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HomeMy WebLinkAboutSA_2014-09-09_Agenda PacketSPECIAL MEETING CITY OF ATASCADERO CITY COUNCIL IN THE CAPACITY OF SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF ATASCADERO FOR REDEVELOPMENT AND HOUSING PURPOSES1 AGENDA Tuesday, September 9, 2014 (Immediately following the City Council Regular Session) City Hall Council Chambers, 4th floor 6500 Palma Avenue Atascadero, California (Enter from Lewis Avenue) REGULAR SESSION – CALL TO ORDER: ROLL CALL: Mayor O’Malley Mayor Pro Tem Sturtevant Council Member Fonzi Council Member Kelley Council Member Moreno APPROVAL OF AGENDA: Roll Call 1 On January 10, 2012, the Atascadero City Council adopted Resolution No. 2012-002, electing to serve as the successor to the Community Redevelopment Agency of Atascadero for redevelopment purposes, and also elected to retain the housing assets and functions previously performed by the Community Redevelopment Agency of Atascadero. A. CONSENT CALENDAR: (All items on the consent calendar are considered to be routine and non-controversial by City staff and will be approved by one motion if no member of the Agency or public wishes to comment or ask questions. If comment or discussion is desired by anyone, the item will be removed from the consent calendar and will be considered in the listed sequence with an opportunity for any member of the public to address the Council concerning the item before action is taken. DRAFT MINUTES: Successor Agency meeting draft minutes are listed on the Consent Calendar for approval of the minutes. Should anyone wish to request an amendment to draft minutes, the item will be removed from the Consent Calendar and their suggestion will be considered by the Successor Agency. If anyone desires to express their opinion concerning issues included in draft minutes, they should share their opinion during the Community Forum portion of the meeting.) 1. Successor Agency Draft Action Minutes – August 12, 2014  Recommendation: Council in the capacity of the Successor Agency to the Redevelopment Agency of Atascadero approve the Successor Agency Special Meeting Draft Action Minutes of August 12, 2014. [City Clerk] COMMUNITY FORUM: (This portion of the meeting is reserved for persons wanting to address the Board on any matter not on this agenda and over which the Board has jurisdiction. Speakers are limited to three minutes. Please state your name and address for the record before making your presentation. The Board may take action to direct the staff to place a matter of business on a future agenda. A maximum of 30 minutes will be allowed for Community Forum, unless changed by the Board.) B. PUBLIC HEARINGS: None. C. MANAGEMENT REPORTS: 1. Approval of Property Disposition and Marketing Plan for the Creekside Building  Fiscal Impact: The costs of hiring a broker are included in costs of real property disposal on the ROPS 14-15A.  Recommendation: Successor Agency Board adopt the Draft Resolution, approving the Property Disposition and Marketing Plan for the Creekside Building Located at 6907 El Camino Real, Atascadero. [Administrative Services] BOARD ANNOUNCEMENTS AND REPORTS: (On their own initiative, the Board Members may make a brief annou ncement or a brief report on their own activities. Board Members may ask a question for clarification, make a referral to staff or take action to have staff place a matter of business on a future agenda. The Board may take action on items listed on the Agenda.) D. ADJOURNMENT ITEM NUMBER: SA A-1 DATE: 09/09/14 Atascadero Successor Agency August 12, 2014 Page 1 of 3 CITY OF ATASCADERO CITY COUNCIL IN THE CAPACITY OF SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF ATASCADERO FOR REDEVELOPMENT AND HOUSING PURPOSES1 DRAFT ACTION MINUTES Tuesday, August 12, 2014 (Immediately following the City Council Regular Session) City Hall Council Chambers, 4th floor 6500 Palma Avenue Atascadero, California (Enter from Lewis Avenue) REGULAR SESSION – CALL TO ORDER: Mayor O’Malley called the meeting to order at 10:40 p.m. ROLL CALL: Present: Council Members Kelley, Moreno, Fonzi, Mayor Pro Tem Sturtevant, and Mayor O’Malley Absent: None Others Present: City Clerk / Assistant to City Manager Marcia McClure Torgerson 1 On January 10, 2012, the Atascadero City Council adopted Resolution No. 2012-002, electing to serve as the successor to the Community Redevelopment Agency of Atascadero for redevelopment purposes, and also elected to retain the housing assets and functions previously performed by the Community Redevelopment Agency of Atascadero. ITEM NUMBER: SA A-1 DATE: 09/09/14 Atascadero Successor Agency August 12, 2014 Page 2 of 3 Staff Present: City Manager Rachelle Rickard, Deputy Administrative Services Director Cindy Chavez, Community Development Director Warren Frace, Interim Public Works Director Douglas Breeze, Police Chief Jerel Haley, Fire Chief Kurt Stone, Police Commander Joe Allen, and City Attorney Brian Pierik. APPROVAL OF AGENDA: Roll Call MOTION: By Council Member Moreno and seconded by Council Member Fonzi to approve the agenda. Motion passed 5:0 by a roll-call vote. A. CONSENT CALENDAR: 1. Successor Agency Draft Action Minutes – February 11, 2014  Recommendation: Council in the capacity of the Successor Agency to the Redevelopment Agency of Atascadero approve the Successor Agency Special Meeting Draft Action Minutes of February 11, 2014. [City Clerk] MOTION: By Mayor Pro Tem Sturtevant and seconded by Council Member Fonzi to approve the Consent Calendar. Motion passed 5:0 by a voice vote. COMMUNITY FORUM: None B. PUBLIC HEARINGS: None. C. MANAGEMENT REPORTS: 1. Approval of Draft Resolution Authorizing a Master Agreement Between the City of Atascadero and the Successor Agency to the Community Redevelopment Agency of Atascadero  Fiscal Impact: The fiscal impact of this agreement is unknown at this time. Any expenditures made as a result of the Master Agreement would be paid using restricted bond proceeds pursuant to bond covenants.  Recommendation: Successor Agency Board approve the Draft Resolution authorizing a Master Agreement between the City of Atascadero and the Successor Agency to expend excess bond proceeds. Deputy Administrative Services Director Cindy Chavez gave the staff report and answered questions from the Council. ITEM NUMBER: SA A-1 DATE: 09/09/14 Atascadero Successor Agency August 12, 2014 Page 3 of 3 PUBLIC COMMENT: None MOTION: By Mayor Pro Tem Sturtevant and seconded by Council Member Kelley to approve the Draft Resolution authorizing a Master Agreement between the City of Atascadero and the Successor Agency to expend excess bond proceeds. Motion passed 5:0 by a roll-call vote. (Resolution No. SA 2014- 002) BOARD ANNOUNCEMENTS AND REPORTS: None D. ADJOURNMENT Mayor O’Malley adjourned the meeting at 10:42 p.m. MINUTES PREPARED BY: ______________________________________ Marcia McClure Torgerson, C.M.C. City Clerk / Assistant to the City Manager ITEM NUMBER: SA C-1 DATE: 09/09/14 Successor Agency to the Community Redevelopment Agency of Atascadero Staff Report – Administrative Services Approval of Property Disposition and Marketing Plan for the Creekside Building RECOMMENDATION: Successor Agency Board adopt the Draft Resolution, approving the Property Disposition and Marketing Plan for the Creekside Building Located at 6907 El Camino Real, Atascadero. DISCUSSION: The former Community Redevelopment Agency purchased the real property located at 6907 El Camino Real, otherwise known as the Creekside Building, in late 2004. The purchase of property had been identified as a benefit to the Redevelopment Project