SAN CLEMENTE : City Has Chance at Bargain on Building

The same recession that is causing economic crisis at City Hall has given city officials a chance to buy badly needed office space for the Planning Department at a bargain price.

City Manager Michael W. Parness announced Wednesday that officials have an opportunity to buy an office building, where space is already rented to house the Community Development Department, for $2.75 million, about $1.65 million under its market appraisal. The total deal, including costs for capital improvements, would be about $3.8 million.

Because of the depressed real estate market, Parness said, the city could buy the 55,000-square-foot building at 910 Calle Negocio from Bank of America for less than it would cost to continue renting space there.

For the past two years, the city’s Community Development Department has rented nearly the entire first floor of the three-story building for about $300,000 a year.

“There’s no way in the world we would even be considering acquiring a building like this if it was going to have a negative impact and cost us a penny more,” Parness said.

The City Council is expected to make a final decision Wednesday after a public hearing on the issue.

Depending on the way bonds would be issued to finance the purchase, the city would save $279,200 to $349,800 over the next five years, compared to what it would pay in rent, according to a report prepared by Community Development Director James S. Holloway.

In another 10 years, the city could then consider selling the building and the existing City Hall site and using the proceeds to build a consolidated Civic Center, Parness said.

Bank of America foreclosed on the building about four months ago and was left with a loan of more than $5 million, Parness said.

“They are losing money on this every day they hold it,” Parness said. “That’s why they’re willing to sell it so cheap.”

Because the deal seemed almost “too good to be true,” Parness said, the city had three separate firms make independent market studies, all of which concluded that the city could save money by buying the building rather than continuing to rent space there.

In addition, the extra space would allow the city to consolidate its land-use services. For example, builders must often travel to three different places throughout San Clemente for a simple plan check.

“We’re really being hurt in terms of our efficiency because we’re spread all over town,” Parness said.

Since the Community Development Department would only need about a third of the building space, the rest would be rented to other tenants. About 47% of the building is presently occupied.