GSA auction turns to disaster at ‘Ziggurat’ building

Topline: There’s no denying that the federal government needs to sell many of its buildings. It would cost $370 billion to repair all of them, while they were only 12% occupied on average last year.

However, the government might have been better off keeping the Chet Holifield Federal Building on its 89-acre campus in Laguna Niguel, California. The “Ziggurat” building, modeled after an ancient Mesopotamian rectangular stepped tower, will sell for less than even low-end estimates, after the General Services Administration left it in disrepair and mismanaged its auction.

Key facts: The Public Reforms Building Board first warned Congress about issues with the building in a March 2024 report. The 1 million square foot, seven-story building had 3,000 federal employees working inside but was classified as “exceptionally high risk” because of asbestos, fire safety issues and more.

Repairs had been ignored since the 1980s and now would cost an estimated $916 million. The General Services Administration decided to sell the building, but the process “was characterized by mixed signals and confusion across parties,” according to the report.

The GSA first tried to designate the Ziggurat as a historic building, meaning anyone who bought it would need to keep the building intact. Who would want a building that needs $916 million of repairs?

The GSA also required potential buyers to make a $300,000 deposit just to tour the building, “an unusual amount for this type of sale,” according to the report. There was also a lack of publicity, meaning “very few usual buyers seemed to know about the sale.”

Bidding for the Orange County began at $70 million, with the GSA estimating the building would sell for $200 to $300 million. Not a single bid was placed.

The auction was restarted in June 2024 with fewer restrictions. This time, three companies bid, but not without controversy.

Hilco Development Services, a real estate company, announced in November it had won the auction with a $177 million bid. This March, the GSA canceled the purchase and instead awarded the property to Hoag Memorial Hospital Presbyterian with a $176.7 million bid, the Orange County Register reported.

Hoag had filed a lawsuit to stop the sale to Hilco, alleging that a Hilco partner violated terms of the auction by seeking to collude on the price of the sale.

In its court filings, Hilco argued that no collusion occurred and that nothing improper took place during the auction. They told the newspaper they plan to challenge the decision in court.

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Summary: Regardless of who ends up purchasing the Ziggurat, it’s clear the GSA could have saved money by keeping the building in usable condition or making its auction less restrictive.

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