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SR-06241986-11C1 t - ~.. JUti 2 ~ 1l16 C/ED:PC:ms City Council Meeting 6/24/86 Santa Monica, California TO: Mayor and City Council FROM: City Staff SUBJECT: Recommendation to Approve Agreement with Schurgin Development Corporation for City Participation Development of a Full-Service Grocery Market and Retail Project in the Pico Neighborhood INTRODUCTION This report requests the City Council approve an agreement with the Schurgin Development Corporation for City participation in the development of a retail project of approximately 65,000 square feet, including a full-service grocery market, to be located at the northwest corner of Pico and Cloverfield Boulevards. BACKGROUND The Pico neighborhood and adjacent Sunset Park neighborhood have long been recognized as having inadequate grocery shopping available to residents. In consideration of this problem, the Council approved an objective in the current fiscal year budget in the Department of Community and Economic Development which directs the Department to "facilitate the development of a supermarket-anchored neighborhood shopping center in the Pico neighborhood". In an effort to meet this objective, staff has been in communication for over a year with the owner of the northwest corner parcel of Pico and Cloverfield Boulevards. Smart and Final Iris was located at this site until it vacated t ~-~, - 1 - ~uN Z ~ 19.x. the premises this past December. This parcel was targeted as a possible market site because it is sufficiently large to accommodate a full-service market as part of a larger retail development, and because it was available for purchase. The owner of the property was encouraged to work with the City to find a purchaser who would be willing to establish a market. The owner was very cooperative, placing staff in contact with several prospective purchasers to discuss the opportunities for a market on the site. These communications led staff into discussions with the Schurgin Development Corporation, the party currently in escrow on the property, to discuss the means by which a grocery market could be developed on the site. Unfortunately, despite the owner's cooperative attitude, the market value of the land is too high to warrant the development of a market; typically a grocery store operation can amortize land costs of about $19 per square foot. This land is priced at $47 per square foot, which is reasonable for commercially zoned property along Pico. The high cost of land in Santa Monica is a major factor in causing the market shortage problem in the first place. Other communities with high land values are facing similar problems of retaining or attracting grocery stores, which operate on a much lower margin of profit that other retail establishments. Thus it was clear that for the City to achieve its goal of having a market in this area it would have to assist the project in some fashion or find other incentives for this type of development. - 2 - Project Description The proposed project is a retail center of approximately 65,000 square feet consisting of two stories in an "L" shaped development. The sales area grocery market portion of this center will be a minimum of 10,000 square feet. The market will be a full-service grocery store, which means it will sell fresh meats and produce in addition to other grocery items. While liquor sales will be permitted in the grocery store, the balance of the development will not include any liquor outlets. Parking for the project, which would meet code requirements, is provided in one level of subterranean parking and surface parking in front of the retail space. The land is currently zoned C-4 and R-2, which permits this use and the square footage proposed with a Conditional Use Permit for the R-2 zoned portion of the property. If the agreement with