HomeMy Public PortalAbout10C Redevelopment Options for 5800 Temple City Boulevard-------------------------
AGENDA
ITEM 10.C.
MANAGEMENT SERVICES DEPARTMENT
MEMORANDUM
DATE: Dece mber 15 , 201 5
TO: The Honorable City Council
FROM: Bryan Cook, City Manager
By: Brian Haworth , Assistant to the City Manager
Michael Forb es, Community Development Director
SUBJECT: REDEVELOPMENT OPTIONS FOR 5800 TEMPLE CITY BLVD.
RECOMMENDATION:
The Ci ty Council is requ este d t o:
a. Re ceive a presentation on redevelopment options for 5800 Temple City Blvd .; and
b. Provide staff with fu rt he r d irection .
BACKGROUND:
1. On September 2 , 2014 , the City Council ("Council ") reviewed schematic designs
for the redevelopment of 5800 Temple City Blvd ("Project Site"). Those concepts ,
prepared by Gonzalez Goodale Architects , provided a number of options including
public parking , parkland , commercial/retail space , multi -family housing and a
hybrid thereof. Staff was subsequently directed to further assess the economic
feasibility of such uses . Furthermore , direction was given to explore the property's
interim use as a parking lot, w ith the intent of having a local water purveyor cover
landscaping costs through the installation of a water demonstration garden.
2 . On December 5 and 19 , 2014 , staff provided project updates to the Future
Deve lopment of City Properties Standing Committee ("Standing Committee"). In
particular, it was reporte d that local water purveyors were not interested in
covering costs for a water demonstration garden as its use would be temporary in
nature . Furthermore, estimated costs for a temporary parking lot -including site
preparation and installation -was (conservatively) estimated upwards of
$275 ,000 , nearly th e cost of a permanent parking lot.
City Council
Decemb er 15, 20 15
Page 2 of 6
3 . On July 31 , 2015 , staff and consultant team Applied Development Economics
presented the Standing Committee with its pre limin ary market and financial
analyses. Market findings concluded that:
• Retail. Temple City's population and household income growth will continue
to influence demand for local retail, as the community sees ongoing increases
in both spending power and retail leakage. In comparison to adjacent
communities, Temple City is experiencing higher lease rates and lower
vacancies. Bringing a national c hain restaurant or retailer to the Project Site
may be feasible , as it cou ld accommodate local demand for a more diverse
retail mix.
• Residential. It is projected that for the next severa l years , Temple City will
cont inue to be a strong and healthy submarket for low-density , multi-family
residential units. Suitable rents are recommended at mid-point and are
expected to grow, particularly as Millennials and Baby Boomers fue l local
demand. Furth ermore , the Project Site is a viable location for multi-family
housing given its close proximity to downtown and major arterial corridors.
• Office . Through 2019 , the W est San Gabriel Valley -including Temple City
-will see steady growth in the office market as lease rates increase and
vacancy rates decrease. As it pertains to the Project Site, its location is
appropriate for small , Class A office space that serves professional uses like
finance, insurance and real estate .
Financial analyses were also presented on the following five development
scenarios to evaluate the Project Site 's best use in way of generating highest
project value over 1 0 years , and le ast sensitivity to market co ndition s related to
construction costs and lease pricing . General and preliminary recommendations
were provided, which are summarized below.
Prototypes
• Office
This prototype assumes a two-story Class A office bu ild i ng of 7 ,304 sq. ft . (or
3 ,652 sq. ft. on each floor). The concept is financially feas ible in the medium-
term , but can have an average return rate as office lease rates are relatively
sensitive to market conditions . While lease rates generally fluctuate in
response to the regional economy , an office use at the Project Site is deemed
viable as regional vacancy rates are low and there is no new office inve ntory
citywide.
Recommendation : Consider.
City Council
December 15 , 2015
Page 3 of 6
• Cafe/Restaurant
This prototype assumes a one-story cafe or restaurant building of 4 ,2 50 sq . ft .
Like the office prototype, this concept has an average return rate but is less
sensitive to market conditions , i.e ., consumers need to eat and be entertained
regardless of the economy . As it pertains to the Project Site , corner visibility
and (a hypothetical) new construction product can avail longer and higher
lease terms to support amortized construction and ancillary fixture costs.
Recommendation : Neutral.
• General Retail
This prototype assumes a one-story 3,643 sq . ft. retail building . The concept
is the least sensitive to market conditions as the Project Site is a gateway
location that would provide the newest retail space in already built-out (and
older) downtown environment. Anticipated lease rates could easily support
construction costs , since this concept -of all five prototypes -is the
cheapest to build . Nevertheless, as this concept presents the least financial
risk , it also presents the least gain in net revenue.
Recommendation : Neutral.
• Office Over Restaurant
This two-story prototype assumes a 4 ,250 sq . ft. ground-floor restaurant with
3,652 sq. ft. of above office space . From a financial perspective , this concept
has /ow sensitivity to market conditions because of locally unmet restaurant
and office demand. While this product is the most costly to construct , it could
also provide a sizable gain of net revenue .