Area, assisting in the elimination of physical and economic blight conditions by encouraging new development and providing needed public improvements. The purchase was consistent with the former Agency’s Five Year Implementation Plan to revitalize downtown and encourage rehabilitation of deteriorated structures. During this same time period, the 2003 San Simeon Earthquake had damaged Historic City Hall and required the City offices to relocate to temporary facilities. The City and the former Agency negotiated a lease to rent the Creekside Building as temporary City Hall offices until the Historic City Hall was repaired. The building acted as City Hall from late 2005 to August of 2013. Then in December, 2011, the California Supreme Court upheld Assembly Bill x1 26 (“ABx1 26”) that dissolved all redevelopment agencies in the State as of February 1, 2012, the new dissolution date established by the Supreme Court. Effective June 27, 2012, Assembly Bill 1484 passed and a mended certain provisions of ABx1 26. One such provision, Section 34191.5, requires each Successor Agency to prepare and approve a Long-Range Property Management Plan (“LRPMP”) that addresses the disposition and use of the real properties of the former re development agency. Properties held by a successor agency cannot be disposed of until the State Department of Finance (“DOF”) has approved the LRPMP. The Creekside Building is ITEM NUMBER: SA C-1 DATE: 09/09/14 the one significant piece of real property owned by the Successor Agency and has been approved for disposal in the LRPMP. On July 9, 2013, the Successor Agency approved the LRPMP. It was approved 9 days later by the Oversight Board. On January 17, 2014, the Successor Agency received a response from the DOF, giving the final approval of the Long-Range Property Management Plan. In preparation for disposal, the Successor Agency entered into contract with Rosenow Spevacek Group (“RSG”) to conduct a market analysis and explore a range of potential development options to maximize value of the property. RSG has completed the market analysis, identified feasible reuse and development options for the property in order to identify potential buyers, and recommended a marketing plan to target appropriate buyers under the development options. RSG identified three financially feasible development options consisting of 1) office use for 100% of the building, 2) mixed used of office space and indoor recreational use, and 3) mixed use of office space and a public marketplace concept. Option 1 is the most conservative option, resulting in the highest initial development profit but will likely provide few economic development benefits , limited property value enhancements, and would likely not bring additional visitors to the City. Option 2 provides a more modest initial development profit, but may stimulate limited economic development benefits and provide moderate property value enhancements. It is not likely that the indoor recreational use will attract visitors from outside the City. Option 3 creates the greatest potential for foot traffic and tourist visitation , has the most significant effect on property values, and would have ripple effects on local economic development. Development of this Option would set the City apart as the only community on the Central Coast with this type of retail use. The public marketplace concept is a relatively new retail trend where a large building houses independent retailers under one roof. With a large number and variety of specialty shops, the publi c marketplace provides unique, local business offerings that cannot be found anywhere else in the region. This option does indicate the lowest initial level of profit due to high costs of modifying the building for retail use, but offers the highest value overall. RSG recommends that a qualified real estate broker with proven experience and expertise with office and retail properties be retained after a public request for qualifications (“RFQ”) process is followed. The RFQ would provide an additional commission incentive to the selected broker for the successful sale to a progressive and creative property owner who would improve the Property under Option s 2 or 3, due to the potential to more fully maximize value with the later options . The qualifications of all brokers will be reviewed by City staff and the Successor Agency would recommend one broker to the Oversight Board for approval. ITEM NUMBER: SA C-1 DATE: 09/09/14 FISCAL IMPACT: The costs of hiring a broker are included in costs of real property disposal on the ROPS 14-15A. ATTACHMENTS: 1. Draft Resolution 2. RSG Property Disposition and Marketing Plan ITEM NUMBER: SA C-1 DATE: 09/09/14 ATTACHMENT: 1 DRAFT RESOLUTION RESOLUTION OF THE SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF ATASCADERO APPROVING A PROPERTY DISPOSITION AND MARKETING PLAN FOR THE CREEKSIDE BUILDING LOCATED AT 6907 EL CAMINO REAL, ATASCADERO WHEREAS, the Successor Agency is a public body corporate and politic, organized and operating under Parts 1.8 and 1.85 of Division 24 of the California Health and Safety Code, and the successor for the former Community Redevelopment Agency of the City of Atascadero (former Agency) that was previously a community redevelopment agency organized and existing pursuant to the Community Redevelopment Law, Health and Safety Code Section 33000, et seq. (“CRL”); and WHEREAS, the former Community Redevelopment Agency became the owner of real property located at 6907 El Camino Real, Atascadero, California; and WHEREAS, ABx1 26 dissolved the Community Redevelopment Agency as of February 1, 2012; and WHEREAS, Health and Safety Code Section 34191.5 requires each Successor Agency to prepare and approve a Long-Range Property Management Plan (“LRPMP”) that addresses the disposition and use of the real properties of the former Community Redevelopment Agency; and WHEREAS, properties held by a Successor Agency cannot be disposed of until the State Department of Finance (“DOF”) has approved the LRPMP; and WHEREAS, the DOF approved the LRPMP of the Successor Agency per a letter dated January 17, 2014; and WHEREAS, the Successor Agency entered into a contract with Rosenow Spevacek Group (“RSG”) to conduct a market analysis and explore a range of potential development options to maximize value of the property; and WHEREAS, RSG identified the top three financially feasible development options; and WHEREAS, RSG recommends that a qualified real estate broker with proven experience and expertise with office and retail properties be retained after a public request for qualifications (“RFQ”) process is followed; NOW, THEREFORE, BE IT RESOLVED, by the Successor Agency of the Community Redevelopment Agency of Atascadero: ITEM NUMBER: SA C-1 DATE: 09/09/14 ATTACHMENT: 1 Section 1. The Successor Agency Board hereby approves the Property Disposition and Marketing Plan for the property known as the Creekside Building and located at 6907 El Camino Real, Atascadero, California. Section 2. The Successor Agency Executive Director or his or her designee is authorized to issue a public request for qualifications (“RFQ”) for a qualified real estate broker with proven experience and expertise with office and retail properties. Section 3. The qualifications of all brokers shall be reviewed by City staff and the Successor Agency shall recommend one broker to the Oversight Board for approval. PASSED AND ADOPTED at a regular meeting of the Successor Agency Board held on the 9th day of September, 2014. On motion by _______ and seconded by ___________, the foregoing Resolution is hereby adopted in its entirety on the following roll call vote: AYES: NOES: ABSENT: ADOPTED: SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT AGENCY OF ATASCADERO By: Tom O’Malley, Mayor ATTEST: Marcia McClure Torgerson, C.M.C., City Clerk APPROVED AS TO FORM: ____________________________________ Brian Pierik, City Attorney ITEM NUMBER: SA C-1 DATE: 09/09/14 ATTACHMENT: 2 Property Disposition and Marketing Plan Hitta Mosesman, Principal Dmitry Galkin, Analyst RSG, Inc. August 29, 2014 hmosesman@webrsg.com 1 Property Disposition and Marketing Plan July 31, 2014 Contents CONTENTS ............................................................................................................................................................. 