Civic Center lease arrangement to be decided on
SAN DIEGO (CNS) – The San Diego City Council Monday will consider whether to approve a 20-year lease-to-own arrangement for a privately held 18-story office building in the Civic Center complex, a deal that the city’s Independent Budget Analyst contends is being rushed.
According to a staff report, the city of San Diego has been trying to buy Civic Center Plaza, the brown tower across from City Hall where more than 800 municipal employees work, for three years now. Plans for an outright purchase fell through when it was determined that a type of bond usually used by the city wasn’t appropriate.
The current deal calls for a third party, Cisterra Development, to buy the office tower and a smaller adjacent building that houses the King/Chavez Charter School and lease it to the city at rates agreed to during earlier talks. Ownership of the building would transfer to the city at the end of the 20-year term.
The hitch, according to the city’s IBA, is that the current owner wants the deal signed by Friday or the building will go up for sale on the open market. The city would then be faced with leasing space at current market rates — the difference being $1.15 per square foot compared to $2 per square foot or more.
While council members have been kept apprised of the negotiations, they haven’t had a chance to publicly question staff about the agreement, the IBA said in a report released Friday. Details were only provided to the council last week, the report said.
“Bringing the item forward in this manner and asking council to take an immediate action to approve the proposed lease-to-own agreement, while at the same time highlighting the potential for significantly increased costs absent immediate action, does not allow council sufficient time to fully vet the item, request additional information, or suggest modifications,” the IBA said.
A city staff report said San Diego will save around $9.1 million by jumping at the deal now, and avoiding current market lease rates.
The city also wants to rearrange some office space to cram 245 more employees into the building, and make other improvements, at an estimated cost of $15 million. That would be partially offset by rental income from the school and revenue from a 418-space underground parking garage.
The total lease cost over the 20-year term would be $91.4 million under the proposed lease-to-own plan. If the city decides to wait, staff believes the cost would rise to $100.5 million.