Unused Building May Cost College District Millions

The cash-strapped Los Angeles Community College District faces the prospect of losing millions of dollars on a never-used administration building it purchased five years ago, according to a report released Wednesday.

The Mid-Wilshire high-rise--which cost $12.5 million in 1990 at the height of the region’s real estate boom--would sell today for no more than $4 million, according to the district report.

“What we are really looking at is a white elephant,” said board of trustees member Gloria Romero, “a $12.5-million, unoccupied, boarded-up, gutted-out building. And if that’s not a white elephant, what is?”

The district delayed moving into the Mid-Wilshire building because it needed to make improvements first estimated at $5 million. In the meantime, another attractive offer emerged and a divided board of trustees entered into a 20-year lease for its current offices in downtown Los Angeles.

The original plan was to sell the Mid-Wilshire building and stay at the leased site because the agreement included two years free rent.

But by 1993, the value of the Mid-Wilshire building had dropped to $9 million and has continued plummeting ever since, halting any sale.

For a few years, the vacant high-rise at 4050 Wilshire Blvd. did not pose a serious financial drain. But this year the district has had to begin paying rent on its downtown offices at 770 Wilshire Blvd. on top of a delayed debt obligation for the Mid-Wilshire property. Each site now costs about $1 million a year.

District officials face the unpalatable choice of selling the Mid-Wilshire building at an estimated $8-million loss or holding on to the property in the hope it will someday recover its value. The report presented Wednesday to the board’s Capital Assets Committee said the prospect of the district recovering its original investment there “is not realistic.”

“In a sense it’s a crapshoot,” said Robert Grabski, the district’s director of facilities planning and development. He said the district has become a victim of falling real estate values.

The Los Angeles district is spending about $75,000 a year, mainly on security measures, to maintain the vacant Mid-Wilshire building. And it could take an additional $8 million to $12 million in improvements just to make it ready for the district or any buyer, the report said.

“Our choice at this point is finding the least bleak alternative,” said Romero, who was elected last year vowing to deal with the problem.

The district report said the Mid-Wilshire building could be sold or traded at a major loss; it cannot be converted into classrooms without huge costs and zoning changes, and that breaking the lease downtown could cost millions of dollars in penalties. Grabski and other district officials maintain that even with a possible $4-million sale, the district has perhaps broken even. They argue that the savings on their leased building downtown over a long period will offset any losses from the other building.

In 1994, a county grand jury report found no illegalities or other improprieties in the transactions. But the panel--whose probe was prompted by a complaint--faulted the district for not having retained an experienced relocation firm, saying they might have warned of the slumping market and recommended against the original purchase.