The Next Real Estate Boom: Prison Cells?

San Quentin. The name evokes thoughts of iron bars, hardened criminals and the gas chamber.

But if one California lawmaker has his way, the site of the state's oldest prison could one day be home to waterfront mansions and luxury condos with spectacular views of the San Francisco skyline.

In what might be called the worst real estate blunder in California's history, in 1851 San Quentin State Prison was built on a then-remote peninsula at the northern end of San Francisco Bay. Today, that 432-acre spit of land is surrounded by some of the area's best real estate with breathtaking views.

Click Here for More Photos of San Quentin State Prison

"Quite frankly, our inmates just don't need ocean views," said state Sen. Jeff Denham, who has been pushing to auction the 5,300-inmate prison complex to private developers. "It's one of the oldest and most inefficient prisons in the entire nation. We could sell this one and build four others at less expensive places in the state."

Denham said California could get as much as $2 billion for the property, money much needed as the state struggles with a tanking economy and major budget problems.

But don't go picking out that new living room furniture just yet. Denham's dream is far from a reality and many in the state say it is just that: a dream.

"We very much disagree with the idea that you can sell this property for $2 billion," said Seth Unger, press secretary for the California Department of Corrections and Rehabilitation. "Furthermore, the cost to build a new prison with 5,300 beds would likely be over $2 billion and there's not any identified site in California that has open arms to housing the next death row."

Denham has introduced his legislation to sell the prison for several years but it has never made it to a vote on the Senate floor. A committee hearing on it this year is scheduled for March 31.

Unger said it's really not "a viable plan at this point," especially given the system's massive overcrowding.

Prison Overcrowding

A federal judge has a tentative ruling that would force the state to release 57,000 inmates early because of overcrowding. Gov. Arnold Schwarzenegger has declared a state of emergency in the prisons, allowing the government to transfer inmates to out-of-state facilities.

"The idea that we should be discussing closing prisons in this context would not be good for public safety and it would not be good for the state of California," he said.

Schwarzenegger has not taken a formal position on the legislation but spokeswoman Lisa Page said: "There are a lot of issues that would have to be resolved."

To start with, a brand new $125 million hospital for inmates is scheduled to open in the complex this year. Then there are the plans for a new death row. The legislature originally approved the new facility in 2003 and gave additional support in last year's budget for the $360-million addition.

"If you were [to] start over today, it's the last place that you would put a massive prison. It's a pretty remarkable property and anyone who proposed putting a prison there today would probably be laughed out of the room," said state Rep. Jared Huffman, who represents the area. "But the truth is we've got a lot of investment and a lot of sunk costs into the main environment of San Quentin."

That doesn't mean that people can't dream.

Rick Turley, president of Coldwell Banker residential brokerage in the Bay Area, said the prison has "unparalleled views" and could make a fantastic gated community. That is, a different sort of gated community.

The historic prison buildings might be converted into high-end condominiums and larger plots of land that could be set aside for mansions that Turley said could sell for $10 million to $20 million.

"The historical element could give it that quirky feel," he said. "It's truly a once-in-a-lifetime location. We'd be very excited about it, those of us in the housing industry."

But would you really want to live in a place that once housed Charles Manson and Sirhan Sirhan, who assassinated Robert F. Kennedy?

Well, people are doing it elsewhere in the country.

New Uses for Jails

Outside Detroit, in Jackson, Mich., a former 19th century prison was converted into subsidized housing for artists, along with gallery and classroom space. Armory Arts Village, as the former jail is now called, opened in January 2008 and includes 62 loft apartments. Artists get free gallery space in exchange for seven hours of community service each month.

In Texas, the Houston Museum of Natural Science is planning to open a satellite museum this summer at the former Central State Farm Prison in Sugar Land, and New York City's development agency has even looked at turning Bellevue Hospital's former psychiatric ward into a luxury hotel.

But the real appeal of these former institutions seems to be for hotels.

In 1996, the 65-room Four Seasons Istanbul opened up in Turkey's former Sultanahmet Prison. Then in 2005, British hotel chain Malmaison opened a hotel in Her Majesty's Prison Oxford in Oxfordshire, England.

The latest in the trend is Liberty Hotel, which opened in September 2007 at the site of Boston's former Charles Street Jail.

Richard L. Friedman, president and CEO of Carpenter and Co., developed the hotel with the help of historic tax credits. The hotel includes a bar called Alibi and a restaurant called CLINK. Cocktails include "The Key."

"Any building with great history is a good candidate for rehabilitation," he said. "The Liberty was particularly well-suited because what's now its lobby was its exercise facility, so it worked architecturally to convert it into a great space."

The key is to preserve enough of the original building so that you have a memory of what was there, but also transform it into something new.

"In today's day of the dull, ordinary, cookie-cutter hotels, people like the experience of being in a building that has some real character and a real history," Friedman said. "The trick is converting an unhappy place to a happy place."

Developers can't go too far or get too cute or else they channel the building's bad karma.

All can be fine "as long as you can make it fun and drive the bad spirits out," Friedman said. "We have themes but we don't take it too far. It's a fine balance."

Friedman has developed several hotels in San Francisco, including the St. Regis, and said that "San Quentin and Alcatraz are both incredibly attractive ideas for redevelopment."

"In the old days," he said, "they picked great sites."