The Daly dilemma
by JUDY HODGSON
It's been a little comical this past year reading reports in newspapers -- this one included -- about the Daly building complex. ("Daly building sold." "Daly building not sold.") If you're having a tough time as a news consumer, try being a reporter attempting to explain it all.
This is what we do know: At least four commercial real estate developers have looked into buying the property. Two of them (Dan Ollivier and Don Murrish) actually reached an agreement on price with the seller, the Humboldt State University Foundation, put down a deposit, and entered escrow while they searched for tenants and additional financing. Both failed to close escrow and both lost their deposits.
Just Monday another developer, Steve Strombeck, came before the Eureka Redevelopment Advisory Board looking for city help in putting together a deal.
Why is this piece of real estate so difficult for HSU to sell and who cares anyway?
First, the why: HSU paid too much -- $515,000 -- which is more than any developer with all their marbles would pay.
How do developers figure out how much a property is worth? Add cost of property plus cost of rehabilitation (or costly demolition and rebuilding), then figure out what the rent would have to be per square foot. Even at prime commercial office space rent -- $1.25 a square foot -- it doesn't pencil out. Period.
HSU could afford to pay more in 1998 than commercial developers because they had a number of advantages. Through the Foundation, HSU can solicit donations from patrons who want to see the State Theater, one of the three Daly buildings, turned into a performing arts center; it can apply for grants; it can ask the city of Eureka for help; it doesn't have to make a profit; and, it received an interest-free loan to make the purchase.
In 2000 in spite of these advantages, HSU officials, now retired, changed their minds and the buildings have been sitting there boarded up ever since in the heart of Eureka. Meanwhile, all around the Daly buildings the city has been undergoing a renaissance: Developer Ollivier did a beautiful job on the old Arthur Johnson building which now houses Plaza Design; Kurt Kramer (Vance Hotel and other Old Town buildings) is finishing the Professional Building (which the county will occupy) and has bulldozed half another block for parking; Rob and Cherie Arkley (Vance Hotel, North Coast Dance building) will be rebuilding half a block of 5th Street across from their Security National Servicing Corp. office (the old Woolworth, remember?).
So who cares about the Daly complex?
Citizens of Eureka, because after five long years, it's still an eyesore; the city, because it has a half-million dollar loan earning no interest while other projects go unfunded; the arts community and those interested in historic preservation, because State Theater continues to deteriorate; HSU, because it is an albatross passed from President Alistair McCrone when he retired to President Rollin Richmond.
Monday the Eureka Redevelopment Advisory Board reaffirmed its previous position that this property is primarily -- and legally -- HSU's problem and the City Council will likely agree again when it comes up on its agenda.
What is needed to solve this impasse is for city and university leaders to acknowledge that the property isn't worth what it sold for five years ago -- not to any developer, anyway -- and to move forward.
HSU is poised to take a loss on this endeavor any way you look at it. The city of Eureka, which has everything to gain from a successful project, can help cushion that blow by considering a discount of the original note which would lower the purchase price to a private buyer.
Finally, HSU should take great care in selecting a buyer, one with the means and vision to restore the State Theater and to rebuild the remaining buildings.
I am looking forward to some fancy ribbon cuttings soon.
© Copyright 2003, North Coast Journal, Inc.