sr-030309-1c~-
ctyor City Council Report
Santa Monica
City Council Meeting: March 3,.2009
Agenda Item: ~ - G,
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: Demolition of Improvements Located at 1324 Fifth Street
Recommended Action
Staff recommends that the City Council authorize staff to seek permits and bids for the
demolition of the City-owned building located at 1324 Fifth Street and temporarily reuse
the lot for surface parking as part of implementation of the City's Downtown Parking
Strategy and the community revitalization component of the Redevelopment Agency's
Five-Year Implementation Plan.
Executive Summary
'The City closed escrow on the acquisition of seven lots on Fifth Street on September
11, 2007. One of the lots, located at 1324 Fifth Street, is improved with athree-story,
25,335 sq. ft. building. The City had leased this building in March 2003 for the interim
Main Library. The building has been vacant since December 2005, and has deteriorated
in the ensuing three years.
Staff is seeking approval from Council to initiate the process to demolish the building by
early 2010 once all materials being stored in the building have been moved to their new
locations, and to use the lot for surface parking on a temporary basis, rather than
rehabilitate the building for lease to private entities or for. City offices. The anticipated
cost for demolition and resurfacing is $400,000. The long term plan is to redevelop the
entire site and recently acquired adjacent properties for a use consistent with the.
Downtown Parking Strategy.
Background
Between March 2003. and December 2005, the City leased the 25,335-square foot
building at 1324 Fifth Street for the interim Main Library. On September 11, 2007, the
City .acquired property on Fifth Street, south of Arizona Avenue, that includes the
building (Attachment "A"). The building has been vacant for approximately three years
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and over that period has deteriorated. Currently, the City uses it to store furniture and
equipment.
Discussion
In January 2008, the City received a Building Assessment Report that evaluated the
building. and estimated the cost of repairs to upgrade the building for use as City offices
or to lease to private entities temporarily until its ultimate reuse would be determined.
The report concluded that the City would need to repair and replace major building
systems, carpeting, and flooring, paint the interior/exterior, remove mold and. complete
other repairs at a cost of approximately $400,000. Staff estimated an annual
maintenance cost of $100,000. In addition, a new occupant would likely need to invest
in tenant improvements.
There are two factors which lead staff to conclude that rehabilitation of the building
would not be cost effective. Currently, the commercial leasing market in Santa Monica is
very soft. According to the Los Angeles Business Journal, during the fourth quarter of
2008, the office vacancy rate in Santa Monica was 12%, representing almost one million
square feet. During the same quarter there was a negative net absorption of office
space of 64,000 sq. ft.
In addition, staff estimates that the property will be needed for new construction within
five years. The long-term plan for reuse of the City's properties on Fifth Street will be
developed within the next two years as information becomes available about additional
property acquisition opportunities and recommendations have been made about the
need for additional parking. Staff intends to return to Council within the next 18-24
months to discuss reuse options for the property. After reuse decisions are made,
planning would begin, with construction anticipated within another three years.
Given these market conditions, the City would likely demolish the building in the next
few years as part of its broader downtown strategy, the leasing opportunity would likely
attract only short-term tenants, and lease-up of the building could take several years.
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As shown in the table below, based on an assumption that only 7,500 square feet of the
first floor would be leased; that the City would likely need to offer a rent credit for tenant
improvements; and that the City would receive rent of only $2.00 per square foot per
month due to the short-term nature of the tenancy, the City would need almost five
years to recoup its investment.
Rehabilitation Costs: Private User
If the City were to rehabilitate the building and occupy it as office space, the investment
to make the building habitable for City use would likely not be recovered within the
building's time horizon. Additionally, none of the City's existing leases for administrative
space is expected to expire within the near term and the site is outside the walking
distance to City Hall necessary to enhance customer service and City operations.
If the building is demolished, the property could be resurfaced so that it could function in
the short term as part of a larger, 45,000 sq ff. surface parking lot, adding approximately
25 new parking spaces to the existing 108 spaces. This parking lot could be utilized as
replacement parking while Parking Structures 1, 3 and 6 are being reconstructed, as
recommended in the Downtown Parking Program EIR, and/or a portion of the lot could
be used as a staging area during the construction. The first parking structure is
scheduled to begin construction in 2011.
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*additional tenant improvements
Alternative
In addition to the options discussed above, the building could remain in its existing
condition and used short-term for warehousing and storage of City property until it is
programmed for future use. However, long-term use for storage would require
significant investment (e.g. roof replacement) to forestall further building deterioration.
Environmental Analysis
The property is located within an area-studied in the Downtown Parking Program EIR,
certified by the City Council on May 9, 2006 for the development of new parking
resources. This report can be viewed online at EIR . None of the conditions described
in CEQA Guidelines Section 15162 and 15163 have occurred which would necessitate
additional environmental review.
Financial Impacts & Budget Actions
Sufficient funds are available in Capital Improvement Account Number
0172001.589000 in the amount of $400,000 for FY 2008/09 to take the necessary
actions to demolish the building located at 1324 Fifth Street and resurface the 7,500 sq
ft. area as a parking lot.
Prepared by:
Donna Rickman, Senior Administrative Analyst
Approved: Forwarded to Council:
And Agle, Direc o`t~r- ~! P. ont Ewell
Housing and Economic Development City Manager
Attachments:
Attachment A: Demolition of 1324 5th Street Map
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