1 EXECUTIVE SUMMARY ........................................................................................................................................... 2 DEVELOPMENT ALTERNATIVES .......................................................................................................................................... 2 Alternative #1 - 100% of Building as Office (Including Medical Office) ................................................................. 2 Alternative #2 - Approximately 21,000 Square Feet of Office and 10,000 Square Feet of Indoor Recreational Use (e.g., Gymnasium or a Laser Tag Center) ....................................................................................................... 3 Alternative #3 - Approximately 21,000 Square Feet for Office and Repurposing the Remaining 10,000 Square Feet for Public Marketplace Concept Similar to Oxbow Market in Napa.............................................................. 3 PROPERTY DISPOSITION/MARKETING PLAN ......................................................................................................................... 3 INTRODUCTION ..................................................................................................................................................... 4 LEGAL REQUIREMENTS .................................................................................................................................................... 4 THE PROPERTY............................................................................................................................................................... 4 Property Disposition and Marketing Plan ............................................................................................................. 4 MARKET ANALYSIS ......................................................................................................................................................... 5 Levels of Analysis .................................................................................................................................................. 5 Current Conditions ................................................................................................................................................ 6 OPPORTUNITIES ............................................................................................................................................................. 7 TAPESTRIES (GROUPS DEFINED BY LIFESTYLE AND SPENDING PATTERNS) ................................................................................... 9 REAL ESTATE AND DEVELOPMENT METRICS ........................................................................................................ 11 RETAIL TRENDS .................................................................................................................................................... 11 MARKETPLACE/PUBLIC MARKET ..................................................................................................................................... 11 PLACE-MAKING /RETAIL NEAR PUBLIC SPACES .................................................................................................................. 12 RESULTS AND CONCLUSIONS ........................................................................................................................................... 12 Alternative #1 – 100% Office ............................................................................................................................... 13 Alternative #2 – 21,000 Square Feet Office/10,000 Square Feet Indoor Recreation .......................................... 13 Alternative #3 – 21,000 Square Feet Office/10,000 Square Feet Public Marketplace ........................................ 13 DEVELOPMENT FEASIBILITY ANALYSIS ................................................................................................................. 14 OFFICE AND MARKETPLACE ............................................................................................................................................ 14 OFFICE AND INDOOR RECREATION ................................................................................................................................... 15 OFFICE ....................................................................................................................................................................... 16 PROPERTY DISPOSITION/MARKETING PLAN ........................................................................................................ 17 APPENDIX 1 ......................................................................................................................................................... 18 CASE STUDIES .............................................................................................................................................................. 18 2 Property Disposition and Marketing Plan July 31, 2014 Executive Summary Pursuant to the requirements of Assembly Bills x1 26 and 1484 (“Redevelopment Dissolution Law”), the City of Atascadero Successor Agency (“Successor Agency”) seeks to dispose of the 31,000 square foot former City Hall building, located at 6907 El Camino Real in downtown Atascadero (“Property”). The property is currently improved as office space, with a large portion of the structure (approximately 10,000 square feet) as a large open room that was previously the City Council chambers. The Property is a relatively high- value property. It is the Successor Agency’s intent to adhere to the requirements of the Redevelopment Dissolution Law by yielding the maximum possible value for all taxing entities. The Long Range Property Management Plan (“LRPMP”) was approved by the State Department of Finance (“DOF”) earlier this year. Development Alternatives Prior to embarking on the property disposition process, the Successor Agency seeks to understand the value of the Property in the current development and real estate market. To that end, RSG was retained to conduct a market analysis, work with the City of Atascadero (“City”) staff to explore a range of potential development options, and prepare a Property Disposition and Marketing Plan providing feasible development options to determine the sales value and a marketing approach for the disposition of the Property. This Plan presents a range of three (3) conceptual reuse options that were developed to estimate the potential sales value of the building. The analysis presented in this Plan indicates that the best reuse options for the highest overall value have more risk and costs for a potential buyer. Consequently, the Agency should consider flexible pricing for certain desirable uses and an incentive program for the broker to find the "right" buyer, even if it results in a reduced sales price. It is important to note