The federal government is in the process of auctioning off a popular office building in Laguna Niguel, California. The Chet Holifield Federal Building, sometimes called the Ziggurat, was designed by William Pereira, a well-respected architect. An interesting building, made in a kind of Mesopotamian style, but in my eyes not particularly successful:
I OC register had a series of auction stories, where strong bidding pushed the price much higher than expected. This is because this building is not only an office building, but also 89 acres in one of the most desirable communities in California, just a few miles from Laguna Beach. The article contains this graph:
Note that the original asking price was only $70 million. One reason people were caught off guard is that this is actually the GSA’s second attempt to sell the building:
By the way, this is the second auction of the 53-year-old Ziggurat, the first one, which required the buyer to preserve the structure of the Ziggurat, did not issue bids. A long response to a recent auction — without that restriction on development — suggests a buyer may demolish the building designed by the late architect William Pereira.
Not a single developer was willing to bid even $70 million for this highly desirable building at a time when there was a requirement for the building to be saved. Once that limit was lifted, at least two developers were willing to pay more than $150 million (and the auction is still going on.)
From this information, we can conclude that the economic cost of this regulatory barrier was at least $84 million, the difference between the current auction price and the previous auction price.
But even that figure is a gross underestimate of the cost of managing this area. Although the new owner will be allowed to remove this eyesore, they will continue to face a number of byzantine regulations and lawsuits, from all kinds of interest groups hoping to reduce the value of the development. After all, this is California.
Although I can’t be sure, I suspect that a developer would be willing to pay hundreds of millions of dollars for this property if he were given a free hand to develop it in any way he wished. I also suspect that the resulting development would be extremely impressive—the kind of grand project that the US used to do, but that is somehow beyond our control.
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