The fate of the Chet Holifield Federal Building in Laguna Niguel, Orange County’s largest office and one of the area’s most distinctive structures, is once again up in the air.
Federal agencies are evaluating long-term options for the seven-story, pyramid-shaped building, which sits on about 90 acres on Avila Road just off Alicia Parkway in the northwest portion of the city.
Demolition of the iconic property to make way for new uses headed by a third-party developer that would buy the site from the government is an option, as is a major overhaul of the 47-year-old building. No decisions have been made, though.
Area real estate companies familiar with the property that the Business Journal contacted say they believe the expansive site could accommodate a variety of development and attract quality buyers, if the government first works with the city to re-entitle the site.
“It will take a sophisticated seller to get a sophisticated buyer,” said Brandy Birtcher, chief executive of Newport Beach-based Birtcher Development.
Residential construction would likely bring in the highest price in a sale, perhaps $100 million or more, though it’s unclear if city residents would welcome such a project.
Laguna Niguel Mayor Elaine Gennawey expressed interest last week in a variety of commercial uses.
“I would hope any development would include a performing arts center, one of a kind retail shops, restaurants and; perhaps, an art museum,” Gennawey said in a statement.
“We welcome the opportunity to work closely with interested developers should the site become available.”
Study Due
The General Services Administration, which runs the property, will release a feasibility study in about a month, “designed to identify long-term capital needs of the building, evaluate housing alternatives and develop agency requirements.”
It’s also in the process of formalizing a “Disposal Recommendation Report,” which is required for federal buildings “that no longer meet the needs of the federal government” and could be demolished.
“While no final decision has been made, GSA has been asked to consider the most effective method for housing the federal agencies in Laguna Niguel, including relocation to alternative sites,” the agency told tenants last month.
If the government decides to vacate the building, sell the property and move tenants elsewhere, the process could take more than five years, before any demolition or development work took place, according to federal documents. In the meantime, no new long-term tenants are being courted for the 1 million-square-foot facility, which is said to be big enough for about 6,000 employees.
Only a fraction of the employee base uses the facility.
The property, roughly the size of the four-building Five Point Gateway office complex that recently opened in Irvine, is occupied by a variety of federal agencies but operates far from full capacity.
Ziggurat
Commonly known as the ziggurat because of its terraced design that resembles an ancient temple, it has its share of issues that make long-term occupancy an expensive proposition, particularly when federal agencies are being encouraged to shrink operations and costs, government filings note.
In addition to updating aging electrical, mechanical and plumbing infrastructure—much of which has had few updates in the property’s life—the building needs a seismic retrofit, the documents indicate.
It also harbors 28,000 square feet of asbestos-containing materials that require mitigation. Monthly tests take place, and “the building remains safe to occupy,” a March report to tenants said.
The structural issues, plus costs related to any tenant improvements and maintaining an office operating at far less than capacity, have made it “clear that continued reinvestment in (the building) had become impractical in a budget constrained environment.”
Reinvestment is “too expensive and GSA has been authorized to begin development of alternative space solutions with agencies to relocate,” documents note.
Laguna Niguel’s office market encompasses about 1.7 million square feet and has an availability rate under 5%, so unless facilities were built on part of the site, a move outside of the city appears likely for many of the building’s tenants.
Few of the employees there live in the immediate area, making its suburban location west of the San Joaquin Hills Corridor (73) Toll Road, inefficient for the government, developers previously said.
Central OC, in particular the county seat of Santa Ana, plus Orange, Garden Grove and Anaheim, hold the bulk of OC’s federal office space.
Large federal agency-related lease deals in the area in the first quarter include a nearly 67,000-square-foot lease GSA signed at the Create Tustin creative-office campus near the Tustin Marketplace shopping center, according to local brokerage reports. The tenant is moving from a different location than the Chet Holifield building, according to real estate sources.
Movie Prop
The ziggurat property was designed by famed architect William Pereira, who also helped create Irvine’s master plan and the Newport Center business district.
The futuristic-looking building, incorrectly described by some in the public as the West Coast Pentagon, has been used as a prop in several movies, including “Outbreak” and “Death Race 2000.”
It was originally designed for aerospace company North American Aviation, which merged with Rockwell International Corp. before the structure’s completion in the early 1970s. Neither company ever used the property, giving the site a white-elephant reputation that became hard to shake.
Fluor Corp. considered buying it in 1970 for its local operations but didn’t complete the deal.
Rockwell offered to trade the building to the federal government in exchange for surplus government facilities of equal value, according to the GSA, which assumed control of it in 1974. It was renamed in 1978 to honor longtime Democratic congressman Chet Holifield from San Jose.
The government has seriously considered offloading the property at least three times, often when it struggled to fill the building with tenants. It put it on the market in 1983 with the marketing pitch, “Pharaoh Wanted. Pyramid for Sale.”
The New York Times noted at the time that the property was “perhaps the costliest in the Government’s huge inventory of unused or underused property that the Reagan Administration is trying to dispose of.”
Bids reportedly came in at about $40 million but no buyer emerged.
Three years later, an undisclosed local real estate firm made an unsolicited $60 million bid for it, reportedly with an aerospace company lined up as a big tenant, but the deal never closed.
The GSA again put the building on the market for sale or lease in 2009. The Business Journal reported then that a nearly $100 million price tag was possible.
Complicated Site
At least four area developers expressed serious interest in buying the property that time, the Business Journal reported. A sale again failed to occur, though, due in large part to the ongoing effects of the Great Recession.
Birtcher Development was among the companies interested in it then. Brandy Birtcher said last week that his company might be interested again if commercial uses are explored.
“It’s a complicated site,” said Birtcher, whose family-run business has developed other properties in the vicinity of the Holifield building over the years.
The important thing this time is that the “U.S. government and the city have a shared vision, prior to it going on sale,” which wasn’t necessarily the case the last time around, Birtcher said.
A single private-sector tenant looking for relatively cheap office space could still end up taking a bulk of the building in the right situation, he said.
But city officials said they’re preparing for change.
The city “has been proud to have the iconic Chet Holifield Federal Building within our City for over forty years; but, recognize a time will come when the federal building is no longer needed,” Gennawey said.
The site “provides a significant opportunity for our city to bring to the region amenities that will enhance quality of life and provide unique experiences for all residents of South Orange County.”
