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HomeMy WebLinkAboutOCTOBER 24,1991 I I Ol/Q.s.o 33:030l/0~?(I"I1 '...... CITY COUNCIL PROCEEDINGS ARE TAPE RECORDED AND ON FILE IN THE OFFICE OF THE CITY CLERK 0<:1....-, P 0 e>LI-"IA~IOI\. ROLL CALL MINUTES CITY COUNCIL OF THE CITY OF ARCADIA and the ARCADIA REDEVELOPMENT AGENCY STUDY SESSION (SANTA ANITA FASHION PARK EXPANSION) OCTOBER 24, 1991 The City Council and the Arcadia Redevelopment Agency met for a Study Session at 4:00 p.m., Thursday, October 24, 1991, in the Conference Room of the City Hall Council Chambers. This meeting was scheduled for the purpose of hearing representatives of the Santa Anita Realty Company and the Hahn Corporation, owners of Santa Anita Fashion Park Mall, present a proposal for the expansion of the Mall. PRESENT: Councilmembers Ciraulo, Fasching, Harbicht, Young and Gilb ABSENT: None OTHERS IN ATTENDANCE: Mr. Glen Carpenter, Santa Ani ta Real ty Company Mr. Bill Doyle, The Hahn Corporation Mr. Alex Engel, Santa Anita Realty Company Mayor Gi1b opened the Study Session and introduced Mr. Carpenter and Mr. Doyle, who presented the proposed plan for the expansion of Fashion Park Mall. Excerpts from their presentation follow: Glen Caroenter began the presentation with a brief review of the background and history of the Santa Anita Fashion Park Mall. A booklet was distributed charting the flow of business and those conditions affecting sales and tenancy at the Mall. Mr. Carpenter defined the market area for Fashion Park as all of, or portions of, Arcadia, La Canada-F1intridge, A1tadena, Pasadena, Alhambra, El Monte, Azusa and Glendora. These areas provide 78.9% of the shoppers that frequent Fashion Park. The additional 21,9% of shoppers are those that just happen to be in the area and such. Fashion Park first opened for business in 1974, The year of 1975 was the first entire year of operation and produced $95.53 per square foot of Mall area in sales volume. Volume continued to increase until 1980 when sales increased by just 1. 9% due to the opening of the Pasadena Plaza which affected the customer base of Fashion Park. From 1979 to 1988 there was very little growth at the Mall, it was starting to lose some of its market share in this geographical area. In 1983-84 Nordstroms opened in the Glendale Galleria which further decreased Fashion Park's market share. As other competitive malls opened or were renovated and/or expanded, the market share for Fashion Park was further depleted. Then in 1988 Fashion Park was renovated; the Center Court was redone; skylights were opened up; new tenants added; and after working with Nordstroms for five years, they finally became interested in locating at Santa Anita Fashion Park. The renovation, he added, increased 1 10/24/91 33:0302 sales dramatically in 1988 and in 1990 the sales showed a continual growth. At this date, October 1991, the Mall has been experiencing a downturn due to the state of the economy. Through September of this year, sales have been down approximately 6%, year-to-date. Within the last month several new shops have opened at Fashion Park, such as Gwnp's and Champs, however, because the Mall lacks a good strong major department store, they are having a problem attracting the tenants they would like to have such as Disney, Imaginarian, and a few others. Bill Doyle added that a Nordstroms type of department store is considered to be a prime store for this market area. Further, that Fashion Park has lost approximately 12% of its market share because shoppers go to malls such as the Glendale Galleria only because they want to shop at Nordstroms. He added that Nordstroms also attracts other major department stores to locate in a mall if I Nordstroms is there. Mr. Doyle noted that Nordstroms is located in nine out of 50 of the Hahn Corporation's Malls, and they have found that Nordstroms bring in the larger revenues than other major department stores. Mr. Doyle then proceeded to page through the booklet, explaining the trends indicated on each chart, such as sales, and the effect of competitive malls on Fashion Park. Santa Anita Fashion Park has had an average growth rate of 6.6% from the opening in 1974 to-date. This percentage includes the sales of all the stores in the Mall. The growth rate slowed as competition increased. For the past two years all Mall tenants t with the exception of the department stores, have enjoyed a fairly good increase in sales as a result of renovation of the Mall. However, overall, when the department store sales are included, the entire Mall sales remain fairly flat, according to Mr. Doyle. When compared with all of Hahn's 50 centers, which they manage and control, Santa Anita Fashion Park was still the top mall for a nwnber of years after opening. Sales only started dropping after the Pasadena Plaza opened. At this time Santa Anita is listed as 26th or 27th out of Hahn's 50 or so malls. Referring to the page in the booklet entitled, "Santa Anita Sales Projection Status Quo vs. Expansion", Mr. Doyle explained, in part, that if Fashion Park were not expanded at all it would still have an average growth rate of 2.5% in sales per year. If the Mall expands' to include a 167,000 square foot May Co.; a 137,400 square foot Nordstroms; and an additional 89,550 square feet of other tenant space; using the same nwnbers for income and population growth for the market area, and the identical rate of 14.35% in estimated expenditures for goods, etcetera, the estimated Market Capture Rate then increases from 7% in 1990 to 11.5% in 1994 after the expansion occurs. This, along