City Sells Old Town Building

The city council on Tuesday approved the $2.5 million sale of a largely vacant  building at 2401 San Pablo Ave., but one council member didn't support the transaction.

The deal will transfer the mixed-use, three-story building from city ownership to three investors under the name 2401 San Pablo Partners. It also gives the buyers $787,337 in credit for repairs to the building, including water damage from leaks.

The building has 7,360 square feet of commercial space on the ground floor. The buyers intend to hire a property management company to operate 24 residential apartments on the second and third floors.

Councilman Phil Green abstained in the vote. He didn't support the sale because of concerns about the credit for repairs and about possible city litigation against the construction company that built the project.

"What really bothers me about this particular deal is the fact that we are giving approximately $800,000  in credit to the person that is buying it and then we're talking about possibly having litigation or suing the group that built it, and we have not given them an opportunity to make the repairs."

Mayor Roy Swearingen replied that major repairs are needed now and the city doesn't have the luxury of time to do them.

Council member Pete Murray said he came to the conclusion that the city, as owner of the property, would have to pay for the repairs sooner or later and the city would incur more expenses if it delayed the sale.

"Am I 100 percent happy about it? No I'm not," said Murray.

Swearingen agreed.

"I don't think any of us are," Swearingen said.

Because some of the apartments will be reserved for low-income tenants, the project helps to meet a state mandate that requires cities to promote and sustain a certain percentage of affordable housing units among the housing stock.

The city took full ownership of the property nearly a year ago. In August, 2010, it found a broker to sell it. Then an inspection found the water damage. Over several years the city invested $5.6 million in the project through construction and redevelopment loans and other expenses. The building is at the intersection of Tennent and Fernandez avenues.

Negotiations between the city and 2401 San Pablo Partners had gone on since last fall.

in 2003 the city's redevelopment agency provided a $4.1 million construction loan, with a 7 percent interest rate, to Downtown Pinole Partners. Other incentives included a $300,000 economic development loan for attracting tenants. In the ensuing years, market conditions did deteriorate. More details are available in the city staff report, which is on the city's Web site.