Recommendation : Consider.
• Residential Over Retail
This two-story prototype assumes five apartment units totaling 3,972 sq . ft.
over a 4,320 sq . ft . ground-floor cafe/restaurant. The concept has a high
sensitivity to market conditions as housing rental rates fluctuate with the
economy . Assuming the very best case-scenario of a continued , strong
economic market over the next decade, this development type would provide
an average return of net revenue .
Recommendation : Do not consider.
Upon conclusion of the meeti ng , the Standing Committee requested that staff and its
consultant re-evaluate their findings based on three Project Site development scenarios ,
as well as explore the Project Site as a potential public parking lot. Those findings are
provided in the following section .
City Council
December 15, 2015
Page 4 of 6
ANALYSIS:
On November 6 , 2015 , staff and its consultant met with the Standing Committee to
discuss feasibility of th e various prototypes , assuming the following four development
scenarios . Staff was ultimately directed to present this information to the full Council.
1. City builds the project and holds it for 10 years, receiving net operating income .
Recommendation : This approach is not recommended, as it requires the City to
be the owner, developer and operator. This strategy is better
suited for municipal ities with vast property portfolios , and an
in-house property management and acquisition team. While
this ar rangement provides the City with complete control
over the property and future development type , it also places
the City with all responsibility and risk assoc iated with
construction , leasing , maintenance and prevailing wage
requ irements.
If this arrangement is desired, the Office Over Restaurant
prototype is the most financially fea sib le as it could generate
the highest net income return of $85,00 0 over a 1 0-year
period .
2 . Cit immediate! sells the roperty to an investor/developer with a condition to
build, result ing in a lower development cost.
Recommendation: This approach is not recommended , as selling to an
investor/developer suggests the City may receive 50 -60% of
its $1 .1 million outlay fo r the property's purchase and site
preparation activities .
3. City enters into a public-private pa rtnershi p with a developer, sharing net operating
inc ome over a ten-year period .
Recommendation : This approach should be further explored, whereby the City
solicits private sector participation and negotiates a public-
private partnership to build and operate the project. The
City 's contribution to the partnership would be the site , which
it already owns . The private developer would bring expertise
to the design and build the project , as well as coordinate all
leasing activities. The advantages of this approach are that it
requires less City management and technical expertise than
City Council
December 15 , 2015
Page 5 of 6
if the City functioned a s the sole developer, while providing
the City a larger say in future tenants and lease terms . This
arrangement also provides a longer-term holding period that
allows market value to escalate to where the C ity may
recoup its initial investment on the property.
There are also disadvantages to this approach ; particularly
that it requires a long-term commitment of City resources i n
the site , including a trigge ring of prevailing wage rates for
project construction . While this approach is solid in theory,
there are no local examples of public/private partnerships
that exist with such a sma ll property. It is staff's opinion that
many cities are adjusting to real estate prices post-
redevelop ment, and it may be a while before this
arrangement becomes more common . The City should
further test the market directly with potential developers to
yield more information about the site 's market value and the
City 's specific role in such a partnership .
Using a hypothetical, best-case scenario for this approach,
the Office Over Restaurant prototype is the most feasible , as
it could generate the highest net income return over a 1 0-
year term : $25 ,000 to the City and $59,000 to the developer.
4 . City converts the property into surface pub l ic pa rking .
Recommendation : This approach should be further explored, parti cularly since
the above development analyses concluded relatively low
net income revenues and some unknowns associated with a
public-private partnership .
As conceptualized by Gonzalez Goodale Architects , the
Project Site can accommodate two public park ing layouts :
full site coverage of 42 parking stalls with some landscaping ;
or 31 parking stalls with a major landscaped gateway
treatment (Attachments "A " and "8 ", respectively ). In all
cases , this parking would alleviate downtown parking
demand , particularly for patrons visiting nearby businesses
on Las Tunas Dr. and Temple City Blvd . Furthermore ,
regardless of permanent or temporary use , a parking lot can
act as a "land banking " measure until market prices adjust
and an appropriate development opportunity arises .
Of note , costs for an on-site parking lot will be somewhat
similar between a temporary and permanent use as these
City Council
December 15, 2015
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CITY STRATEGIC GOAL:
improveme nts require complian ce wi th the Americans with
Disabilities Act, existing "green " municipal policies , and
hours of operations and conditions pursuant to current
practices and risk management protocols .
Recommended actions contained in this report align with the Strategic Plan 's Economic
Development goal, i .e., private sector investm ent , associated business attraction efforts
and the provision of reliable infrastructure .
FISCAL IMPACT:
Actions contained in this report provide no fiscal impact to th e adopted FY 2015-16 City
Budget. Should Council direct additional reuse analyses or the development of a
parking lot, program cost estimates will be prov ide d as part of the mid-year City Budget
review scheduled for February 17, 2016 .
ATTACHMENTS:
A. Potential Pa rki ng Config uratio n: 42 stalls
B. Potentia l Park i ng Configuration: 31 stalls
ATTACHMENT A
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