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