City of Aspen considers $50M in new office space
July 1, 2018
Aspen City Council is being asked today to approve a real estate contract to buy a building across the street from City Hall and allow a developer to create turnkey office space for $23 million.
It's an alternative plan to the city's approved Rio Grande/Galena Plaza project, which would see between 37,500 and 41,000 square feet in new office space at a current cost estimate of $22.6 million.
That project is on hold while the city fights two lawsuits levied against it from citizens who oppose it.
It could be as long as three years before there is a resolution to the litigation, and then another two years at least to construct the new building. The Hopkins building could come online as early as the winter of 2020.
If council approves the real estate contract, it has a 45-day due diligence period in which the city can walk away with no financial ramifications.
Council also is being asked to spend as much as $250,000 during that due diligence period for schematic design plans, which include space programming, a "daylight analysis" and refining the magnitude of construction across three different city properties.
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If the city purchases 517 E. Hopkins Ave. from developer Mark Hunt, it still will have to find additional office space elsewhere since it is planning for 54,600 square feet to fulfill the government's needs until 2035.
That square footage reflects providing 2,700 square feet for the Aspen Chamber Resort Association.
Jack Wheeler, the city's capital asset director, estimates the total cost to the city will be $50.4 million if council goes with the Hopkins option.
"The budget is higher now," he said. "Part of our challenge during due diligence is to get more accurate with these costs."
He has provided council with an analysis of different options for square footage across the city's properties.
He also has put some preliminary costs together regarding what it will require to build out 21,442 square feet at the Hopkins space.
Wheeler estimates an additional $4.2 million in construction costs above the $23 million offer from Hunt for a total of $27.2 million, which includes new office furniture and moving city employees.
Plans to remodel the Armory, which serves as City Hall, remain intact. At 20,000 square feet, Wheeler estimates the renovation will cost $15.8 million.
If council goes ahead with the Hopkins building, 6,400 square feet can be realized in the Rio Grande building, which currently houses the Parking Department and Taster's Pizza. That renovation will cost $1.9 million, according to Wheeler's estimate.
The Galena building, which used to house the Aspen Chamber Resort Association, can provide 4,200 square feet and be renovated for just over $1.2 million, according to Wheeler.
And then a yet-to-be-determined space downtown would give the city another 2,600 square feet, which Wheeler pegs at $1.95 million.
The $2.2 million that's been spent in design and planning for the Rio Grande/Galena Plaza building has been factored into the total cost of the Hopkins alternative.
The city would have five different addresses if council went with the Hopkins option, and two if it stays with the Rio Grande/Galena Plaza plan.
The $23 million purchase for the Hopkins building includes a $100 per-square-foot allowance for city of Aspen tenant improvements. City officials estimate they will need more than that to finish out the space to their specifications.
The contract requires $2.5 million in earnest money be deposited into an escrow account.
Council is expected to discuss the pros and cons of each scenario and determine the next steps.
Council members appear supportive of the Hopkins option, although they acknowledge that the Rio Grande/Galena Plaza plan is preferred but the lawsuits and escalating construction costs are major barriers.
Mayor Steve Skadron said last month that the Hopkins building is attractive because it becomes a concentrated municipal campus downtown.
Councilwoman Ann Mullins said the Hopkins option will give the city much-needed office space quickly, is a good location and uses something that is already there, instead of new construction.
But what she said she likes about the Rio Grande/Galena Plaza plan is that it keeps people out of basements. The Hopkins building has employees working on the first and second floors and in the basement. Hunt plans to keep a portion of the space for street-facing retail stores.
Councilman Ward Hauenstein said he is willing to look at Hunt's offer but has concerns, including what the financing mechanism is going to be, the lack of parking and the city owning only part of a building.
"This is a 50-year decision," he said, adding that the Hopkins options hasn't been vetted as much as the original city plan. "I have to be convinced that 517 Hopkins is the right option and right now, I'm not convinced."
Councilman Adam Frisch said the Hopkins option has merit, especially because of the "legal unknowns" with the current city office plan.
"That legal uncertainty could take a lot of time to play out," he said. "To me, (the Hopkins building) is a very, very viable option."
Councilman Bert Myrin is perhaps the biggest proponent of moving city offices to Hopkins Avenue. He said he is opposed to the city's current plan at Rio Grande/Galena Plaza because it's at least 37,500 square feet of new construction — additional development the community doesn't need.
Hunt already has approvals to tear down the current structure at 517 E. Hopkins Ave. and is planning to develop a commercial building.
"We could avoid an entire construction project," he said.
Council meets at 4 p.m. today to discuss its options. The special meeting will be held in council chambers in the basement of City Hall.
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