DEL MAR — Del Mar officials have spent more than two years looking for the best option to pay off a $3.5 million loan the city took out to help fund its purchase of a 5.3-acre site that was once home to Del Mar Shores Elementary School.
The issue was resolved in less than 10 minutes at a Sept. 29 public auction, during which a city-owned lot with ocean or mountain views from any direction sold for $4 million.
The city plans to use about $3.4 million to pay off the principal balance on the loan once escrow closes in the required 45 days from the auction date. The loan is due Nov. 13, 2011, with a balloon payment of about $3.2 million.
Current plans are to use the remaining $600,000 to help fund the replacement of the aging 17th Street beach safety center and lifeguard tower.
The sale required a 10 percent buyers premium, due the day of the auction, that was automatically added to the top bid to ensure the city received the full sale amount. That means the winning bidder will pay $4.4 million.
The 50 or so people who gathered at Powerhouse Community Center for the auction included city staff, residents, at least one architect looking for a potential client and the 12 qualified bidders who were required to register before the event and submit a $100,000 holding fee that was returned to the losing bidders.
During the two-month marketing campaign, Realtor Steve Uhlir said he received inquiries from people in seven countries and 13 states.
The sale was subject to city approval so if the top bid was lower than what city officials wanted, the auction could have ended without a sale, or without “going to the bank,” as Florida-based auctioneer Jim Gall said.
An appraisal was conducted before the sale, but the city would not release the results. City Manager Karen Brust had council approval on a minimum bid to accept during the auction, but she declined to say what that amount was.
Bidding started at $500,000 and within seconds shot up to $3.5 million. It stalled briefly at that amount until Jake Rohe, representing the eventual buyer, bid $4 million.
Gall attempted to entice higher bids — first $4.5 million, then $4.25 million and finally $4.1 million. Meanwhile, Uhlir received confirmation from Brust that $4 million satisfied the city’s minimum bid requirement.
Rohe said he was representing a friend he described as a “local buyer” who intends “to build one home and stay here for a long time.” The 22,215 gross-square-foot parcel at 2160 Balboa Ave. is large enough to be subdivided into two lots.
Rohe, director of development for Pacific Medical Buildings, said he was authorized to bid “as high as I needed to go.” He declined to identify the buyer.
“I’m happy to have the property sold,” Councilman Don Mosier said. “It’s wonderful we can retire the Shores debt and move onto other projects.”
The city bought the Balboa lot from Del Mar Utilities in 1965 for $250,392. At the time, it housed a pressure treatment plant and cement water reservoir tank that were eventually deemed obsolete and demolished in 1992. The lot is currently vacant and zoned for residential use.
The city bought the Shores property from Del Mar Union School District for $8.5 million in 2008. Later that year the city secured a three-year bank loan with a lower interest rate to pay off the school district.
Councilwoman Crystal Crawford once described the Shores property as the “last remaining open space within city limits.” Plans are to develop the site into a park.
Friends of Del Mar Parks raised more than $5 million to help buy the Shores property, but donations have dropped off significantly since the original purchase.
Barbara Mandel Pache, who has lived next to the Balboa lot for 28 years and is the campaign coordinator for Friends of Del Mar Parks, declined to comment other than to say, “We’re thrilled to have new neighbors.”
Friends of Del Mar Parks plans to continue fundraising efforts for park development and improvements, she said.