The Legislature has signed a deal to completely renovate and expand its leased office building downtown under terms that will more than quadruple its monthly rent bill.
Currently, the Legislature spends $56,863 a month to lease the old bank building at 716 W. Fourth Ave. that has served as its home base in Anchorage for 21 years. The Anchorage Legislative Information Office is housed there, Anchorage legislators work there between sessions, and other legislators, including the House speaker and Senate president, have offices there.
Under the terms negotiated by state Rep. Mike Hawker, R-Anchorage, the state will pay $281,638 a month, or more than $3.3 million a year, for Anchorage rent once the renovation is complete in January 2015. Hawker was tapped to craft the deal as chairman of the Legislative Council, the joint House-Senate committee that conducts the Legislature's business.
The lease was vetted by the Alaska Housing Finance Corp., which has expertise in real estate. The Legislative Council set aside $50,000 for the housing agency's help.
While the rent is going up significantly, the amount will be 13 percent lower than the fair market rate for similar property downtown, said Michael Buller, deputy executive director of Alaska Housing Finance Corp. That was the conclusion of a California real estate expert hired to analyze the deal, he said. The 10-year lease locks in that rate. Under state law, the Legislative Council can only extend a lease for so long if the deal is at least 10 percent below market value.
The current rent also is far below market rate, Hawker said. After years of unsuccessful efforts to buy or build a new Anchorage office, legislators needed to secure something before the current lease expired May 31, 2014, Hawker said. They wanted to stay downtown, which the Anchorage Downtown Partnership, which serves businesses, said is important.
After $44 million in renovations, the six-story building will be more functional and energy efficient and will be better designed for public access, said both Hawker and Mark Pfeffer, the Legislature's landlord and new part owner of the building. Pfeffer, a real estate developer, has been involved in many high profile Anchorage projects including the Dena'ini Civic and Convention Center and he's part of the group that owns Anchorage City Hall. He and Bob Acree are developing the legislative project.
It won't be deluxe, Hawker and Pfeffer said Thursday during an open house to explain the project to legislators. There won't be a fitness center, for example. The House speaker and Senate president will end up with smaller offices than they now have. But the ramp into the underground parking used by legislators will be heated, to make it safer.
The biggest visible change will be the public space on the ground floor. The Legislative Information Office will be there instead of at the current second-floor location. The design includes a first-floor auditorium big enough for 110 people and three conference rooms that could open into another large room for about 50 people. The entire Legislature could meet there for a special session. Legislators earlier said they are not trying to quietly move the capital, however.
On top of the quadrupled rent, the Legislature is putting in $7.5 million for carpet, walls, doors, suspended ceilings and other basics to finish internal work spaces.
The developers plan to spend $36.5 million for renovations that include a new heating and air conditioning system, new plumbing, new bathrooms, and two new elevators to replace one slow one, Pfeffer said.
"It's a very old, tired existing structure," Hawker said. "We don't even have potable water in the building." The water is brown, and no one drinks it. Sinks, toilets and the ice machine are rusty. The building is cold some days and hot others. Complaints over the years fill thick binders.
Under the current lease, the Legislature is renting about 40,000 gross square feet; under the new terms, it will end up with about 64,000 gross square feet.
The developers have closed on a deal to buy the recently shuttered Anchor Pub and Club next door, a former theater among other things, Pfeffer said. The bar will be surgically removed to make space for an addition to the legislative building that will house the bathrooms and the mechanical core, Pfeffer said.
"This isn't going to be one of those things where you go in and, poof, it's gone. It's going to be more surgical because it has buildings on either side," Pfeffer said. Developers hope to reuse an old lattice and plaster dome from the theater days found in the pub attic. Pfeffer also is saving a wall that dates to 1917.
After the renovations, the building will be rated Class B-plus, which is considered good but not premium office space, according to the Alaska Housing Finance Corp. That's an upgrade from the current Class B-minus. Class A office space is generally newer with quality materials, such as the JL Tower signature building in Midtown.
Legislators and their staffs -- about 85 people -- are supposed to move out of their Anchorage legislative offices next month into space that Pfeffer is securing downtown. Hawker sent out a memo last month telling legislators they may have to share offices and will be in the building across the street. But Pfeffer said nothing has been signed yet.
The Legislature ultimately needs to look into buying its Anchorage building, said Buller, of the housing agency.
Pfeffer said he's open to talks.
Reach Lisa Demer at ldemer@adn.com or 257-4390.
By LISA DEMER