Schurgin is approved, the project will proceed through the normal planning process of the City. Approval of the Agreement does not constitute project approval, which will remain the discretion of the Planning Commission or the City Council on appeal. Schurgin Development Corporation The Schurgin Development Corporation was established in 1976 as developers of retail convenience and neighborhood shopping centers. They have successful developments in eight states, but most of their projects are located throughout California. Schurgin has worked with many cities and redevelopment agencies in the development of shopping centers. In 1985 Schurgin completed its 50th shopping center. - 3 - Pico Nei hborhood Association Involvement Once initial discussions made it evident that the developer was willing to consider a market on the site, staff put the developer in touch with representatives of the Pico Neighborhood Association. As a result of several community meetings, the developer agreed to pursue a full-service market on the site and that the other retail spaces in the development would not include any liquor outlets. One significant result of the interaction with the neighbors concerns parking for the project. Staff's initial position with Schurgin was that the building should be built along the street frontage with the parking in the rear. Schurgin reluctantly agreed to this restriction, although stated clearly its position that it is very difficult to make any retail, but especially a grocery store, work without clear ample parking in front. However, the meetings with the neighborhood contradicted the position of staff on this point. The neighbors stressed a clear preference for parking in front, along Pico and Cloverfield, rather than to the rear and adjacent to an apartment building. The neighbors believe it will enhance security, both perceived and real, for the establishment to have the parking area clearly visible from the street. They also feel this will buffer noise from the adjacent neighbors. Because of the neighbors strong opinion about the parking, staff agreed to support the developer in placing the parking in front of the project. After the meetings with Schurgin, the Pico neighborhood representatives endorsed the proposed development and requested City staff to - 4 - work with the developer to find a way to make the market economically feasible. Project Financing Typically a retail development such as this could expect to realize rents significantly higher than the approximately $.90/month a grocery market can be expected to pay. Thus, the inclusion of a market in the project carries a cost to the developer he would not otherwise bear, and in this case makes the project less profitable and functions as a disincentive for the developer to proceed. To encourage the development of a market, staff began a series of discussions with Schurgin, along with the assistance of Morrison and Foerster, a law firm specializing in tax-exempt bond issues which worked with the City in the issuance of the tax allocation bonds for the Ocean Park Beach Improvement Plan, to investigate the possibility of using such bonds to improve the economics of the project. Ultimately, the use of such bonds was determined to be infeasible due to restrictions in state and federal law and the state's unwillingness so far this year to establish allocations with which cities can issue Industrial Revenue Bonds (IDBs). The concept of a taxable bond issue was also investigated but was not found to be useful in improving the economics of the project. Staff worked with the developer to devise a method of City participation in the project that would ensure that a market would be developed and which would make the project sufficiently - 5 - desirable from a development perspective. Staff also enlisted the assistance of the real estate