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HomeMy WebLinkAboutJUNE 5,1990 1 1 O}/~-- :;'17 OGO!Sql{) 32: 0118 fl/(II CITY COUNCIL PROCEEDINGS ARE TAPE RECORDED AND ON FILE IN THE OFFICE OF THE CITY CLERK ROLL CALL SW CORNER SITE - HTG. DR. & 2ND AVENUE OJ 0'0. 1/'1 /I1!J l.Jfld WLA ARCON/ SCHAEFER BROS. M I NUT E S CITY COUNCIL OF THE CITY OF ARCADIA . , and the ARCADIA REDEVELOPMENT AGENCY ADJOURNED REGULAR MEETING (ARCADIA REDEVELOPMENT STUDY SESSION) JUNE 5, 1990 The City Council and the Arcadia Redevelopment Agency met in an Adjourned Regular Meeting at 6:00 p.m., June 5, 1990 in the Conference Room of the Council Chambers and immediately convened as the Redevelopment Agency. PRESENT: Agency Members Ciraulo, Fasching, Gilb, Harbicht and Young None ABSENT: On March 6, 1990, the Agency directed staff to begin negotiations with WLA Arcon/Schaefer Brothers (A/SB) on an Exclusive Right to Negotiate (ERN) for development of the Southwest Corner Site. A draft ERN was sent to A/SB on April 4, 1990. Since that time the Derby Restaurant withdrew from the project and two new members were elected to the Agency. The staff report this date contains a summary and update of the current status of the original proposals submitted by WLA Arcon/Schaefer Brothers and Champion Development Co.; no significant changes have been made by the proponents. Staff has modified its cash flow proj ections to reflect known changes from the initial proposals. Since the Derby Restaurant and Pier I Imports are no longer being considered as potential tenants in these developments, staff has altered projected sales tax revenue to reflect a range of possible monies which could be generated. The proposals scheduled to be heard will address both th~ full site, which includes the park area at the east end, and the smaller parcel without the street and park. PRESENTATIONS Howard Schaefer, principal of Schaefer Brothers, stated, in part, that the Arcon/Schaefer Brothers (A/SB) is a combination restaurant and medical office project. They originally had a letter of intent from the Derby Restaurant upon which the Agency had approved the commencement of negotiations of an Exclusive Right to Negotiate (ERN). A/SB could not reach a definitive agreement with the Derby, subsequently the Derby backed out and A/SB did not continue forward with the ERN. Arcon/Schaefer Brothers are resubmitting a proposal based on the same type of project -'a combination restaurant and office complex, with the Red Lobster as the proposed new 9,000 square foot restaurant. To accommodate the larger restaurant Mr. Schaefer stated they would reduce the size of the office complex for the site. Referring to the staff Summary of Southwest Corner Proposals (Attachment No. I, staff report this date), Mr. Schaefer noted that should the Red Lobster locate at this site, they should generate over $3 million in sales annually. A/SB estimates the sales tax would be $20- $30,000 rather than $12-$18,OOO for the smaller restaurant as -l- 6/5/90 32:0119 " shown on the Summary. The Estimated Total Revenue per year would range from a low of $67,000 to a high of $77,000 and an anticipated pay-back Amortization Period of between 13 to 15 years rather than the 16 to 17 years for the originally proposed smaller restaurant. A/SB, according to Mr. Schaefer, have a number of dentists and doctors who have expressed interest in locating at this site and have attended meetings where A/SB has discussed their needs as tenants; parking requirements; and rental "rates. It is his feeling that if they were to build a 9 -12 ,000 square foot medical office building they could have it from 50% to 60% pre-leased by the time they enter into the DDA with the Agency. Warren Lortie, WLA Arcon principal, designer and general contractor for this project, exhibited the revised site plan which, he pointed out, is very similar to the original plan in their first proposal. Mr. Lortie stated, in part, that this latest site plan is the prototype plan included in the information from the Red Lobster restaurant representatives. The Red Lobster facility will be a single floor building of 9,307 square feet, which will front on Huntington Drive and run through the property to the alley. The main entrance will be on Huntington Drive. A/SB have received a letter of interest from James Gray, realtor, on behalf of the restaurant in regard to the SW Corner Site which the owners of the restaurant, according to Mr. Lortie, have approved. A detailed information fact sheet of the Red Lobster restaurants is included in the staff report this date. The prototype theme design of the restaurant indicates the buildings are finished in a light stain on wood siding with an open wood tower element incorporated, located near the entrance. It was noted that this particular larger size restaurant and design has been built mostly in the southern states, and usually built where they anticipate over $3,000,000 in sales per year. The Agency noted that their fact sheet indicates they have 32 restaurants in Japan; 43 in Canada; and 445 in the United , States. Also that there is a Red Lobster restaurant in Pasadena. They state in the fact sheet that the average restaurant generates between $2 to $3 million in sales a year. In his presentation, Mr. Lortie stated that A/SB feel strongly that the island should be incorporated, in some way, into the project. He noted that it is of marginal benefit to their proposed project since they cannot build a structure on it because of the infrastructure underneath. The area can only be used for surface parking. If it is not used for parking and the project site was reduced by eliminating that area they would reduce the size of the medical office building by the ratio of reduced parking spaces. In the discussion Mr. Schaefer commented that the Red