Client: State of California, Department of General Services, Real Estate Services Department
GG+A was engaged by the State of California Department of General Services, Real Estate Services Department, to provide analysis and negotiation support for the redevelopment and ground lease of a 6-acre site in the Hillcrest neighborhood of San Diego currently occupied by the Department of Motor Vehicles. GG+A assisted the State in conceptualizing and negotiating a deal in which the selected developer would build a new 20,000-square-foot DMV facility and parking in exchange for rights to develop a mixed-use multi-family project on surplus portions of the site.
GG+A considered the market and financial feasibility of the proposed multi-family project and compared its supportable residual land value to the costs of creating a new facility for the Department of Motor Vehicles at the site. The results of the analysis suggested that if obtainable market rents for apartment units and retail space were to increase considerably (above prevailing market rents), the value of the surplus land would exceed the cost of the DMV facility, and therefore the selected developer should pay ground rent. GG+A determined, however, that under current market and capital market conditions, in addition to encumbrances related to selling ground-leased property, that the $14 million investment by the developer to construct the DMV facility would constitute an adequate pre-payment for the 65-year ground lease of the surplus property.