consulting firm Kotin, Regan and Mouchly to review the terms of the development. The following participation arrangement was developed: City Participation in the Project The City will contribute to the project the lesser of 50~ of the sales tax generated by the project or $300,000, as follows: Year 1 - - $100,000 Year 2 - - $ 80,000 Year 3 - - 40% of the sales tax receipts from the previous year Year 4 - - 30~ of the sales tax receipts from the previous year Year 5 - - 20~ of the sales tax receipts from the previous year Year 6 - - l00 of the sales tax receipts from the previous year The first City payment would commence six months after the opening of the Market. The payments extend into the sixth year because sales tax information for a given year does not become available until the following year. If the market ceases to operate, all payments will cease until the market is resumed. If the market is replaced with another use within the first five years, the developer will repay the City any payments it received that exceeded 500 of the sales tax receipts from the project while the market was in operation. - 6 - Neighborhood Benefit In exchange for this annual revenue, the developer agrees to enter into a minimum five-year lease with a full-service grocery market operator. The developer will also refund the entire City contribution to the project to the Pico neighborhood during years 7 through 10 of the project. This developer contribution will be as follows: Year 7 - - 10~ of the total City contribution Year 8 - - 20~ of the total City contribution Year 9 - - 30~ of the total City contribution Year 10 - - 40~ of the total City contribution. This refund of the City contribution will go to artists or non-profit organization(s), to be approved by the City, for arts projects, graffiti removal or other beautification projects in the Pico Neighborhood of the City. If the project is sold before year 9, any outstanding balance due from the Developer will be paid at the time of sale. BUDGET/FINANCIAL IMPACT This agreement will necessitate amount not to exceed $300,000 payments totalling $180,000, General Fund unobligated Fund Neighborhood Reserve Account. they are linked to the receipt the expenditure by the City of an over five years. The first two must be appropriated from the Balance to a General Fund Pico The balance of the payments, as of sales tax, do not need to be - 7 - appropriated at this time. Staff will return with budget appropriation requests for funds as necessary. RECOMMENDATION It is respectfully recommended that the City Council adopt the attached resolution approving the Agreement with Schurgin Development Corporation. It is further recommended that the City Council appropriate $180,000 from the General Fund unobligated Fund Balance to a General Fund Pico Neighborhood Reserve Account for the purpose of payment under this agreement. Prepared by: John Jalili, City Manager Peggy Curran, Director of Community and Economic Development Attachments: Resolution Agreement Site Map - 8 - FFANK '" •n a t ~ ~ z.~p : . Q :s~i ~`^? ~_ :r ~ ~.i J -~1.{1GH I f w 1 D i93ar•r+ • L' ,• IIY• 1f76Y D ~ D ~- B1.-VO EFFIEL~ / / ~n0 / ~.•r ~- ~ it ,, D ~/ a /D _ ; ~ 7 i•CA~s /~~ IY ~ 5T. 2~-4~ ._.. ny . ' ~ 1 ~ ,..~ .., ... 1 ~ 1 ~ ~ 1 ' ~ • i. ~. ~ 2 11 R.c ~-~F ' ~,.• ,11 ~1 • 1 `T 1 7 _1~ i-D ~ I~ a 5 z'. ~ Y ~ p6.9 G~ ~ 20.9 ~ Q 9. 1 -`~ Q Z i !49 ti 2 29-~' ~ 'A ~ ~' y . r1j ~ ~' t .~ 1t 1 ~h Y p = D' • ~` 1•iy 1i .• ~ , I ~, ~ D C I'`y I L • ~ ~' R ` 2 . 