Lobster and Olive Garden restaurants are both owned by General Mills. They are familiar with the market here and have indicated a desire to locate a Red Lobster on Huntington Drive. With them, he noted, the issue is construction costs... the financial aspect of locating at this site. Referring to the medical office building, Mr. Lortie explained that the building would be two stories over a two-level parking unit, underground and surface. The medical offices were shown as 12,000 square feet on the site plan. Reducing the size of this building would not affect any of the individual suites which would each be between 1,500 to 2,000 square feet. A/SB have commitments at this time for four confirmed tenants who would each require 2,000 square feet. Parking for the site was considered at length. A joint use parking agreement between the medical office building and the restaurant could be arranged. The underground parking area will be utilized by the medical building clients as well as the restaurant patrons. There will be no physical separations -2- . 6/5/90 1 1 1 1 '. CHAMPION DEVELOPMENT COMPANY J ~ ' ,~ :0120 . .~~ pan<1.ng area between the two buildings with __ wicnout the island parking area. Using the reduced site option, the Agency inquired if there would be adequate under- ground and surface parking to comply with Code for both the medical office and restaurant. Mr. Lortie explained that they would lose approximately 2,000 feet off of the office struc- ture; adjust the medical building on the site or change the shape of the buil4ing to ~o through the site another way, and the surface area would have to be modified. In response to a question of setbacks for both the medical building and restaurant, Mr. Lortie replied the landscaped area would be seven feet wide... from the inside edge of the sidewalk to the building. In closing Mr. Lortie stated that A/SB have another restaurant standing behind the Red Lobster, but declined to release the name. A/SB had presented a very similar format to the Red Lobster representatives, that is - they would have to build the site for them and they could then have the option of either using a build-to-suit for the restaurant, or A/SB would deliver the foundations and structure and they would build up from there. The restaurant did not appear to have a problem with that concept, according to Mr. Lortie. Richard Tillberg, principal of Champion Development Co. (CDC) , stated, in part, that they are proposing a 19,OOO square foot retail development for two and, at the most, three 'tenants. They feel the site will be leasable to two, possibly three, major tenants who want to be on Huntington Drive in this area. CDC have talked with their brokers, The brokers have canvassed the area and have compiled a list of tenants who are not represented in this area and, depending on the Agency's action this date, they can go back out and try to qualify a number of these tenants and get back to the Agency within the next 30 days. Chris Wilson, principal of Champion Development Co., stated, in part, that he thinks the economics are very clear.. .CDC's haven't changed at all since the last time they presented their proposal to the Agency for this site. They are here tonight to tell the Agency that they think it's a retail deal. They do not want to build a mini-mall, and they are very aware of the tenant interest in the City of Arcadia because they have built in Arcadia... He went on to state that while they recognize that this site is, in the truest sense, probably secondary from a retail standpoint, because Second Avenue isn't a major thoroughfare in the City, they think it's a viable alternative for a lot of prospective tenants. Referring to the site plan, in particular, the area that had originally been proposed for a tenant the size of a Pier I store, Mr. Wilson noted that CDC might narrow the depth of that area and build three free standing buildings there. The market place for an 8,000 square foot individual tenant is a lot narrower than if they build three - 6,000 square foot buildings. He reported that CDC has completed 15 commercial retail projects and all of them are anchored by what they consider to be a regional or a credit tenant. They have built for a number of Music Plus', Warehouse Records, Blockbuster Videos and Rogers Soundlab, which is a stereo chain. They would look for a "credit tenant"... at this time they do not know who that would be, but they would begin by identifying every major tenant that is not within a couple of miles of Arcadia and go to them. In response to the Agency's query, he stated that CDC likes the reduced site without the park for retail because they would have less tenants to fill, however, when the island is removed it makes the site even more inferior and really takes away all the viability of attracting a "credit natural tenant". He does not think the reduced site would work well for retail. Staff inquired of Mr. Wilson if -3- 6/5/90 32:0121 there would be any kind of a guarantee or an asaurance the Agency would have for the long term that we would have retail uses that would pay sales' tax out past five or ten years. Mr. Wilson replied, "No, because what you're doing is putting a condition that runs with the land forever and if they didn't sell the project what they would be doing is, in five or ten years when a lease expires they might have a vacant building there if the Agency put that kind of condition on it." CDC would have no problem with doing a "best faith effort", however. Referring to the possible sales tax return to the 'City, staff responded, in part, that they have estimated this at $20,000 to $34,000, assuming that the three buildings are retail and that they are going to be good producers. In the ensuing discussion, it was noted that both proposals are speculative. Although