SAN CLEMENTE : City Buys Building for $2.75 Million

The City Council has approved buying an office building, which already houses the city’s Community Development Department, for $2.75 million.

By buying instead of renting badly needed office space in the building at 910 Calle Negocio, officials say the city will save about $91,000 to $237,000 in the first year alone, depending on the financing arrangements.

“Financially, it does make sense,” Councilwoman Candace Haggard said at Wednesday night’s council meeting.

With the purchase, the city will also be able to consolidate its land-use services into one location and create a more “user-friendly” process, officials said. For example, builders now must often travel to three different places throughout San Clemente for a routine plan check.

“This is a plus for the city right now,” Councilman Thomas Lorch said. “We’ll keep some options open.”

Mayor Truman Benedict cast the only dissenting vote, saying he philosophically opposes public entities getting involved in private-sector activities.

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.

Because of the depressed real estate market, City Manager Michael W. Parness said the city is able to buy the 55,000-square-foot building in the Rancho San Clemente Business Park from Bank of America for less than it would cost to continue renting space there. The bank had foreclosed on the property four months ago.

The $2.75-million price tag on the building is about $1.65 million under its market appraisal. Officials estimate that it would cost more than $3 million just to construct the shell of a similar building under prevailing market conditions.

The total cost of the deal, including about $500,000 in needed building improvements for tenants, is $3.8 million.

Since the Community Development Department will only need the first floor of the building for now, the city will hire a property management company to lease the remaining space, officials said.

City officials had sought studies from three independent firms on purchasing the building, and each concluded that the city could only save money with the deal, Parness said.

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

City officials will sign a sale agreement in the next couple of days and put down a $100,000 deposit, Parness said. The city will then have 30 days to secure financing through certificate of participation bonds.

Parness said he expects the city will take possession of the building in June.