SOUTH PORTLAND — The City Council on Monday directed the city manager to begin looking into buying an office complex adjacent to City Hall.
City Manager Jim Gailey said the complex at 148 Ocean St. would be a “strategic buy” for the city, which could use the additional real estate if it decides to build a new City Hall at its existing location.
The single-story building is owned by the Riverview Foundation, which provides educational and wilderness programs. The complex also houses offices for State Farm Insurance and Mullens Driving Academy.
Over the last decade, councilors have been focused on keeping City Hall, 25 Cottage Road, in the Knightville-Mill Creek area.
But councilors were recently cool to the idea of purchasing a new building at 100 Waterman Drive. Meanwhile, the future of Mahoney Middle School, another location under consideration, is uncertain.
Gailey said the city originally tried to purchase 148 Ocean St. in 2005, five years after an architectural firm produced plans for a new City Hall at the current location.
In preparation for the project, the city purchased the former Inness Photo building at 97 Ocean St., behind City Hall, but the effort to acquire 148 Ocean St. was shelved to deal with more immediate needs.
“The Inness property was a slam dunk, but (148 Ocean St.) was a recommended acquisition, but not as strong as the Innis building was,” Gailey said.
Councilors Tom Blake and Maxine Beecher were initially hesitant to more forward with the proposal. Beecher expressed concerns about the city’s ability to be a good landlord, while Blake said he doesn’t want the city to lose money on any potential deal.
“If this building had a positive cash flow, I’d say buy it tomorrow,” Blake said. “Then, we could justify it to our taxpayers.”
Gailey said State Farm has a lease for its office for another two years, while the Riverview Foundation has indicated it would sign a five-year lease for the space.
Gailey said the city would operate the building as a revenue generator for the short term, while acquiring real estate for a future City Hall.
“It would be strictly a strategic buy,” he said. “The City Hall complex is a pretty small postage stamp area.”
According to seller’s documents, the 7,100-square-foot building at 148 Ocean St. was built in 1940 and sits on about a third of an acre of land.
The assessed value of the lot and building is $480,600, but the sellers are asking $499,000.
According to the real estate broker, CBRE-The Boulos Co., the current owners are spending a little more than $29,000 annually on the property, while generating about $40,000 in revenue from the three tenants.
The real estate broker predicts another $15,500 could be generated by leasing two vacant offices of 860 square feet and 700 square feet.
Gailey, meanwhile, said the city’s profit margin would likely be greater, since its insurance costs are lower and other maintenance expenses, such as plowing, could be absorbed by city departments.
Although the building – with the exception of the recently renovated State Farm offices – suffers from deferred maintenance, Gailey said none of those issues presented code violations.
Gailey said the State Farm offices show the potential of the building.
“This is really turning a sow’s ear into a silk purse,” Councilor Tom Coward said of the renovation.
“(But) now is a very good time to be buying real estate,” added Coward, who is a real estate attorney. “We need to do something with our current City Hall, and the worst this would do it turn up some income.”
Although no councilors were exuberant about buying the building, Councilor Patti Smith said the city should be proactive and at least look into it.
“I’m not crazy excited to move in fifth gear, but we have to kick the tires,” Smith said. “You can only get there if you can envision the future.”
Councilors asked Gailey to set up a tour of the property.
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