NEWSWATCH

‘The Edison Lofts’ Project In Downtown Long Beach Moves Forward With Sale Of ‘City Hall East’

By Tiffany Rider - Senior Writer

May 7, 2013 – Despite protest from one of the project bidders and the objection of one councilmember, the Long Beach City Council on April 23 approved the purchase and sale agreement of 100 Long Beach Blvd. (known as City Hall East) with Ratkovich Properties.

This was welcome news to downtown representatives, 2nd District Councilmember Suja Lowenthal and Vice Mayor Robert Garcia, who made the motion to approve the item and seconded it, respectively.

“I’m very pleased that this brings one era to a close and opens a new chapter in the building’s life as well as that of the East Village and downtown,” Lowenthal said. “I am really excited about the potential here. The timing for revitalizing this building could not have come at a better time. . . . The building’s activation will go a long way bridging the large chasm between the downtown core areas of Pine and The Promenade, and the East Village retail and arts. I have a feeling that this could certainly be the glue that brings it all together.”

Garcia echoed Lowenthal’s comments about this project bringing forth connectivity between the downtown and East Village. “To be able to think that we will have something there that will be bringing new people in, new residents, people who are going to be shopping, eating and enjoying what downtown has to offer is pretty exciting,” he said.

Though the property has been vacant since 2005 – the police department had previously occupied it – the city has over the past year incurred $90,000 to $100,000 in costs to provide 24-hour security due to vandalism. In addition to ongoing costs, city staff has struggled to sell City Hall East since the first request for proposals (RFP) was issued for the structure back in March 2010, according to Michael Conway, business and property development director for the city.

The selected respondent to the first RFP decided to end the deal after five months of due diligence, “ultimately advising that the project did not support the proposed sale price of $4 million,” Conway said at the council meeting. A second RFP was issued in January 2012, this time proposing residential use for the property to align the project with the new Downtown Plan. The selected respondent to the second RFP, Watt Investment Partners, withdrew its offer by December 2012 “citing similar project revenue shortfalls and unachievable financing hurdles.”

Ratkovich Properties was the second choice bidder on the project and was selected in February at a price of $2.1 million to develop a mixed-use project called The Edison Lofts with 134 studio, one-bedroom and two-bedroom apartments and ground floor retail. Close of escrow is estimated to be June 7.

Lyon Capital Ventures submitted a formal protest to the council as one of the bidders on the RFP. “This is a formal protest to the proposed action by the city,” City Attorney Robert Shannon told the council. However, Conway later told the Business Journal in an e-mail that there is no protest procedure for RFPs.

“The implied procedure for an RFP would be to address the Council at the time the contract is agendized to be awarded,” Conway said. No one in the audience at the April 23 meeting identified themselves as representing Lyon in protest.

“Everyone is aware of our attempts with this property in the East Village, to sell it and have it developed,” City Manager Pat West said during the meeting. “We’ve gone through a couple of RFPs. We now have a responsible respondent.” Staff estimated revenues of $2.4 million from city development and building permit fees, approximately $300,000 a year in property tax and the benefits of about 175 new residents in the downtown area.

According to Conway, the process of valuing the property was complex as there are no other surplus assets that come close to City Hall East. “Appraisals generally rely on comparable sales, replacement value and income capitalization,” he said in an e-mail. “As this property is a complete re-use of an office building, there is very little comparable information. Nonetheless, an appraisal was prepared that used vacant land values, comparable rental rates and estimated rehabilitation cost to arrive at a ‘value.’ I continue to avert that bidding the property to sophisticated real estate developers, with access to experienced and well funded financing partners, will result in the best estimate of market value. While we may be able to wait for a better price, we could very well miss both the interest rate market and residential demand as they both significantly influence cost and value.”

Even so, 5th District Councilmember Gerrie Schipske indicated several objections to the deal and voted against the item. One such objection was with regard to the valuation of the building by the city’s insurance company. “We are either paying a helluva lot more for insurance than we need, or somebody is not valuing that property appropriately. This isn’t the first time. This is a repeated process that we get. I would hope we could maybe sit down and talk with our insurance company about why they’ve indicated the value was $35 million.” Conway responded to her comment, “Absolutely.”