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D A pyl'h h A ~ ,• • ~ • ~ i K r-... _ .v ws, nr ~d -t~ i~ ~ EXHIBIT "A" LEGAL OESCRIPTIO~: PARCEL 1: ThAT PORTION GF LOT 3 IN BLOCK 25, ERKENBRECNER SYNOICAT£ SANTA MGNICA TRACT iN THE-CITY OF SANTa MONICa• IN ThE COUNTY OF LOS ANGELES, STATE OF -- CALIFORNIA. AS PER. MAP RECORDED Ih B00+~ b PAGES 26 AND 27 DF MAPS• IN THE OFFICE OF THE COut~TY RECOROEk OF SAID COUNTY• DESCRIBED AS FOLLONS: BEGINNING AT THE MOST EASTERLY CORNER OF SAID LOT; THENCE NORTHWESTERLY ALOhI THE NORTHEAST LINE OF SAIU LUT• 252.95 FEET; THENCE SOUTHWESTERLY ANO PARALLE WITH THE NGRTHEEST LIhE OF SAID IOTr 160 FEET; THENCE SOUTHEASTERLY TO A POIP IN THE SOUTHEAST LInE OF SAID LOT. DISTANT 165.37 FEET SOUTHircSTERLY.FROM THE MGST EASTERLY COP.NrR CF SAID LOT AND THE~~ICE NORTHEASTERLY 165.37 FEET 70 THE PGIhT GF aEGINNING. EXCEPT THE: SGUTHv;ESTEkLY 83 FtET, FRONT AND REAR OF THAT PORTION OF SAID LOT 3. ALSG EXCEPTING THEREFROM ONE-HALF OF ALL MINERALS, OIL. GAS, ASPHALTUM AND OTHER HYDROCARBGN SudSTAhCES NOW OR HEREAFTER IN ANO UNDER SAID LANC OR NHICH MAY bE PROOUCtO THEREFROM AND ALL RIGHTS IN RELATION THERETO• INCLUDING THE RIGHT TO EXTRACI SAM[ EiY Ai~Y MEANSr E3UT WITH NO RIGHT OF ENTRY UPON SA10 lAtvO EXCEPTING BELOW A DEPTH OF 500 FEET• AS RESERVED E3Y R. J. SUTHERLAND• TRUSTcc Ih DEED kECOk0E0 DECEMBER 29, 1959. ALSO EXCEPTING THEREFROM GNE-HALF OF ALL MINERALSr OIL+ GAS• ASPHALTUM AND OTHER HYDROCARBON SUBSTANCES Now GR HEREAFTER IN ANO UNDER SAID LAND OR ~tHICH MAY BE PRGDUCEO THEREFROM AND ALL RIGHTS IN RELATION THERETG, INCLUDING THc RIGHT TO EXTRACT SAME EY ANY MEANS. auT KITH NO RIGHT OF ENTRY UPON SAID LAhD~ EXCEPTING E3ELOw A DEPTH OF 500 FEET• AS RESERVED BY JEAN RADIS ANO MAX RADIS, IN DEED RECORDED Oc`CEMnf:R 29. 1959. PARCEL 2: THAT PORTION GF 1.07 4 Itv BLOCK 25 OF THE ERiCENdRECHER SYNDICATE SANTA MONIGA TRACT, IN THE CITY OF SANTA MOt~tICA, Ih THE COUNTY OF LOS ANGELES. STATE OF CALIFORtiIA. AS PER tiAP RcCUR~?ED IN 60UK b PAGES 26 ANO 27 OF MAPS. IN THE OFFICE OF THE CGU~TY RECORDER OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGI~~tNING AT THE BUST EASTERLY CURNER OF SAID LOT; THENCE NORTHWESTERLY ALOtvG THE NORTriEaSTERLY lINt TnEREOF• 223.62 FEET TO THE NORTHEASTERLY CORNER OF A PORTION OF SAID LDT• COnVEYcG TO JACUR w000• BY OEEO RECORDED IN Ej00k 3215 PAG~ 122 OF UEE05; THENCE SOUTHWESTERLY PARALLEL WITH THE NORTHWESTERLY LIN: OF SAID LGT 4, 3U5 FEET TG A POINT IN THE SOUTHWESTERLY LINE OF SAID LOT; THENCE SOUTHEASTERLY ALONG THE SUUTHi~ESTERLY LINE, 161.4 FEET TO THE MOST SOUTHERLY COktvER THEREOF; ANU THENCE NOKTHEASTERLY ALONG THE SOUTHEASTERLY LINE OF SAID LOT, 311.37 FEET TO THE POINT OF BEGINNING. EXCEPT THEREFROM THAT PORTION DESCRIEsEO AS FOLLOaS: tr.~ _ ~ U`i3bU~5 75S TICOR TITLE INSURArvCE COMPANY OF CALIFORNIA CONMcNCIrvG A7 THE MUST EASTERLY CORNER OF SA10 LOT; THENCE SOUTHWESTERLY AlG!~ THE SCUTHEASTERLY LING OF SAID 107, A DISTANCE OF 21.05 FEET TO THE POINT Gr BEGIhNI-.G; THENCE rvOkTHEASTEhIY ALONG SAID LINEr A DISTANCE OF 27.05 FEET T:, SAID EASTERLY CUKNcR; ThEhCE rvvRTHwtSTtRIY ALONG THE NORTHEASTERLY LINE OF SAID LOT, A DISTANCE GF 31.29 FEET; THENCC 50UTHERLY IN A t3IRECT LINE TO THE PCIhT OF G~EGINNIhG. ALSO EXCEPTING 7HEREFf~OM ONc-HALF OF ALL MINtRALS, OIL, GAS, ASPHALTUMS ANC OTHER HYDROCARBON SU85TANCcS NOw GR HEREAFTER Irv AND UNDER SAIU LAND OR WHICt MAY $~ PRODUCED THEREFROM ANO ALL RIGHTS IN RELATION THERETO. INCLUDING 7Hc RIGHT TO ExTRACT SAME BY ANY MEANS, BUT WITH NO RIGHT OF ENTRY UPON SAID l~-tiu EXCEPTING EsEIOw A DEPTH OF SOG FEET, AS RESERYcU BY R. J. SUTHERLAND, TRUSTcc IN DEED RECOkOED OECEr~BER 29. 1959. ALSO EXCEPTING THEREFROM ONE-HALF OF ALL MINERALS. OIL, GAS, ASPHALTUM AND OTHER HYDROCARBON SUBSTANCES NO-~ OR HEREAFTER IN AND UNDER SAID LAND OR WHICH MAY BE PRODUCED THEREFROM AND ALL RIGHTS IN RELATION THERETO, INCLUDING THE RIGHT TO ExTRACT SAME BY ANY r'EArvS, HUT WITH NO RIGHT OF ENTRY UPON SAIU LAhJ EXCEPTING BELOr~ A DEPTH OF SOU FtET, AS RESERVED BY JEAN RADIS ANG MAX RADIS, IN CEED RECOkOED DECEMBER 29, 1959. PARCEL 3: THAT PJRTION CF LDT 4 IN FLOCK 25, ERKcNBRECHER SYNDICATE SANTA MONICA TRACT, IN THc CITY OF SANTA MONICA, IN THE COUNTY OF lOS ANGELES, STATE OF CALIFORNIA, AS PEP. MAP RcCURDEO Iti tiGDK 0 PAGES 26 AND 27 OF MAPS, IN THr OFFICE OF THE CGUhTY RcCORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT A_PGINT IN THE NORTHEASTERLY LINE OF SAID 10T, DISTANT 223.02 FEET FROM THE M05T EASTcRLY CGRfvER THEREOF; THENCE SOUTHWESTERLY PARALLEL KIT THE NORTHWESTERLY LINE OF SAID LOTr 305 FEET TO SOUTHWESTERLY LINE OF SAID LOT; THENCE NGRTN.