that the potential buyer could consider other options not included in this Plan for the Property. More specifically, the three (3) financially feasible development options include the following: Alternative #1 - 100% of Building as Office (Including Medical Office) • This alternative is the most conservative option. • Highest resulting initial development profit according to a pro forma analysis. • However, this alternative would likely provide few economic development benefits and would not bring additional visitors to the City. 3 Property Disposition and Marketing Plan July 31, 2014 Alternative #2 - Approximately 21,000 Square Feet of Office and 10,000 Square Feet of Indoor Recreational Use (e.g., Gymnasium or a Laser Tag Center) • Pro forma analysis indicates some initial development profit, but may spur limited economic development benefit as it is unlikely that the indoor recreational use will attract visitors from outside of the City. Alternative #3 - Approximately 21,000 Square Feet for Office and Repurposing the Remaining 10,000 Square Feet for Public Marketplace Concept Similar to Oxbow Market in Napa • Creates the greatest potential for foot traffic and tourist visitation and would have catalytic ripple effects on local economic development. • Would set the City apart as the only community with this type of retail use in San Luis Obispo County and would be a regional draw that would likely capture a good share of the tourism from Paso Robles and the Central Coast area. • Pro forma analysis indicates the lowest initial level of profit (due to relatively high costs to modify the building for retail use), but it is important to note that the public marketplace concept is a very new and emerging retail trend. As a result, very little development cost information is available to date. True development costs for this specific retail concept could be lower than for general retail. The analysis of developer profit in these scenarios shows that the most beneficial uses to the community, Alternatives #3 and #2 (i.e., the public market and indoor recreational uses combined with office) would likely result in less developer profit. This is because of the relatively high initial costs to convert or modify the entire building for either retail or recreational uses (i.e., ceiling removal, plumbing improvements, the moving of walls, etc.) causes the exclusive use of the building to be financially infeasible. The initial costs of improving the property for Alternative #1 (100% office) are lower as major modification would not be needed. Ultimately, the maximum value is achieved through the options that have more risk and costs for a prospective buyer. Consequently, the Agency should consider flexible pricing for certain desirable uses to enhance the potential for meeting the goal of greatest value. Property Disposition/Marketing Plan It is recommended that a qualified real estate broker with proven experience and expertise with office and retail properties be retained after a public request for qualifications (“RFQ”) process is followed. The RFQ would provide an additional commission incentive to the selected broker for the successful sale to a progressive and creative property owner who would improve the Property under Alternatives #2 or #3. The qualifications of all brokers will be reviewed by City staff and the Successor Agency would recommend one broker to the Oversight Board for their confirmation or approval. 4 Property Disposition and Marketing Plan July 31, 2014 Introduction Legal Requirements As part of the requirements under Redevelopment Dissolution Law, the Successor Agency prepared and submitted an LRPMP to DOF that prescribes how the Successor Agency will dispose of its real property in accordance with the Redevelopment Dissolution Law. The LRPMP was subsequently approved by DOF on January 17, 2014. The most valuable property in the LRPMP, Asset #1, is the site and building located at 6907 El Camino Real. Previously used as a bowling alley and temporary City Hall, this property represents an attractive reuse opportunity to incorporate a use that will increase visitors and foot traffic in the downtown area and encourage further economic development in Atascadero. The LRPMP calls for the Successor Agency to sell the property. In order to maximize value, as required by Assembly Bill x1 26, a market and development feasibility analysis that identifies alternatives that will inform the sale process and guide the marketing and disposition of the property to the appropriate audience. The Property The Property is located in the heart of the City’s Downtown Revitalization Plan Area, between the City Hall Rotunda and Colony Square, an important downtown commercial center. The Property at 6907 El Camino Real represents the best current opportunity for the City to enhance downtown activity for economic benefits as it is within walking distance of City Hall, the Famous Sunken Gardens, Atascadero Historical Museum, and the city’s largest modern commercial center and it contains more than 30,000 square feet of floor space in an architecturally interesting building, The Property faces El Camino Real and U.S. Route 101, the latter being the modern highway that follows the route of the former, the main trail used during the time of Spanish rule. El Camino Real, more locally oriented, is the primary commercial district in the City, with retail stores, restaurants, and visitor-serving uses located alongside its stretch. On a broader level, U.S. Route 101 connects the City to other regional destinations such as Paso Robles and San Luis Obispo, as well as California’s large metropolitan areas of San Jose, San Francisco, Santa Barbara, and Los Angeles. The nearest intersection is with State Route 41, which connects the City to Morro Bay to the southwest and to Fresno to the northeast. Property Disposition and Marketing Plan This Property Disposition and Marketing Plan (“Plan”) provides an analysis of the local market and a development feasibility analysis that identify the potential feasible future uses of the property from the perspective of the development community. 5 Property Disposition and Marketing Plan July 31, 2014 More specifically, the market analysis provides the following information:  Strongest business sectors currently in the area (an area encompassing a 15-minute drive time presents opportunities for business growth and is therefore the primary focus area covered in the market analysis);  Gaps in retail supply (i.e., opportunities where demand for goods and services is not being met currently);  Demographic, socioeconomic, and spending patterns of local households; and  Potential lease rates. The development feasibility analysis identifies several existing office, retail and recreation opportunities, notwithstanding the potential of future retail needs that will arise with the full development of the Colony project (particularly with residential uses). Market Analysis Levels of Analysis The first step in market analysis is to identify geographic areas of analysis, or trade market areas to best analyze and understand market data. These areas are often defined by standard geographies such as the City of Atascadero, San Luis Obispo County, and the State of California, but can also be defined as “trade areas” that are based on drive times for consumers (i.e., how long it takes a consumer to drive from their location to a business). Using 5-minute, 10-minute, and 15-minute drive times from the point of interest (shown in Figure 1) is most appropriate and widely-accepted for basic retail analysis. Many studies have shown that the average person in a retail market will:  Drive approximately 5 minutes for groceries, drug stores, and fast food.  