A/SB has gone a long way in their talks with the Red Lobster representatives, it is not set; CDC works with a lot of different people and can tell the Agency what type of retail they want to bring in. This is not set either. The Champion Development purchase price offer was discussed, with Champion offering $260,000 more for the full site option than Arcon/Schaefer. The difference in tax increment was considered - a $44,000 potential per year for A/SB, and a potential of $22,000 per year for CDC's retail proposal. The return of sales tax to the City was considered; the possible loss of the park concerned some; the retail store vacancies on Huntington Drive were noted. Member Harbicht stated, in part, that he would rather sea a medical office building and a restaurant anchor that downtown area rather than a retail development. Member Ciraulo commented that he is not personally much in favor of the retail businesses at that location either. He likes the idea of the reduced site and the idea of keeping the island, if possible. He would like to see aome sort of an office/medical/restaurant complex at this site. Member Fasching stated, in part, he would kind of go along with Members Harbicht ,and Ciraulo on the restaurant/medical office concept. Arcon would be able to do the development and leave the green space and the park atmosphere, which he would really like to keep. He did not feel that this particular location is really geared to a heavy retail operation... He likes the concept of the medical building and the Red Lobster, if it materializes... With respect to the purchase of the land, he would like to propose that Arcon match the CDC purchase offer for the property - the property is worth that much. Member Gilb stated, in part, that he would like the $260,000 more for the property... Champion has a good reputation and he believes that maybe retail should be on that corner... although he may like the Arcon project better, from a dollar and cents standpoint he likes the $1,460,000 for the property and the proposal from the developer. ~~Il.' " Comments about the aesthetics of the park in connection with the site... and by keeping the park it also will increase the open air feeling of that corner were offered by some, and Chairman Young stated, in part, that she feels that that is essential on that corner with the railroad trestle and the trains... she also would want to keep at least part of the park worked into the parking lot or the landscaping. The Chairman did not feel that that is a retail corner, MOTION After further discussion, Agency Member Fasching MOVED to DIRECT staff to continue negotiating with WLA Arcon/Schaefer Brothers on an Exclusive Right to Negotiate. -4- 6/5/90 1 1 1 1 MOTION ADJOURNMENT ROLL CALL CLOSED SESSION ADJOURNMENT ATTEST: J Alford, 32: 0122 A discussion then ensued with respect to the purchase price for the property and would Arcon be willing to match the price of Champion's bid on the property. Staff commented that that would be part of the ERN. At this point Mr. Schaefer of WLA Arcon/Schaefer Brothers was allowed to sddress this issue. Mr. Schaefer stated, in part, that the Agency Members were business people. .. they know that everything is negotiable in a business situation. And certainly the price is negotiable, but it's negotiable in terms of a lot of other issues that deal with the construction. The many phases of the estimating process, negotiations, and certain requirements were enumerated. Their proposal was based on certain assumptions and it is their feeling that the price is probably about correct as it stands. This is a soft market because interest rates for construction are so high. They took this major fact into consideration. He understands that within the ERN process, however, the ultimate price is subject to are-use appraisal. When this re-use appraisal comes forward if their number is significantly out of line, then under that re-use appraisal there would have to be a renegotiation. The price would then have to be adjusted at that time if Arcon under- offered... conversely, if the market goes down they might be able to get a lower price. He does not think it is going to go down below what their figure is... he believes that at this time based on their evaluation of current rents; the costs that they are going to have to incur to put in subterranean parking, and the fact that for a medical building they have to provide more parking space than usual... their price is about correct for this particular project. He also commented, in response to the Agency, that they have not gotten into certain details with the Red Lobster... many things have to be worked out. Mr. Schaefer reiterated that it is his feeling that the Red Lobster is very much interested in going forward to locate in this area. Member Fasching's MOTION to DIRECT staff to continue negotiating with WLA'Arcon/Schaefer Brothers on an Exclusive Right to Negotiate was restated, Member Harbicht seconded the MOTION, CARRIED on roll call vote as follows: AYES: NOES: ABSENT: Members Ciraulo, Fasching, Harbicht and Young Member Gilb ' None Staff then requested that the Agency give DIRECTION as to the size of the site... either keep the whole park and the street or not... a brief discussion ensued with suggestions offered and the Agency DIRECTED staff to consider the Agency's discussion and come back to them with some of the suggestions incorporated into the project. At 7:00 p.m. the Arcadia Redevelopment Agency ADJOURNED and the City Council CONVENED. PRESENT: Councilmembers Ciraulo, Fasching, Gilb, Harbicht and Young None ABSENT: The City Manager requested a Closed Session before the Regular Meeting this date. The Council then entered the CLOSED SESSION, RECONVENED AND ADJOURNED sine die at 7:30 p.m. ~~4.~~I'~ ary B. ng, Ma r -5- 6/5/90