SANTA ANA — The construction of Orange County’s tallest building is now back on track. The California Fourth District Court of Appeals ruled in favor to the City of Santa Ana and ordered Superior Court Judge Derek W. Hunt to vacate his ruling in favor of a the plaintiffs in a suit brought to halt revisions to the One Broadway Plaza Development Agreement by the City of Santa Ana.
In June, Orange County Superior Court Judge Derek W. Hunt ruled in favor of the Coalition for Accountable Government Ethics (CAGE) and against the City of Santa Ana concerning City’s amending the One Broadway Plaza development agreement. Last year, in what was arguably an illegal vote once you factor in the reality that several City Council Members voted despite having received campaign contributions from parties involved with the project, the Santa Ana Council amended the voter approved development agreement on the 37 story high-rise project. CAGE sued to overturn that decision.
The June ruling orderd the City put their decision to amend the Development Agreement to the voters. Santa Ana sought extraordinary relief to overturn Hunt’s decision.
In the unpublished ruling posted on December 2, 2011 the Court of Appeals determined that the trial court plainly erred in declaring the ordinance approving the amendment void and ordering the City to hold a referendum election on the amendment to the development agreement. The court will issue a peremptory writ of mandate directing the superior court to vacate the judgment declaring the ordinance amending the development agreement void and ordering the City to hold a referendum election on the amendment ordinance. The writ of mandate will further direct the superior court to enter a new judgment denying CAGE’s complaint for declaratory relief and petition for a writ of mandate.
CAGE will be meeting on Wednesday evening with their attorney to discuss the ruling and see if there are any options left for CAGE in the case.
Ironically, the April 2005 Ballot Initiative that developer Mike Harrah put forward to move the project forward included the provision that the property be 50% pre-leased before construction could begin. It was Harrah’s bait and switch that convinced voters that the project would not be built without assurance that it would not be a vacant glass monolith in the heart of Santa Ana. With the economic downturn, Harrah found that he could not meet the requirement so he sought a change in that requirement.
Voice of OC reported in October (Does Harrah Owe Santa Ana $300,000 for Special Election?) that CAGE also contends that the city was supposed to, but didn’t, force developer Michael Harrah to pay the $300,000 cost of the 2005 referendum that green-lighted the project. The residents are basing their argument on a clause in the development agreement that calls for Harrah to pay for “approval or certification” costs.
“Unbelievable, in a word.” said Jeff Dickman, a member of the group known as the Coalition for Accountable Government Ethics (CAGE). “It’s not like it was a $10,000 or a $20,000 bill — it was $300,000. It’s really mind-boggling.”
There has been no formal answer from the city since the Voice of OC report as to whether they will be invoicing Harrah for the costs of the April 5, 2005 Special Election.
So now with the Court of Appeals ruling, Harrah is free to move full stream ahead with his project without any pre-leasing requirement. If anything, the economic downturn has had an even greater effect on premium office space vacancy rates since 2010. According to forecasters at the USC Lusk Center for Real Estate overbuilding during the boom and falling employment during the bust have left Orange County with glut of about 10 million square feet of office space – equal to about 386 average-sized buildings. Landlords are expected to keep cutting office rent through 2013, even though the amount of empty space is shrinking.
The Orange County Register reported on Thursday, December 1st (Does O.C. have 400 office buildings too many?) that commercial real estate executives got a preview of Lusk’s 2012 Casden Forecast for Orange County, which will be released on Tuesday.
The forecast shows:
- The vacancy rate in O.C.’s Class A office buildings – the ritziest properties in the best locations – is expected to drop by seven percentage points to 14.7% in the third quarter of 2013. As of the latest quarter, 21.8% of the county’s offices are vacant.
- Vacancies for Class B buildings – older properties in less desirable areas – will fall to 12.3% by Q3 2013, down from 16.6% in the latest quarter.
- Despite those decreases, office rents will drop for the next four quarters, declining from $2.17 a square foot each month to $2.07 for Class A properties and from $1.75 a square foot to $1.70 for Class B properties.
- That 10-cent drop for Class A offices amounts to a loss of $2,600 a month on the average, 26,000-square-foot office building, or $31,000 a year.
- There is no doubt that the progress of this project will help the jobs outlook for the construction sector, but it remains to be seen if the project will be even 50% rented in the first year after completion. The forecasted trends don’t show much light at the end of the tunnel for the near future.