned its Michelin star in 2023, said there’s a common adage in the industry about how stars impact a restaurant’s bottom line.
“They say when you get one star, your business grows by 40 percent. If you get two stars, it grows 60 percent, and if you get three stars it grows 100 percent. But when we got our star, our business grew 100 percent,” Alcocer said.
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The chefs and owners of California’s eight Michelin three-star restaurants at the 2025 Michelin Guide California Awards Ceremony in Sacramento. At far right is William Bradley, the chef-director at Addison by William Bradley in San Diego. (Marc Patrick / BFA.com)
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The chefs and owners of California’s eight Michelin three-star restaurants at the 2025 Michelin Guide California Awards Ceremony in Sacramento. At far right is William Bradley, the chef-director at Addison by William Bradley in San Diego. (Marc Patrick / BFA.com)
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The lure of Michelin
Two of San Diego County’s five Michelin-starred restaurants are in Carlsbad: Jeune et Jolie, which earned its star in 2021, and the 24-seat Lilo, which landed a star in 2025 just 10 weeks after it opened. Both are led by restaurateur John Resnick and executive chef Eric Bost, who is also a partner in Lilo.
When Resnick opened Jeune et Jolie in December 2018, there was no California Michelin Guide. But meeting Michelin’s high-quality standards was Resnick’s top priority for the contemporary French restaurant.
“Michelin was the mindset. They’re not here, but if they were, we want this to be a one-star restaurant,” he said. “We wanted to be creating a really great restaurant that’s incredibly delicious, equal parts special occasion and neighborhood restaurant.”
Bost said that when he was growing up, he was fascinated with the “mystique and romanticism” of Michelin-star restaurants, but it was an abstract concept, since the Guide didn’t exist in the U.S. at the time. So in 2001, he moved to Paris to work in French kitchens, and later worked under French master chefs Alain Ducasse and Guy Savoy.
Bost said earning a Michelin star is a proud achievement, but it’s also a big responsibility. Customers expect excellence every night and stars must be re-earned each year.
“It’s about how to keep the team engaged, the restaurants growing and doing better and better each year,” Bost said. “We’re very conscious of that. It keeps this positive pressure. We have a responsibility to maintain those standards for our guests. It’s an internal compass as much as it is an external recognition.”
Alcocer said his desire to earn a Michelin star was one of the main reasons he moved to Carlsbad from his native Mexico in 2021 to open Valle in Oceanside. Mexico didn’t launch its Michelin Guide until 2024, but by then Alcocer already had a star under his belt in the U.S.
How Michelin works
The Michelin Guide tightly guards the secrecy of its inspectors and its judging process, but the anonymous Chief Inspector of Michelin Guide North America did respond to questions submitted via email by the Union-Tribune.
Inspectors choose the restaurants they visit based on their knowledge of the region’s gastronomic scene and they pay their own bills. They rate restaurants based on the five criteria Michelin has used in its now-global methodology since 1926: use of quality products, harmony of flavors, mastery of cooking techniques, the voice and personality of the chef reflected in the cuisine and consistency between each visit.
The decision to award a star is done collegially, meaning several inspectors will visit a potential star restaurant throughout the year to ensure they all agree that the five criteria have been met.
A Michelin Guide award is not permanent. Every recipient, whether they have a top-tier star or a third-tier selection, are revisited each year to ensure that all five criteria continue to be met.
In San Diego in 2024, Sushi Tadokoro’s star and Solare’s Bib Gourmand awards were both downgraded to selection status. And since 2019, more than a dozen local restaurants that were named selections have been dropped from the guide completely.
Even though Addison’s Bradley is in the Michelin major leagues with fellow three-star California chefs like Thomas Keller, Dominique Crenn, Cory Lee and Michael Cimarusti, he said he still finds it nerve-wracking each year to find out whether his stars have been renewed.
Bradley, Bost and Alcocer said their job as chefs at Michelin-starred restaurants is to never rest on their laurels.
