City Set to Buy RAND Land for $53 Million

By Jorge Casuso

In a stunning twist, Santa Monica's liberal City Council is set to pay RAND $53 million to buy back most of the prime property the city sold to the military intelligence think tank at the dawn of the Cold War.

The land deal - at 11.3 acres one of the biggest in the city's post war years -- is expected to win the council's approval Tuesday night, ending a six-year effort by RAND to develop its approximately 15-acre Civic Center property a block from the beach. Under the agreement, RAND would retain the remaining 3.5 acres to build its new headquarters.

"We have reached a tentative agreement that will be presented to the City Council on the 26th," said City Manager John Jalili, who negotiated the transaction.

The city would pay for the property - which stretches from Pico Blvd. to Colorado Ave. and from Main St. to Ocean Ave. -- by issuing bonds secured with income generated from its Earthquake Recovery Redevelopment District, which was established after the 1994 temblor.

"There are few properties, if any at all, of this size in as integral and prominent a location," reads the report from city staff released Thursday evening. "The parcel strategically links the seat of government, coastal beach and park resources, the Pier, and the vital commercial areas of Main Street and Downtown/Third Street Promenade."

The city began negotiations to buy the property in May after RAND failed to find a developer for its 1993 voter-approved Civic Center Specific Plan. Under the plan, RAND would demolish its existing buildings and develop a replacement facility as part of a massive one-million-square-foot complex that would include up to 350 housing units, park space and retail uses.

"RAND had asked if the city could provide substantial money in public subsidies," Jalili told a gathering in his honor of the Chamber of Commerce's Pico Boulevard Committee Thursday. "It led us to ask if it wasn't better for the city to buy it. When properties of that size are developed privately, there are more limited opportunities than if they are developed publicly."

If the council approves the deal - which is nearly certain - a new planning process for the Civic Center area will be initiated. It may require either amending the existing plan or adopting a new one, which would require extensive public input, new environmental impact analyses, and Planning Commission and City Council approval.

"I think there will be extensive debate Santa Monica style," Jalili predicted.

To comply with state law, the city cannot pay more than the appraised market value for the land. Agreeing on what the land is worth, inside sources said, was perhaps the biggest hurdle in the negotiations.

In the end, the city is prepared to pay $107.86 per square foot for 491,361 square feet of land, which includes existing RAND office buildings and parking, and RAND-owned lots along Ocean Avenue.

Ten percent of the purchase price would be retained in escrow to ensure all of RAND's obligations are satisfied. As RAND fulfills its obligations, the funds would be released. Escrow must close no later than April 30, 2000.

According to the agreement before the council, RAND can occupy its current premises for 42 months from the close of escrow, during which time it is expected to construct a new building on the southeastern corner of the 15-acre site. RAND would then demolish its current headquarters, with the city paying $2.3 million toward the cost of demolition.

Staff also is recommending that the city execute a lease agreement with Chez Jay, the tiny but venerable tavern in the shadows of RAND headquarters. The future of Chez Jay - which houses a peanut that traveled to the moon - seemed dire under RAND's Civic Center plan.

The city's negotiation with RAND was a race against the clock. The Civic Center plan is set to expire in less than two years, and Jalili has announced he will retire next month. The husband of incoming City Manager Susan McCarthy works for RAND, posing a potential conflict of interest.