Drive approximately 10 minutes for clothing, gifts, crafts, and full-service restaurants.  Drive approximately 15 minutes for a regional mall, car purchases, furniture, specialty building supplies, and unique dining experiences. A 5-minute drive time from the Property would include approximately one-half of the City and County unincorporated area (“5-Minute Drive Time Trade Area”). A 10-minute drive time from the Property includes most of the cities of Atascadero and Templeton, the census designated place of Garden Farms, and County unincorporated area (“10-Minute Drive Time Trade Area”). Finally, a 15-minute drive time includes the cities of all of the cities of Atascadero and Templeton, one-half of Paso Robles, the census designated places of Garden Farms and Santa Margarita and County unincorporated area (“15-Minute Drive Time Trade Area”). Figure 1 on the following page illustrates the 5-Minute, 10-Minute and 15-Minute Drive Time Trade Areas. 6 Property Disposition and Marketing Plan July 31, 2014 Figure 1 - Map of the City of Atascadero and 5-Minute, 10-Minute, and 15-Minute Drive Time Trade Areas from the Property Beyond these distances, consumers can usually find retailers or restaurants located more conveniently elsewhere. Two or more of these trade areas can also be compared to each other to provide a sense of relative conditions and opportunities. Current Conditions RSG used data from Environmental Systems Research Institute (ESRI)—which gathers and summarizes data from sources such as Dun & Bradstreet, the American Community Surveys, and the Bureau of Labor Statistics—to analyze current demographic and socioeconomic conditions. Examining the ESRI data for the 5-Minute Drive Time Trade Area (as shown on Figure 1) indicates that there are limited opportunities for retail business growth, with the exception of clothing and general merchandise. Given the proposal for Walmart in the City currently, which would considerably fill this area of opportunity, additional retail opportunities do not appear promising to attract consumers within the 5-Minute Drive Time Trade Area. However, in examining the 10-Minute and particularly the 15- City of Atascadero Source: ESRI, 2014. 7 Property Disposition and Marketing Plan July 31, 2014 Minute Drive Time Trade Area, ESRI data indicates potential for retail business growth that would draw from an area larger than just the City of Atascadero. Given the City’s population and current retail vacancies, drawing consumers from the region represents the largest opportunity for growth. As detailed below, the 15-Minute Drive Time Trade Area is the area with identified opportunities for retail and office growth. Unless otherwise noted, the analysis below pertains to the 15-Minute Drive Time Trade Area rather than only the City boundaries. Opportunities In order to identify opportunities for growth within the City (as opposed to the trade areas referenced above), the level of concentration of different industries was measured utilizing ESRI data to determine the “location quotient” for all identified industries. A location quotient measures how concentrated an industry category or subcategory is for one area (the focus area) relative to another area (the context area). In RSG’s analysis, as shown in Figure 2, the focus area is the City of Atascadero (not one of the trade areas) and the context area it is compared to is the 15-Minute Drive Time Trade Area. Figure 2 provides the City’s location quotient for each industry category based on the number of businesses in that category. The definition of a location quotient dictates that a value greater than 1 indicates that the industry has a high concentration level. A value equal to 1 indicates that the concentration of the industry in the focus area is relatively equal to that in the context area. A value less than 1 indicates that the concentration of the industry is a relatively weak as compared to the focus area. Figure 2 – City of Atascadero vs. 15-Minute Drive Time Trade Area Business Location Quotients 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 Management of Companies Construction Educational Services Personal Services Retail Trade Administrative Services Professional Services Information Manufacturing Health Care & Social Assistance Arts, Entertainment & Recreation Finance & Insurance Public Administration Real Estate, Rental & Leasing Utilities Accommodation & Food Services Transportation & Warehousing Wholesale Trade Mining Agriculture and Related Industries Source: Dun & Bradstreet via ESRI, 2014. 8 Property Disposition and Marketing Plan July 31, 2014 As shown on the previous page, the data indicates that the following eight industries have high concentration levels in the City that make up approximately 60% of all businesses in the City: 1. Management of Companies 2. Construction 3. Educational Services 4. Personal Services 5. Retail Trade 6. Administrative Services 7. Professional Services 8. Information It is important to note that the industries represented by numbers 1, 3, 6, 7 and 8 are five industries that frequently use significant amounts of dedicated office space and represent more than 26% of businesses in the City. Construction, Personal Services and Retail make up an additional 35% of businesses in the City. Since businesses are often drawn to areas where their industry is already strong so they can learn from their competitors or access the same resources (e.g., the way that information technology companies are attracted to Silicon Valley), these industries offer the best opportunities for the reuse of the site . Because Retail Trade is identified as a concentrated industry in the City, Figure 3 focuses on the relationship between supply and demand for certain retail sub-industries that could fit within the project site. Supply is an estimate of retail sales calculated by ESRI utilizing data from Census of Retail Trade, Dun and Bradstreet and the Bureau of Labor Statistics for, businesses currently located in the area. Demand is the amount expected to be spent by consumers in the retail market. The ESRI data presented in Figure 3 covers broad areas rather than specific retail sub-categories and indicates that there is a demand for clothing, general merchandise and furniture and home furnishings within the 15-Minute Drive Time Trade Area, representing retail sales leakage. According to ESRI, retail sales leakage “in an area represents a condition where a market's supply is less than the demand. That is, retailers outside the market area are fulfilling the demand for retail products; therefore, demand is leaking out of the trade area.” Figure 3 - Retail Opportunities, 15-minute Drive Time Area In addition to the numbers shown in Figure 3 above in the major retail categories, ESRI data also indicates that there are gaps in two subcategories; Full-Service Restaurants (e.g., diners and family restaurants) and Grocery Stores. Retail Industry Sales Opportunity Clothing & Clothing Accessories Stores $18,231,339 General Merchandise Stores $7,931,337 Furniture & Home Furnishings Stores $666,115 Source: ESRI and Dun & Bradstreet, 2013. 9 Property Disposition and Marketing Plan July 31, 2014 Tapestries (Groups Defined by Lifestyle and Spending Patterns) ESRI developed a system of tapestry segments as a way to categorize American households according to general characteristics that affect lifestyle and spending patterns.  Who are your best customers and prospects?  What do they buy?  