+ESTERIY ALONG SAID SOUTHWESTERLY LINE, 125 FEET; THENCE NORTHEASTERLY PARALLEL WITH THE NORTH~•ESTERLY LINE OF SAID LOT, 305 FEET Tu THE POINT IN THE NUkTHEASTERIY LINE OF SAID LOT; THENCE SOUTHEASTERLY ALONG SAIC NDRTHEAST~RIY IIhE, 125 FEET TG THE POINT OF BEGINNING. EXCEPT THE NORTHEASTcRLY 150 FEET OF THE hDRTHwESTERIY 50 FELT THEREOF. PARCEL 4: THE NORTHEASTERLY 15U FEET OF THE NORTHEESTERLY 50 FEET OF THAT PORTIDN OF LG 4 IN BLOCK [5 OF ERKEhE.RcCHEk SYNDICATE SANTA MONICA TRACT, IN THE CITY OF SAtrT4 MONICA, IN THE C~UrvTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PcR MAF RECORDED IN BOOK b PAGES 20 ANO 27 OF MAPS, IN THE OFFICE OF THE COUNTY RECOROcR OF SAID COUNTY, OESCRI8E0 AS FOLL0~1S: BEGINNING AT A Pi]INT Ih ThF rORTHEASTERLY LINE OF SAID LDT• DISTANT 223.62 FEET FRGM THE MOST EASTERLY CORNER THEREOF; THENCE SOUTHWESTERLY PARALLEL kITt tHE NORTHWESTERLY LIN~ GF SAID LGT, 305 FEET TO THE SOUTHWESTERLY LINE OF SAI( LOT; THENCE NORTHWESTERLY aLONG SAID SOUTHWESTERLY LINE. 125 FEET; THENCE NGRTHWESTERLY PARALLEL tiITH THE NORTHhESTEkIY LINE OF SAID LOT. 305 FEET TO THE POINT Ih THE f~ORTfiEASTERLY TINE OF SAID LOT; THENCE SOUTHEASTERLY ALONG SAID NGRTHEASTERLY IIhE• 125 FEET TO THE POINT OF BEGINNING. EF:AI;T <.:. .. 0 N N J • N N y. • ~ ~ O • > o' v ~O Q-F~~ JFi .... G~~ ~ ~ ~ ~ ~~ 5 ~ O6.\\ 5`; • ~ - k ~ i c ., Q, '~ ~~~y0 ~~6- `~ ~( r ~~. Cf !: :F Sy• . `~ ~ ~~ .... . ~ ~' o ~ ~-f ~ _ , =;; ~• I a <1 0~ O s6~'L ~ ~= ~~ ~j~ R, a g' 15 \\ a5~ ~ \ ~~ C aD 5p ~ \ l'~' ~~ n ~. \~ \a / NO 2 S~(. OJ o- eo 7 r,~,~ :s 5 ~. -~\ Qh c N o b ab ~ ~ ~0 b 29~ ~ ~I 296.8 ~ s W 0 F- V d % 5o p ~ J' in Z ~ ~ N - ~ ~ Q~ ~ ' U ccDV J ~ W z ~ ~ W m ' ~ N U ~ -W m a ~ v ~ Q ~ ~~ z ~' Q ~ . . ~~ oo W ~ ~° V m -~ O EXHIBIT "B" OFF SITE IMPROVEMENTS FOR DEVELOPMENT OF RETAIL CENTER AT NORTHWEST CORNER OF PICO AND CLOVERFIELD BOULEVARDS THE FOLLOWING OFF-SITE IMPROVEMENTS SHALL BE PERFORMED BY AND BE THE FULL RESPONSBILITY OF THE DEVELOPER. DEVELOPER WILL PREPARE ALL PLANS, CONSTRUCTION STAKING AND OTHER RELATED CIVIL ENGINEERING FUNCTIONS TO FULFILL THESE OBLIGATIONS. ALL IMPROVEMENTS WILL BE MADE TO THE SPECIFICATIONS REQUIRED BY THE GENERAL SERVICES DEPARTMENT OF THE CITY. 1. Excavating, grading and removing asphalt concrete, curb, gutter, sidewalk and other structures on Pico Blvd. to accommodate widening of Pico Blvd.; 2. Relocation or construction of new concrete catch basis 8' back on Pico Blvd.; 3. New combined concrete curb and gutter on Pico Blvd., conforming to required setback for widening of Pico Blvd.; 4. New Portland cement concrete sidewalk on Pico Blvd., including provision for tree wells; 5. New concrete wheelchair ramps; 6. New commercial concrete driveway entrances; 7. 6" thick crushed aggregate base for 8' widening of Pico Blvd.; 8. 8" thick new asphalt base for 8' widening of Pico Blvd.; 9. Relocation of three traffic signals and appurtenant conduits and cable to accommodate widening of Pico Blvd., including provision of new footings; 10. Relocation of four street lights and appurtenant conduits and cable to accommodate widening of Pico Blvd., including provision of new footings; 12. Planting of a minimum of eight street trees along Pico and Cloverfield Blvds., including provision for tree wells; 13. Restriping of north half of Pico Blvd. and west half of Cloverfield Blvd., adjacent to the property, with thermoplastic striping. #### Reference Contract No. 4699 (CCS).