The federal government is auctioning off a famed office building in Laguna Niguel, California. The Chet Holifield Federal Building, also known as the Ziggurat, was designed by William Pereira, a renowned architect. It is an interesting building, executed in a kind of Mesopotamian style, but in my opinion not particularly successful:
The OC register has had a series of news stories on the auction, where feverish bidding has pushed the price to much higher than expected levels. This is believed to be because the property includes not only the office building, but also 89 acres of land in one of California’s most desirable communities, just a few miles from Laguna Beach. The article includes this graph:
Note that the original asking price was only $70 million. One reason people were caught off guard is that this is actually the GSA’s second attempt to sell the building:
By the way, this is the second auction for the 53-year-old Ziggurat, the first where the buyer had to retain the Ziggurat structure. no bids submitted. The long response to the last auction – without that restriction on development – suggests the buyer will likely demolish the building designed by famed architect William Pereira.
No developer was willing to offer even $70 million for this highly sought-after property, at a time when the building needed to be saved. Once that restriction was lifted, at least two developers were willing to pay more than $150 million (and the auction is still ongoing).
From this information we can deduce that the economic cost of this specific regulatory barrier was at least $84 million, the difference between the current auction price and the reserve price of the previous auction.
But even that figure is a gross underestimate of the regulatory costs for this property. While the new owner will be allowed to remove this eyesore, they will continue to face a Byzantine thicket of regulations and lawsuits from all kinds of interest groups hoping to minimize the amount of development. This is California after all.
While I can’t be certain, I suspect that a developer would be willing to pay many hundreds of millions of dollars for this property if given complete free rein to develop it in any way they see fit. I also suspect that the resulting development would be extremely impressive – the kind of grand projects that the US used to be good at, but which have somehow grown beyond our capabilities.