SAN CLEMENTE : Council to Consider Leasing Out Space

Just two months after the purchase of a $2.75-million office building, which the city was already renting to house its Community Development Department, city officials say they are close to leasing out the remaining half of the building.

City officials had originally thought it would take five years to find tenants for 90% of the 55,000-square-foot building. The building was about half full when the city bought it from Bank of America in late June.

The City Council tonight will consider leases worth $2.69 million over the next six years from three firms interested in moving into the building at 910 Calle Negocio.

If the city is able to close the three lease agreements, the occupancy rate would rise to 98%, with the rest of the space available for use by the city.

City purchasing agent Kumi Johnson said the quality of the building a lack of heavy traffic in the area and the stability of city ownership were major draws for the prospective tenants.

“The building itself is considered a ‘Class A’ building,” Johnson said. “It’s considered the best commercial office space you can get. It’s the only Class A in San Clemente. The closest one to us is in Mission Viejo.”

In August, the City Council approved a contract with Grubb & Ellis to act as the city’s agent in finding tenants for the building. A property-management firm, Parkstone Management Co., has also been hired, Johnson said.

Because of the depressed real estate market, the city was able to buy the building in the Rancho San Clemente Business Park for less than it would cost to continue renting space there over the long run, city officials said at the time of the sale.

The Community Development Department had rented nearly the entire first floor of the three-story building for three years for about $300,000 annually.

The $2.75-million price tag on the building was about $1.65 million under its market appraisal. The total cost of the deal, including about $560,000 in needed building improvements for tenants, commissions and in required reserves, was $3.8 million, officials said.

If the three lease agreements are approved, the city would be required to pay about $170,000 in commissions to realtors for Grubb & Ellis, the property management company and the prospective tenants, according to a report prepared for the council.

With the purchase, the city has been able to begin consolidating its land-use services into one location, creating a more “user friendly” process for residents and developers, officials said. For example, builders once had to travel to three different offices throughout San Clemente for a simple plan check.