Where can you find more like them?  How can you reach them? Tapestry segmentation is important because it provides a manner to predict and estimate spending patterns for goods and services, Figure 4 presents key characteristics of the five most common tapestry segments in the 15-Minute Drive Time Trade Area that is the focus of this Plan due to the opportunities presented for business growth. The City as a whole has a younger population, but as the 15 -Minute Drive Time Trade Area is the focus of the market analysis due to opportunities, the population of this trade area is analyzed below. Figure 4 – Top Five Tapestry Segments within a 15-minute Drive Time Radius These five tapestries compose 63% of the area’s households. Considering the most common tapestry segments in the area offers a view into the character of the specific population of an area. Compared to California as a whole, these five tapestry segments feature:  Smaller household sizes because children are less prevalent.  A higher median age with the exception of the Bright Young Professionals and Middleburg segments.  Median incomes are either approximately equal to or much greater than the statewide median. Tapestry Segment Share of Households Average Household Size Median Age Median Household Income Other Characteristics The Great Outdoors 21%2.43 46 53,000$ Empty nesters living an active but modest lifestyle, prefer domestic travel over trips abroad. Green Acres 13%2.69 43 72,000$ Avid do-it-yourselfers who spend a lot of time maintaining and remodeling their homes, gardening, and engaged in outdoor recreational activities. Bright Young Professionals 11%2.40 32 50,000$ Young, educated, working professionals who are physically active and up on the latest technology. Exurbanites 9%2.48 50 98,000$ Approaching retirement, these residents are active in their communities, generous in their donations, and seasoned travelers. Middleburg 8%2.73 35 55,000$ Family-oriented consumers, thrifty but willing to carry some debt and invest in their futures, they prefer to buy American and travel in the US. California 2.91 36 58,469$ Source: ESRI, 2014. 10 Property Disposition and Marketing Plan July 31, 2014  Most of the households enjoy domestic travel, are physically active, and significantly invest in their personal and communities’ future. By utilizing the tapestry analysis of the 15-Minute Drive Time Trade Area, the appropriate retail tenants or other users may be tailored to bring appropriate services to the community and foster economic prosperity in the City. The characteristics of the tapestry segments, as shown in Figure 4, are consistent with the retail sales leakage areas identified in Figure 3. For example, the “Green Acres” segment spends time and money remodeling and investing in their homes and furniture and home furniture stores and general merchandise stores show retail sales leakage. An indoor recreational space, meanwhile, would appeal to the many physically active residents in the Bright Young Professionals and Green Acres segments. Three of the five most common local tapestry segments show a median household income between $50,000 and $55,000. This statistic is likely to impact the City’s ability to attract credit tenants, the commercial tenants sufficiently large and financially strong to receive a rating from one of the three major credit agencies. By working with the broker community, the City can develop further discussion on socio-economic trends in the community, most importantly considering (a) retired residents do not have high incomes, but they may have wealth and (b) targeting niche retail that augments other endeavors such as recreationally oriented businesses or unique restaurants will attract tourists as well as residents. Moving from segments of the population to the population as a whole, Figure 5 provides greater insight on average household expenditures, particularly for expenditure categories related to tourism. Since the majority of regional households are expected to travel domestically, this presents an opportunity for the City to capture and use regional demand for local benefit. Figure 5 - Average Household Expenditures by Geographic Area $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 Entertainment and Recreation Travel Food Away from Home Alcoholic Beverages $37,938 $44,017 $42,607 $44,339 Identified amounts represent other non- housing expenditures $39,499 $40,567 $42,022 Source: Bureau of Labor Statistics via ESRI, 2013. 11 Property Disposition and Marketing Plan July 31, 2014 Moreover, as seen in Figure 5, households in the 10-minute drive time area and beyond spend more than households in the 5-minute drive time area. This suggests that a regionally and statewide-oriented development will have a better chance for success than a locally oriented project. One way to attract a broader base of consumers is by creating an experiential attraction, something that offers a unique shopping and dining experience. This kind of development is gaining popularity in the current market throughout California. Real Estate and Development Metrics The attraction of a developer willing to invest resources into redevelopment or reuse of the property depends on several key real estate metrics in the market. Using the North 101 corridor submarket as the area of analysis, Figure 6 provides average rents and vacancies for the potential uses of the project site based on data from CoStar, a real estate data aggregator. One-bedroom apartments provide the highest rents per square foot compared to the other uses under consideration. Ranging between $1.25 and $1.35 per square foot, the rents for 2-bedroom apartments, retail space, and office space are respectable for the region. The rental residential market also has a very low vacancy at 0.5%. The vacancies for retail and office use, 5.4% and 3.8% respectively, are also reasonably low. Figure 6 - Real Estate Metrics, North 101 Corridor Submarket These metrics favor residential use of the property. The property’s zoning as Downtown Commercial seeks to encourage development of first-floor retail, restaurant, or office uses coupled with residential uses on upper floors. This kind of project, however, would require demolition of the existing structure and construction of a new building. While this is a worthwhile consideration and would increase the likelihood of attaining higher rents, it would also increase the costs of redevelopment to the extent of making the project infeasible. Reuse of the property for office space would preserve the existing structure in keeping with the architectural character of the nearby City Hall Rotunda and would keep the costs of revitalizing the property low. Retail Trends Marketplace/Public Market As economic development and real estate consultants to cities and private developers, RSG stays abreast of all emerging and established retail trends and opportunities throughout California. One of the most successful emerging retail trends today is the “marketplace” concept, a large retail building that houses up to 50 independent retailers under one roof, including clothing, home and garden, lifestyle Use Type Rent per square foot Vacancy Rate Rent Type 1-bedroom apartments 1.50$ Gross of operations 2-bedroom apartments 1.25$ Gross of operations Retail 1.35$ 5.4%Net of operations Office 1.25$ 3.8%Net of operations 0.5% Source: CoStar, July 2014 12 Property Disposition and Marketing Plan July 31, 2014 brands, artwork, restaurants, gourmet food, coffee house, wine and craft beer, and cooking schools. In two examples in Orange County that will open in 2014, the District in