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Franl~lin Building (January 14, 1998) Question: Should the county sell or retain the Franklin Building if Courthouse Square is built? The Franklin Building was purchased in 1985 in order to provide space for county departments being displaced by the state courts. It contains approximately 24,000 nsf of class A/B retaiUoffice space and 23 on-site parking stalls. Current occupancy includes a private attomey, District Attomey offices, the Tu~-Treasurer and Assessor's Department. As of 7anuary 1, 1998, the balance owed on the certificates of participation (COP) is $435,000 . The interest rate on the COP's is 10%. The building has an estimated value of $1,300,000. The question addressed in this report is whether the Franklin Building should be sold or retained as future expansion space. The question is relevant because Courthouse Square, as presently designed, does not contain enough office space to meet the county's 20 year space projections. The county's facility needs for the downtown campus (see attached exhibit) indicates that Courthouse Square may be up to 15,000 nsf short of our long range needs. Therefore, if we retain ownership of the Franklin Building and lease out the unused space, this space can be reclaimed in the future for county use. What are the advantages of retaining ownership? If the Franklin Building was sold, it would generate a"one-time" cash retum, minus expenses, of appro~umately $755,000. This revenue could be used to offset Courthouse Square or other facility expenses. However, if the county retained ownership and leased the building on the open market, in the first year at full occupancy, it would generate excess revenue of $158,000. Over a 10 year period, the county could realize income of $1,905,0001. These revenue estimates are based on the following: • A lease rate in 1999 of $1.25/ sf. • Operating and maintenance (O & 1Vn plus debt service is projected at $.75/ sf. • An annual inflation factor of 4% per year for O& M and lease revenues • Refinance COP's from 10% to 8% The option to retain ownership is not only fmancially sound but, it provides the county with inexpensive office space for future expansion and a source of long term revenue to offset other county facility expenses. 1 Assumptions used to generate this analysis have not been verified by a licensed real estate pmfessional. Sources used include assessment records, leasing report from C. Spence Powell & Associates and facility records. Leasing eapenses and properiy taares have not been fully factored into this analysis.