Council approves $11.7 million purchase agreement for former Sport Chalet headquarters, potential site of future city hall

La Cañada Flintridge municipal employees could soon have a new place to call home, after the City Council voted Tuesday to sign an $11.7-million purchase agreement to acquire the former Sport Chalet corporate headquarters building as a new city hall.

A purchase and sale agreement with the La Cañada Properties, Inc. — owned by the family of Sport Chalet founder and local legend Norbert Olberz — will begin with a $250,000 deposit from the city and a 90-day due diligence period during which La Cañada officials will thoroughly inspect the 24,000-square-foot space.

The city will take advantage of that period to assess the viability of the purchase, review its financing options and take one last stab at identifying other potential city hall sites or possible alternatives. Consultants will be hired, at the estimated cost of $75,000, to help complete the review process, City Manager Mark Alexander told the council.

Join the conversation on Facebook >>

“That would be the time for us to go in and take a look at what are the total costs that would be involved in the acquisition of the building,” he said, highlighting some of what would be inspected, from HVAC and electrical systems to roofing and plumbing.

Upon close of escrow, the city would pay $5.65 million from its reserve fund and receive a promissory note from La Cañada Properties, Inc. in the amount of $6.05 million, secured by a deed of trust. The note will have a 24-month term during which no monthly payments will be required and no interest will accrue.

Daniel Jordan, the city’s finance director, assured council members the withdrawal from the reserve fund would still keep the city within the council-recommended reserve level, equivalent to 100% to 150% of the city’s annual operating budget, leaving the fund at about $12.5 million.

“That’s still in excess of our annual general fund expenditures,” Jordan said.

City officials were looking for possible alternatives to the current crowded Foothill Boulevard quarters — a 7,160-square-foot city-owned building which houses roughly 40 employees working in four departments — long before Sport Chalet’s corporate owners Vestis Retail Group announced in April plans to close all 47 Sport Chalet locations, including the La Cañada flagship store.

Owners of the Town Center, IDS Real Estate Group, are still working with the city to identify an appropriate successor for the retail space and have since prepared its interior for sale.

The street address of the store, 2 Sport Chalet Drive, has officially been renamed and submitted to the Los Angeles County Department of Public Works as 965 Town Center Drive, Deputy Director of Community Development Susan Koleda confirmed Tuesday.

Meanwhile, the decision to move into adjacent former Sport Chalet headquarters building, still listed as 1 Sport Chalet Drive, will not affect the fate or use of that property, council members stipulated. Officials have said the name of the street itself, however, will eventually be changed.

At Tuesday’s meeting, Alexander said that some time around the news of the retailer’s closure and Vestis’ subsequent announcement it would file for Chapter 11 bankruptcy, owners of the headquarters building, constructed in 2002, sought out the city’s interest in purchasing the site.

“La Cañada Properties...had approached the city, asking whether the city might be interested in acquiring the building as a potential site for a future city hall,” he said.

Then-Mayor Dave Spence had formed an ad hoc committee made up of staffers and representatives of various community groups and institutions to review all available options for a city hall, including renovating and possibly expanding its existing location at 1327 Foothill Blvd.

The current city hall, which has been occupied since the late ‘70s and was purchased by the city in the ‘90s after it had paid rent there for about two decades, has an estimated resale value of about $3 million to $4 million. When officials explored the option of renovating the space, including acquiring adjacent offices and parking for the purpose of annexing them to the main building, cost estimates ran as high as $6 million, Alexander said.

Public Works Director Edward Hitti said bringing the site into full compliance with ADA requirements would add another $1.82 million to the price tag. Alexander estimated demolishing the building and starting over would range from $10 million to $12 million.

After reviewing all identifiable options, the ad hoc committee recommended the Sport Chalet corporate office be seriously considered, due to its ample space and prominent location in the city’s Town Center.

The site includes an adjacent 3,038-square-foot Montessori school operating on a lease anticipated to run through at least 2024. Until the expiration of that lease the city, were it to go forward with the deal, would act as a landlord, collecting an annual $84,000 in rent with options to increase rent annually.

Alexander told council members only one of the building’s two floors, about 12,000 square feet of space, would be needed to accommodate a new city hall. The city would need to determine how to make best use of the additional floor.

“One (use) might be to lease that floor for rental income,” he said. “It might be to separate that in a sort of condominum-type format and sell off the additional floor, which would then reduce the total purchase price of the building. Another use would be to partner with a community group...which would be a compatible use with city hall.”

Speakers in a public comment session recommended the city to consider leasing, rather than selling off the additional space.

“I would [advise] if you do acquire the property that you think long and hard about selling off one of the floors,” said La Cañada resident and Public Safety Commissioner Wes Seastrom. “Once you sell it, you’re never going to get it back. You’re going to need that space at some point in time.”

In their comments, council members praised the hard work and negotiating that went into getting a tenable offer on the table. Mayor Jon Curtis and Mayor Pro Tem Mike Davitt told residents Tuesday’s vote was just the first step of many that would be taken in the coming months.

Councilwoman Terry Walker assured the years-long need for a new home, not the availability of the office space, was the true impetus for the decision.

“It’s not the building that is driving the need — it is the need that (gives us) an opportunity to look at the building,” she said. “I think we would be remiss as a council if we didn’t move forward with this step.”

In his remarks, Spence recognized members of the Olberz family for their many contributions to the Town Center.

“I’m thinking of all the sacrifices and efforts that the Olberz family has made,” Spence said, recalling the donation by the family of a now namesake Olberz Park in front of the Sport Chalet corporate office. “We should acknowledge the Olberz family. I think they’ve given us a pretty decent offer.”

--

Sara Cardine, sara.cardine@latimes.com

Twitter: @SaraCardine