Tustin (i.e., the former closed Tustin Marine base) and the 28,000 square foot space in the Kaleidoscope Center in Mission Viejo repurposed existing structures to open Union Markets with these offerings. There are 3 of these urban markets in Orange County currently, including the OC Mix in Costa Mesa. All of these markets, including one in Las Vegas, were created by the same husband and wife team from Orange County. One of the largest factors of the success of these urban markets is the relatively low lease cost for each vendor/retailer. By occupying small spaces, tenants can afford to pay higher costs per square foot because the total rent is still considerably less than they would face in a traditional retail center. With such a large number and variety of specialty shops, these urban markets provide unique yet broad local business offerings that cannot be found anywhere else in the region. These concepts have shown to generate considerable foot traffic in all existing areas. Place-Making /Retail Near Public Spaces Another retail trend is “place-making” and creating retail centers adjacent to public spaces. New research from Herman Kok and Peter Trimp of Netherlands-based Multi Development, whose findings were featured in a recent International Council of Shopping Centers publication on retail property, indicates that the success of retailers hinges on fusing public space and retail development. The authors state that good retail design creates a “third place,” an area people like to visit and come back to frequently. When done properly, retail-led urban development can even serve this role when the shops are closed. Beyond offering their wares, retail developments that include some form of open space can serve a social and cultural purpose in that people want to spend time there. An attractive space adjacent to a retail development helps create identity that others want to be a part of and want to help preserve, Kok and Trimp note. Adding landscaping on the site would contribute to the creation of inviting public space. Results and Conclusions The business location quotient analysis shows that there are relatively significant numbers of business in the City of Atascadero requiring retail and office space. In the retail gap analysis, some broad and subcategories of retail for which outstanding demand exists. In the event that retail will be featured in the eventual development of the site, this analysis indicates that the best options for retail include Clothing, General Merchandise, Furniture and Home Furnishing, and Grocery stores, as well as Full- Service Restaurants. Although a Walmart is proposed to locate in the City, the target retail consumer segment will be different than that of the retail component presented under Alternative #3 of this Plan. Looking at the demographics for the 15-Minute Drive Time Trade Area reveals a larger somewhat older population (as compared to the City alone) with smaller households (i.e., fewer persons per household) and moderate to large incomes, as well as an interest in domestic travel. Data on household spending indicates that a more regional attraction will have greater chances for success. This Plan also identifies a popular current trend in the development of the public marketplace concept, an approach that not only creates a concentration of retailers, but also provides a unique shopping experience. 13 Property Disposition and Marketing Plan July 31, 2014 These data and trends, coupled with the estimated costs of redevelopment, lend themselves to three strategies for developing the project site that correspond to three feasible development alternatives. Alternatives #2 and #3 would provide the highest level of community benefit in terms of the services provided and economic development momentum for the City. Alternative #3 in particular is a significant trend in economic development and would set the City apart from others in the region as it would be the first of its kind in San Luis Obispo County. While Alternatives #2 and #3 appear to be the best reuse options to obtain the highest overall value, they also have more risk and costs for a potential buyer. Consequently, the Successor Agency should consider flexible pricing for certain desirable uses and an incentive program for the broker to find the "right" buyer, even if it results in a reduced sales price. It should also be noted that the potential buyer for the property may consider other development options not covered under the three alternatives outlined below. Alternative #1 – 100% Office The first strategy is the most conservative option and calls for upgrades to the entire existing building’s current interior improvements to attract office users seeking a higher quality of office space. This alternative has the least potential to lead to additional development since it will be minimally used outside of business hours and also the least amount of risk among the three scenarios. The initial developer profit in this scenario, based on a low- and high-cost range, is estimated at between $600,000 and $1.5 million. Alternative #2 – 21,000 Square Feet Office/10,000 Square Feet Indoor Recreation The second strategy is a conservative but somewhat middle-ground approach in terms of risk and reward. The scenario of allocating part of the building for indoor recreational use and upgrading the rest of the building for office use would likely draw City residents to the Property but has limited potential in encouraging further economic development in the downtown area. The initial developer profit for this scenario is between $100,000 and $1,000,000. Alternative #3 – 21,000 Square Feet Office/10,000 Square Feet Public Marketplace The third strategy presents a slightly higher risk than the other two, but involves a bold attempt to activate the City’s downtown and catalyze additional development. This strategy involves a scenario repurposing part of the building for a public marketplace concept and upgrading the remainder of the building for office use. It is important to note that true costs for the public marketplace option were difficult to estimate as the concept is very new and does not have established cost parameters according to industry standard organizations such as Marshall and Swift. Using some general assumptions for retail development from one developer source, the initial developer profit could be approximately $650,000. However, it is important to consider the economic development benefits of this option that extend beyond revenues generated directly from the Property. The fact that the public marketplace would be a regional draw, attracting visitors from Paso Robles and other Central Coast cities would have the indirect benefit of increasing visitors to Atascadero’s entire downtown area, benefiting surrounding businesses as well. Alternatives #1 and #2 do not provide these City- wide benefits to other local businesses. 