The city government is paying double the market price for a gym in the Irvine Business Complex because they said it was cheaper than an alternative sought by the City Council.
The city agreed to pay Lincoln Property Co. about $97 million for some land and an industrial building at IBC for the purpose of building a 110,000-square-foot indoor gymnasium.
The price tag does not include tenant improvements, meaning the gymnasium would likely cost the city more than $100 million to complete the project.
An indoor gymnasium at IBC, however, was the city management’s only feasible option, according to Irvine City Manager Oliver Chi.
Chi told the Business Journal the deal was necessary to save time and money.
City staff and council members were originally considering an indoor gymnasium at Bill Barber Park, located within a residential neighborhood near Jamboree Road and Alton Parkway, until they realized an indoor gymnasium there, according to Chi, would cost the city between $160 million and $175 million. Bill Barber Park’s gym would also take four to five years to build, Chi added.
An indoor gymnasium at IBC, however, would not cost as much money, nor would the project take four to five years to complete, according to Chi.
Reporting in last week’s issue of the Business Journal revealed the city’s transaction with Lincoln Property Co. was Irvine’s most expensive single-building industrial deal. The sales price worked out to about $880 per square foot, more than twice the per-square-foot price for an Orange County industrial building.
The Business Journal also reported that the city claimed the $97 million price tag was based upon a land valuation of the 7.3-acre site on Red Hill Avenue, where the gymnasium would be built, plus construction costs.
Earlier this year, CBRE appraised developable land in the IBC at $4.2 million per acre to determine how much developers had to pay at a fair market rate for dedicated park land. Using this appraisal, the Business Journal estimated the property at $30.2 million.
The property at 17300 Red Hill Ave., however, already has entitlements and permitting in place, Chi said. Lincoln Property Co. was already developing an industrial building on the site, and the developer will remain on the project to complete the gymnasium’s shell.
Chi emphasized that the Red Hill property was the only location within Irvine where this indoor gymnasium could be built.
City council members asked Irvine staff about building a two-level building, with the ground floor dedicated entirely to badminton. Building badminton courts, however, meant the city needed a building with high ceilings. A gymnasium at Bill Barber Park was too expensive, Chi said, so the city started looking into alternatives, specifically an industrial-to-warehouse conversion.
Irvine staff found the property at Red Hill, and Lincoln Property Co. was amenable to amendments and alterations that worked for the city, according to Chi.
Chi also said building at IBC, instead of the Great Park, also worked out for the city because the properties there already had grading in place.
The city manager added the funds city officials had access to were earmarked for specific geographical areas, limiting where Irvine could build this particular indoor gymnasium.
“Given the nature of the resources available, we had restricted funds we could use, and there aren’t a lot of large parcels available for this kind of use [including parking],” Chi told the Business Journal.
Chi acknowledged the proposed indoor gymnasium isn’t central to Irvine, but he added there aren’t many other places in town where a two-level badminton-themed facility with ample parking could be built. City officials could consider building a second indoor gymnasium in another part of Irvine, Chi said.
