Working on a building: City leaders offer thoughts while on the verge of purchase at The Round
For Beaverton City Councilor Ian King, the city's proposed purchase of an office building at The Round at Beaverton Central is a classic 'no-brainer.'
Mind you, he's not trying to diminish the considerable time, effort and mental acuity city staffers expended in reaching the $8.65 million real estate deal for the South Office Building on Southwest Millikan Way. He just sees an opportunity too appealing to pass up.
'We buy properties for their potential,' he said. 'From a purely financial standpoint, it just makes sense.'
King and his fellow councilors will likely consider the purchase of the 108,000-square-foot South Office/Metro Building from Portland-based LNR Property LLC at its Tuesday, March 20, meeting at 6:30 p.m. in City Hall, 4755 S.W. Griffith Drive.
Also, the Beaverton Committee for Citizen Involvement is hosting a community information meeting tonight (Thursday) from 6:30 to 7:30 p.m., also at City Hall.
Tuesday's discussion will follow last week's council approval of a collaboration with Scanlan Kemper Bard developers to revitalize and complete several properties of the long-stalled mixed-use development. In a complex arrangement with the city, SKB agreed to take over several parcels at The Round; work with the city to improve infrastructure, parking and landscaping; and remove close to $1 million of the city's debt burden that failed developers left behind.
The council approved that deal unanimously with minimal discussion. And despite some questions raised about the expense and purpose of the South Office Building purchase, there appears to be majority support for the plan.
City officials, including Community Development Director Don Mazziotti, Finance Director Patrick O'Claire and City Attorney Bill Kirby, call the proposal an opportunity to remove a $400,000 annual lease obligation for its Central Plant on the building's ground floor. The city is on the hook to the building's current owner for up to 33 years for space housing the facility that provides heating and cooling to The Round's buildings. The expenditure would amount to at least $33 million for the entirety of the lease.
Past and future
Calling the $8.65 million price tag a 'bargain,' King sees the investment as a smart move at the right time.
'From my standpoint, it's really a no-brainer, given the cash flows the city is putting out and the market value of the building,' he said. 'Being able to not pay that annual lease, it doesn't take long for it to become cash positive for the city.'
While appreciative of the cost savings from eliminating the lease obligation, Councilor Betty Bode nonetheless has several questions regarding the expense, timing and public input behind the building-purchase deal.
'To purchase the building and not have a specific plan on what to do with the building doesn't, to me, sound like a good business plan,' she said.
Bode is particularly uncomfortable with the prospect of moving government offices from the overcrowded City Hall on Southwest Griffith Drive to the Coldwell Banker building at The Round.
Feasibility studies, for which the city paid about $20,000 in 2010,examined the costs of transforming the building to accommodate City Hall. It was determined the building doesn't meet U.S. Homeland Security standards for public buildings.
'It could not be used for the police department functions,' Mazziotti said. 'And the courts need to be close by, which also makes it not usable for courts.'
General-purpose government operations aren't held to the same security standards, he added. So the building could theoretically accommodate city government offices.
Regardless of what goes in it, he added, 'we would have a Class A office building in great condition.'
Already skeptical about using money from the city's contingency fund to purchase the building, Bode is also unclear about the renovation costs to accommodate City Hall.
'I'm not sure where we would get the money for a remodel,' she said. 'I'm gonna need to get that clarified.'
She also noted a City Hall-occupied building would effectively remove prime downtown real estate from the public tax rolls, affecting the Beaverton School District and other special service districts.
'Reduced taxes for the revenue stream impacts the schools, which have to do a $40 million cut (for fiscal year 2012-13),' she said. 'The cost and unintended impact is that Beaverton schools would not get all their money.'
Building with a purpose
While he's 'not ready to make the decision' about the future of City Hall offices, King said the beauty of the South Office Building is the city - beyond the responsibility of securing viable tenants - doesn't have to create a 'purpose' for the property as it would for a vacant lot or dilapidated structure.
'The building has a purpose now,' he said of the partially occupied five-story facility. 'And as owner of that building, we (would be) in a position to have cash flow from it that other developers may not. We're not in this genre of having to prove how to redo it. We don't need to redesign what its purpose is.'
Councilor Marc San Soucie has no doubt the South Office Building is a good opportunity regardless of whether or not it houses city government offices.
'Paying $400,000 for leasing that building (space) is way too much,' he said. 'The fact that the Central Plant is profitable is a benefit as far as I'm concerned. And the fact that we have an opportunity to acquire the building at a pretty modest price is exciting.'
Furthermore, San Soucie said the investment in feasibility studies will prove valuable as a citizen task force explores the range of uses for the building.
'I think it was useful information,' he said, adding he's 'looking forward to the community information meeting on Thursday night.
'We'll see what questions get asked.'
Weigh in at the forum Thursday night
Beaverton's Committee for Citizen Involvement is hosting an informational meeting tonight from 6:30 to 7:30 p.m. in the Beaverton City Hall Council Chambers, 4755 S.W. Griffith Drive, about the city's proposal to purchase the South Office Building at The Round at Beaverton Central.
The City Council is expected to consider purchasing the building, anchored by Coldwell Banker real estate, for $8.65 million at its Tuesday meeting at 6:30 p.m. City officials say a key incentive is to eliminate the $400,000 per-year lease for the space that houses the Central Plant, which provides heating and cooling for The Round. The impact to the general fund over the remaining life of the lease is $13.3 million.
'This gives us a critical asset, while demonstrating strong fiscal stewardship,' Mayor Dennis Doyle said of the pending purchase, whose funding would likely come from the city's contingency reserves.
Community and Economic Development Director Don Mazziotti will provide an update on the recent activity surrounding The Round. Other panelists include Councilor Marc San Soucie, City Attorney Bill Kirby and Assistant Finance Director Dave Waffle. An open question-and-answer period will follow.
For information, visit www.BeavertonOregon.gov/TheRound .