“You have to keep evolving and keep growing. Every time we learn something or see something that could use a small change, we go for it,” Alcocer said.
In the past year at Valle, Alcocer has introduced a lighter tasting menu for off-hours dining, added patio seating, changed the candles on each table, and he’s now sending diners home with a gift bag stocked with house-made Habañera hot sauce and lavender soap made with recycled cooking oil.
Awards night
Because so many of California’s top chefs will be in San Diego this week for the ceremony, Addison, Valle, Jeune et Jolie and Lilo will all be expanding their operating hours to accommodate visiting chefs and restaurateurs.
Resnick and Bost said they’re excited to welcome colleagues from afar who have yet to explore San Diego’s fine-dining community.
“It’s a rad opportunity for people to come and see how incredible this place is with the great community of restaurants that we’ve forged,” Resnick said. “We’re all excited and it’s a big point of pride for all of us.”
At the California awards ceremony each year, invited chefs mingle at a reception before the ceremony begins. Then, Michelin officials announce the year’s new and returning star recipients, starting with the one-star tier and concluding with three stars.
The biggest cheers of the evening always go to restaurants receiving their first-ever star, as well as the rare restaurants fortunate enough to earn a second or third star. California has eight restaurants with three stars, 14 with two stars and 61 with one star.
Bradley said he’s “pretty confident” there will be some good news for San Diego restaurants on Wednesday.
“I think there will be some chefs that are going to get their star this time around. I want them to. We want more stars here in San Diego. It just makes San Diego more of a destination,” he said. “That was our goal many years ago to help secure this region on a world map and here we are. It’s going to be great.”
Here are all 43 of the current Michelin Guide honorees in San Diego County:
Michelin starred: fiveStars honor outstanding cooking, based on the five criteria of ingredient quality, harmony of flavors, the mastery of culinary techniques, how the chef’s personality shines through their cuisine and consistency across the entire menu and over time. Restaurants can earn up to three stars. There are just 14 Michelin three-star restaurants in the U.S.
- Addison by William Bradley, Carmel Valley – three stars
- Jeune et Jolie, Carlsbad – one star
- Lilo, Carlsbad – one star
- Soichi, North Park – one star
- Valle, Oceanside – one star
Bib Gourmand: nineA Bib Gourmand honors great cooking at great value — simple, skillful dishes that don’t compromise on quality.
- Atelier Manna, Leucadia
- Callie, East Village
- Cesarina, Point Loma
- Ciccia Osteria, Barrio Logan
- Cucina Urbana, Bankers Hill
- Dija Mara, Oceanside
- Lola 55, East Village
- Mabel’s Gone Fishing, North Park
- Morning Glory, Little Italy
Selections: 29This represents high-quality food.
- Artifact at Mingei, Balboa Park
- A.R. Valentien, La Jolla
- Born & Raised, Little Italy
- Catania, La Jolla
- Campfire, Carlsbad
- Coasterra, Harbor Island
- Cloak & Petal, Little Italy
- Craft & Commerce, Little Italy
- The Fishery, Pacific Beach
- Fort Oak, Mission Hills
- Great Maple, Hillcrest
- Herb & Wood, Little Italy
- Hidden Fish, Convoy District
- Himitsu, La Jolla
- Juniper & Ivy, Little Italy
- Kingfisher, Golden Hill
- Lucien, La Jolla
- Market Restaurant + Bar, Del Mar
- Menya Ultra, Convoy District
- Nine-Ten, La Jolla
- Paradisaea, Bird Rock, La Jolla
- Siamo Napoli, North Park
- Seréa Coastal Cuisine, Coronado
- Solare, Liberty Station
- Sushi Tadokoro, Old Town
- Tanner’s Prime Burgers, Oceanside
- Trust, Hillcrest
- 24 Suns, Oceanside
- Sovereign, East Village
For the complete list of all California Michelin Guide honorees, visit guide.michelin.com/us/en/california/restaurants.
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