14 Property Disposition and Marketing Plan July 31, 2014 Alternative #1, office use only, while less ambitious and catalytic, would require fewer and less expensive changes to the property and is therefore the most feasible of the options considered in this Plan. Some interior renovations would make the property more marketable to potential office occupants. RSG found that the office scenario has the relatively highest initial profit of the three options being considered under the current market conditions. Alternative #2 would likely draw City residents to the recreation use, but does not represent a regional draw that would attract foot traffic to the downtown area. However, with the appropriate property owner and development team, the office and marketplace scenario is financially realistic and would activate the City’s downtown area, attracting local and regional consumers as well as tourists. This scenario would also provide the greatest local fiscal benefits due to the sales tax revenue from the marketplace’s tenants. RSG recommends that the Successor Agency encourage Alternative #3, the office and marketplace scenario, by following the Property Disposition and Marketing Plan outlined on page 17 of this Plan. Development Feasibility Analysis RSG analyzed each of the three scenarios to determine their feasibility under current market conditions. Development costs were estimated as a range. This section summarizes the assumptions and results of that analysis. Office and Marketplace  10,000 square feet of marketplace located at the former Council chambers.  Remainder of building upgraded for offices; 40% of office space allocated to medical office use.  Addition of 22 automobile parking spaces and 5 bicycle racks with room for 5 bicycles each.  15,000 square feet of new landscaping.  Complicated project increases developer fee and contingency costs.  24-month timeline.  With low-cost estimate, project is feasible with a moderate buffer for higher costs. 15 Property Disposition and Marketing Plan July 31, 2014 Office and Indoor Recreation  10,000 square feet of indoor recreational space located at the former Council chambers.  Remainder of building upgraded for offices; 40% of office space allocated to medical office use.  Addition of 47 automobile parking spaces and 5 bicycle racks with room for 5 bicycles each.  15,000 square feet of new landscaping.  Complicated project increases developer fee and contingency costs.  24-month timeline.  Project is feasible with low-cost and high-cost estimates, with a large buffer for the former and a small buffer for the latter. 16 Property Disposition and Marketing Plan July 31, 2014 Office  Entire building upgraded for office use; 40% of office space allocated to medical office use.  Addition of 31 automobile parking spaces and 5 bicycle racks with room for 5 bicycles each.  15,000 square feet of new landscaping.  Straightforward project decreases developer fee and contingency costs.  20-month timeline, due to less complexity than other two scenarios.  Project is feasible with low-cost and high-cost estimates, with a very large buffer for the former and a moderate buffer for the latter. 17 Property Disposition and Marketing Plan July 31, 2014 Property Disposition/Marketing Plan While the Redevelopment Dissolution Law requires Successor Agencies to dispose of all property “expeditiously and in a manner aimed at maximizing value,” it does not specify disposition methods. Figure 7 identifies and describes several methods that are available for former redevelopment agency- owned property. However, given that a market and development feasibility analysis has been prepared by RSG that identifies the feasible development options for the Property, and that the Property is a relatively high-value property valued in excess of $1 million, the majority of the available disposition methods below are not appropriate in this case. For example, a request for proposals from developers is unnecessary as the development options are known and this process will be lengthy. In addition, an auction would be more appropriate for a low-value property and doing so would not address the legal requirement to maximize value. Figure 7 - Disposition Methods The recommended method of disposition given the nature of the property and the analyses presented in this Plan would be to issue and RFQ to retain a qualified broker after a transparent selection process. The RFQ should contain a commission incentive for the selected broker upon close of escrow to a progressive and creative buyer who will develop the Property under either Alternative #2 or #3, as these alternatives will maximize the value and provide City-wide economic development benefits. The qualifications of all brokers will be reviewed by City staff and the Successor Agency would recommend one broker to the Oversight Board for their confirmation or approval. It is also recommended that the selected broker and City staff engage the adjacent property owner and developer of the Colony Square project in discussions to assess the level of interest in folding the selected development alternative into the existing retail center. If a buyer is found who wishes to develop the property under Alternative #3, RSG also recommends that City staff reach out to the creators and property owners of the few existing public markets such as those of Oxbow and OC Mix to determine the level of interest. Other important steps would include talking to local businesses and brokers to define and collaboratively market available retail space to local artists, restaurateurs, retailers, wine makers, and craft beer brewers. Disposition Method Summary Maximizes Value in the Form of Targeted Sale Property offered for sale to specific potential buyer Development potential Broker Broker hired to find a buyer and arrange a sale Sale price Surplus Property Auction Property sold at an auction of government properties Sale price Private Auction Property sold at a privately coordinated auction Sale price Offering Memorandum Document prepared that summarizes property for sale Sale price Request for Proposals Document prepared that summarizes property and requests proposals for its use Development potential 18 Property Disposition and Marketing Plan July 31, 2014 Appendix 1 Case Studies Oxbow Market – Napa Oxbow is a 40,000 square-foot marketplace, which includes a scenic outdoor deck with seating along the Napa River, features a diverse tenant mixture of local food vendors, artisan cafes, and an organic produce outlet for local farms. Oxbow Public Market and its artisans and purveyors passionately support the concept of sustainable agriculture and local harvest—promoting a healthy environment and social and economic equity within the community. The Market has a commitment to the unique character, spirit, and content of the Public Market not only as a place to display and sell organic and/or sustainably-produced local crops, other regional specialties, and other high quality and unique food products, but also as a place that actively supports sustainable and organic farming practices, owner-operated businesses, local food producers, and the agricultural community of the Napa Valley and surrounding regions. OC Mix – Costa Mesa This 23,000 square-foot urban marketplace is filled with over 25 small retail shops, gourmet food, and drinks all under one roof. Its moniker is “fashion, food, and findings,” and it seeks to nurture small businesses and owner-operated shops, while advancing in the artisanal environment. This development has a modern, shop-from-your-neighbor feel and the opportunity to touch, taste, feel, see, and hear from its retailers. The project claims similarity to the Ferry Building in San Francisco and the Chelsea Market in New York City, but with a contemporary southern California aesthetic. The building features cement floors, reclaimed wood, and exposed ceilings. The majority of the shops are less than 250 square feet, giving rise to the power of the small business owner and the ability to present products and services in a unique, fresh new way. The Mix also features large common areas that can be transformed into event space. Events typically partner with the Mix operating team to produce shopping events, charity events, corporate events, and private concerts.