Photos by Sarah Bennett
Two years after a failed purchase by Lyon Capital Ventures, City Council approved Tuesday night the sale of 100 Long Beach Boulevard, also known as City Hall East, for $2.1 million. The buyer is listed as 100 LB Real Estate, LLC, a new company affiliated with Cliff Ratkovich, who was involved in both the defeated SECOND + PCH project and the planning and entitlements of the old Pike land, where the Camden Apartments now stand.
City Hall East is a vast, ten-story structure, that houses almost 150,000 square feet of space, and includes the 149 car parking garage attached to the property. The planned development of the CHE will take the form of approximately 130 residential units, and a minimum of 1,800 square feet of usable ground floor space devoted to retail uses.
The building has been vacant since 2005. Vandalism and tough economic times have both hit the building heavily. A credit for $40,000 is being issued to the buyer due to vandalism, mainly from theft of copper wiring being the primary cost. Security has also been required for the building, which will cost Long Beach an additional $90,000-150,000 in security, maintenance, and repairs of the building until the close of escrow. Escrow itself is scheduled to take no more than 45 days from open to close. City Staff also estimate the cost to bring the building up to code for residential living will cost somewhere close to $20 million.
“Staff believes fair market value has been adequately defined,” said Michael Conway Director of Business and Property Development.
No less than 2 times has the CHE attempted to be sold. The latest effort was back in 2010, when Lyon Capital Ventures wanted to purchase the property for $4 million. City Council approved that purchase, with a 6-2 vote. Once adversarial to the 2010 purchase, Councilmember James Johnson voted in support of Tuesday’s proposal.
“For this vote, I have had the experience of three years as a councilmember, and I have witnessed the open, competitive, and fair process that the City used to sell this building. In addition to the dollars the City will receive from this sale, I believe there is real value in the requirement that the developer convert this into residential units, which will continue to help build the ‘critical mass needed downtown,” Johnson says.
The purchase of CHE took a different form than normal selling through a broker. Instead, a Request For Proposal was issued in January of last year. Five proposals were submitted by the March 30, 2012 deadline, with Watt Investment Partners, LLC initially being selected as the best proposal. However, Watt would withdraw their offer, which resulted in Cliff Ratkovich and Associates, Inc. to have made the next best offer. Ratkovich are an affiliate of the buyer, who are listed as 100 LBB Real Estate, LLC.
{loadposition latestnews}The RFP process was favored by City staff due to a finer control over what the use the former CHE building would take on. City staff informed Council that due to the nature of the RFP, CHE would have to be residential, mandating a minimum 72 units be included in the proposal. The developer will also be legally bound to the contract to keep their project in the scope of the proposal. Another aspect of the RFP was to keep the price of the building competitive. In a 2011 RFP process for the property, the top two proposals came with 10% of each other, indicating to city staff a clear valuation of the property.
Dissenting voices of this purchase were Lyon Capital Ventures, who were involved in the 2010 attempted purchase, lodged a formal protest. Additionally, Councilmember Gerrie Schipske was skeptical over a part of the proposal which involves a $1 million payout to the buyer if Long Beach does not fulfill their obligations during escrow.
“The one million dollar cap is somewhat abnormal, but not out of the question. That is the cap on the damages, the only way we pay a dollar of that is if the city defaults on its obligations,” city staff said. “The possibility of this occurring is as close to 0 as you can get without certainty. There is nothing that prevents us from submitting to escrow. We leveraged that certainty to other negotiations of the sale agreement. We believe the risk so minimal that we agreed to this condition. On the other side, we got reductions in other costs.”
Along with concerns about the liquidated damages aspect of the transaction, Schipske brought up a point that the City currently has a $35 million insurance policy for the building, which is being purchased for $2.1 million.
100 LBB Real Estate, LLC, as of today are not listed with the California Secretary of State business directory.
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