with the other elements brings the potential for overall market growth to 6,5%. Mr. Carpenter explained also that when the Mall was built in 1974, the Mall tenants (not department stores who own their buildings) were given 15 and 20 year leases. This was fine when the Mall was growing, but when the Mall began to go stagnant, they could not turn those tenants over. Today's leases now run to seven or ten years for Mall tenants. I Mr. Doyle explained the placement of the proposed Nordstroms and the May Company. Also the possibility of a newly remodeled and expanded Robinson's site, or the possibility of a May Company store placed on the current Robinson' 5 site, and a new Robinsons to the northerly west side of the Mall. The proposal includes a plan to remove the Buffwn's building; creating a lower level Mall area and an area immediately to the west of that would be excavated for subterranean parking; and the new Nordstroms would be constructed over the subterranean parking. The May Company or a new Robinsons would be constructed to the 2 10/24/91 33:0303 north of Nordstorms and the new portion of the Mall would be connected to the lower level off of Nordstroms and the May Company (or Robinsons if May Company moves into the existing Robinson's site). Mr. Carpenter commented that the height of Nordstrom's and the new May Company would not be any greater than the existing department store height, although the new department stores would be positioned closer to Baldwin Avenue, and the expansion on the east side of the Mall would move Robinson's closer to the race track. He noted also that the expanded Mall would need additional parking space from the race track. I Referring to the Proforma Fact Sheet included in the booklet prepared for this presentation, Mr. Doyle explained, in part, that this page was a cover page for part of their financial analysis which will be turned over to the City's consultant in total detail. Further, "it speaks to all of the costs associated with this expansion", of Fashion Park. The Proforma Fact Sheet for the proposed proj ect lists the following: CAPITAL COSTS (OOO's) A. Land 100 B. Construction.Contracts 34,371 C. Building Owner 1,169 D. Consultants 2,801 Soft Costs 2,331 J. Leasing Costs 6,329 K. Advertising & Promotion 175 L. Other Costs 4,336 M. Land Sales/Contributions 6,486- N. Contingency 5,161 O. Financing 3.918 54,205 P. Capitalized Operating Losses 4.333 TOTAL 58,538 CASH FLOW I Net Cash Flow Before Debt Service 4,470 FREE & CLEAR RETURN Net Cash Flow 4.470 58,538 7.63% Mr. Doyle noted that category M - Land Sales/Contributions, includes financial help from the City in the amount of $15,000,000. This amount is contained in the $6,486,000 minus figure as an offset to other costs involved in this category. The actual project costs in total, without any contribution from the City, would amount to $73,538,000. . A discussion ensued of the "Free and Clear Return" category on the Proforma Fact Sheet which is listed as 7.63%. Mr. 3 10/24/91 33:0304 Doyle commented that they hope to raise this percentage to 10 or 11% because they believe there will be still more income within the project "and, without any City help it is our feeling that there is no way we will get to that point". Mr. Carpenter added that their "hurtle rate is 10%", because they will most likely increase the borrowing on the property, with a permanent lender to cover those costs. They anticipate that the long costs will be in the 10% range, so if the return is up to 10% they will basically break even for the first few years - they are trying to match borrowing costs with revenue strength, he added. Mr. Carpenter briefly explained the Summary page in the booklet which lists estimates of the total revenue increases that the expanded Mall project should return to the City, and the Debt Service Schedule for a possible tax exempt bond issue I for $15,000,000. This line, he added, is for Council's information only. There has not been any plan agreed upon by any of the parties, he noted. Further discussion ensued of the proposed expansion and the need to bring in some new major department stores to up-grade the current tenancy. A brief question and answer period followed the close of the presentation in which Mr. Doyle stated that the Hahn Corporation has a firm commitment from Nordstroms; a relatively firm commitment from the May Company; and a general commitment from the existing Mall department stores. They are now finalizing their deal with The Broadway and J. C. Penney's. The estimated project will take from nine months to 21 1/2 months to complete, Their agreement with Nordstroms is for an opening date of a time certain in 1994. CLOSED SESSION At the end of the presentation, the City Manager requested a Closed Session and the City Attorney announced that "pursuant to Government Code Section 54956.8, for purposes of giving direction to the Agency's negotiator concerning the potential acquisition of property, and related terms regarding the Southwest Corner Project (corner of Huntington and Second) in his negotiations with W. Lortie and H. Schaefer". t)IIO, <10 ADJOURNMENT At 5:05 p. m. the City Council and the Arcadia Redevelopment Agency entered a CLOSED SESSION, RECONVENED AND ADJOURNED at 5:30 p.m. to November 5, 1991 at 7:00 p. m. in the Conference Room of the Council Chamber to conduct the business of the Council and Arcadia Redevelopment Agency, and any Closed Session, necessary to discuss personnel, litigation matters and evaluation of properties. ~~ . Charles E. Gilb, Mayor ATTEST: I ~",JyJ) J . Alford, Ci Cler~ 4 10/24/91