(07-10) 09:37 PDT SAN FRANCISCO -- The Goodwill Industries headquarters at Mission Street and South Van Ness Avenue is to be replaced with a 460,000-square-foot city office building and 550 residential units under a public-private partnership being hammered out between the city of San Francisco and developer Related California Urban Housing.

Under the plan, Related would construct a 1 million-square-foot complex on the 2.5-acre site with an office building that would wrap around the residential towers on the eastern portion of the site along 11th Street.

Related is under contract to purchase the site and anticipates closing in early September. The city's total costs for the project are estimated at about $250 million.

Mayor Ed Lee plans to ask the Board of Supervisors to authorize an exclusive negotiating agreement for the deal, which he is expected to introduce at the board as early as next week. That would commit the city to completing the design development and construction documents needed for the 12-to-18-month environmental review process required by the state.

The plan would allow the city to house some agencies - the Department of Public Works, the Planning Department and the Department of Building Inspection - in the new building that are currently scattered around the Civic Center area. The city would then be able to sell its properties at 30 Van Ness Ave., 1660 Mission St. and 1680 Mission St. The building at 30 Van Ness alone is valued at about $70 million.

Related partner Matt Witte said his group had been looking for a Mid-Market site for several years and was aware the city was a potential partner in a mixed-use development. He said the Goodwill site was always the first choice, because it was the biggest one potentially available. But until late 2013, Goodwill had been unwilling to sell.

Related looked at the Honda of San Francisco parcel on the other side of South Van Ness, but housing developer Crescent Heights grabbed that one.

"We had stayed close to the city," he said. "When Goodwill decided to market its property, we were well positioned."

Because the office portion of the development will be used mostly during weekday working hours and the residential part after 5 p.m. and on weekends, the 24/7 mix will help keep Civic Center vibrant all the time, Witte said.

The centerpiece of the development will be a large interior green space that both city workers and apartment dwellers will look out on. Skidmore Owings & Merrill is the architect.

Related will develop both portions of the project, but the city will own the office space.

City Administrator Naomi Kelly said the city has been feeling the space crunch over the last few years in Mid-Market, which has developed with an influx of tech firms. Several city departments were forced to relocate at a much higher rent after Twitter leased 875 Stevenson St. Other city employees were moved from 100 Van Ness Ave. when that tower began converting to apartments.

"We would rather be our own landlord - it gives us a lot more stability," she said.

In addition to 550 units of housing, Kelly said the new complex would have retail, child care - "everything that's important in a little neighborhood."