San Diego Business Journal

Mayor Plans Office Tower Relocation for City Workers

Wednesday, May 8, 2013

San Diego Mayor Bob Filner has signed a letter of intent to relocate a portion of city operations to the downtown office tower at 525 B St., in a move the mayor said will save the city $3 million annually in leasing costs.

The action, which is subject to final lease negotiations with building owner Hines and city council approval, would involve relocating all city workers currently housed at 600 B St., according to a statement from the mayor’s office.

“The city leased office space in 600 B St. for 20 years,” Filner said. “It was time to look creatively at this lease and all future downtown leases in order to save taxpayer dollars, which can now go to needed services such as street repair, public safety and water lines.”

Terms of the proposed deal were negotiated by Jason Hughes, president and CEO of local brokerage firm Hughes Marino Inc., whom Filner recently appointed as an unpaid special advisor on downtown real estate.

The deal calls for the city to lease approximately 77,000 square feet in the new location, with an option for another 25,000 square feet. The city currently leases 138,964 square feet at 600 B St., which was purchased in December by Dallas-based Lincoln Property Co. and the Los Angeles office of Angelo, Gordon & Co.

Leasing costs for the city would go from its current $2.62 per square foot to $1.25 per square foot, for a six-year lease term. The city’s current annual cost is approximately $4.4 million, which would go to between $1.2 million and $1.5 million.

Filner said an efficiency study commissioned last year by the city’s real estate department found that city workers could operate in smaller spaces without compromising productivity.

Houston-based Hines has owned the 525 B Street tower, also known as Golden Eagle Plaza, since 2005. According to CoStar Group, its largest tenants are Golden Eagle Insurance, which is now part of Liberty Mutual, and the law firm Procopio Cory Hargreaves & Savitch LLP, which has its name on the 22-story building.

However, Liberty Mutual is in the process of finalizing plans to relocate to Mission Valley, according to local brokerage firms.

The city has a total of 550,000 square feet of leases expiring soon at three downtown buildings where it houses operations apart from the main Civic Center complex — at 1200 Third Ave., 1010 Second Ave., and 600 B St. The lease in the 24-story B Street tower is set to expire this month, while leases at the other sites expire in early to mid-2014.

— Lou Hirsh