Tuesday, August 05, 2008
Bernalillo County closing in on a $42 million deal to buy Petroleum Club building
By Dan Mckay
Copyright © 2008 Albuquerque Journal
Journal Staff Writer
Bernalillo County government might be moving into some pretty fancy digs next year.
The county is closing in on a $42 million deal to acquire the 500 Marquette office building, once home to the swanky Petroleum Club. The 15-story building lies across the street from the County Commission's current home, the City Hall complex it shares with Albuquerque city government and the water utility authority.
The county also has offices spread across three other Downtown locations and wants to consolidate them in one location, County Manager Thaddeus Lucero said. People who want to file certain records now have to visit more than one building for some land transactions, he said.
Lucero said rental income from the tenants already in 500 Marquette, including law offices and accounting firms, would cover the annual debt payments for a few years.
"It's a heck of a price for that building, especially with the tenants paying the bonds," County Commission Chairman Alan Armijo said Monday.
At least one commissioner, Michael Brasher, sounded skeptical. He said the county has other needs that warrant attention, such as the crowded jail.
"I just don't have enough information to make any judgment," Brasher said. "I have many questions that ought to be answered."
The purchase is scheduled to go before the County Commission on August 12.
Lucero said a recent appraisal estimated the value at almost exactly what the county proposes to pay — $40.8 million for the building itself, plus $1 million for artwork on the property.
He estimates that the annual debt payments to buy 500 Marquette would start at $1.4 million. Rental income from the current tenants would exceed that figure for the first three years, he said. As leases expire, however, that revenue would dwindle.
The county would still be "in the black" for the first six years, Lucero said, considering the savings from moving other county offices there. The county pays about $1 million a year for its space in the Albuquerque-Bernalillo County Government Center at One Civic Plaza NW. The city and county have a complex agreement sharing costs of the government center, but the city has indicated it might be willing to discuss changes, officials said.
After moving out of the government center, Lucero said, "we'd basically have no-net expense" for the new building.
The building is about 30 percent vacant, and Lucero said the county could begin moving in as soon as January.
The Marquette location is a striking building, with a four-story atrium and large Native American statues outside the front entrance at Fifth and Marquette. The complex includes a 630-space parking garage, from which the county could get revenue, officials said. A skywalk connects it to the city-county center across Fifth Street.
Dave Cavan, a developer out of Phoenix, built 500 Marquette in 1986. It was later owned by Sam Zell, a Chicago billionaire who controls the Chicago Cubs baseball team and several large newspapers.
The current owner is Hub Albuquerque LLC, a partnership of out-of-state investors. They weren't interested in selling the property initially, said Tom Jenkins, a real estate adviser working for the owners. They talked to the county about leasing some space in the building. It wasn't on the market for sale, but discussions with the county eventually turned to that topic, Jenkins said.
"The owners were not interested in selling it at the current price" of $42 million, Jenkins said. "The owners wanted more than that, but circumstances in the economy have led them to believe that the offer is fair."
Lucero said it would cost twice as much to construct a similar building from scratch. The building has about 230,000 square feet of space. A recent study done for the county estimated the government will need about 222,000 square feet of office space over the next 10 years, not including the Public Safety and Public Works departments, county officials said.
The county might eventually sell the Rio Grande building, just south of 500 Marquette, which houses the County Assessor's Office, and Union Square, near Central and the railroad tracks, which houses Planning and other departments, Lucero said. He said another possibility would be to rent out those buildings to generate revenue. Staying in the current setup could cost the county millions in renovations that need to be made at the aging buildings, Lucero said.