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Pacific Art League sells building to developer!

Original post made by Art Lover on Oct 8, 2007

What is going on at the Pacific Art League? Why is the 80 year old institution selling the building out from under the members? Why were the 2 surveys which showed majority of members wanted to keep the building ignored? What happened to the 2 million donated to help retrofit the building?

Who is the developer who intends to make a profit off of a friendly historic community organization? And why?

Find out more.

Comments (18)

Posted by Peter, a resident of Southgate
on Oct 8, 2007 at 4:21 pm

This story has been around since March: Web Link


Posted by Boo!, a resident of Another Palo Alto neighborhood
on Oct 8, 2007 at 7:04 pm

oh, please! more "big bad developers" tales. Save them for Halloween!


Posted by Not a halloween story, a resident of Monroe Park
on Oct 8, 2007 at 10:28 pm

If the developer really is John McNellis then it's not a Halloween story. He is the developer who just screwed the neighborhood around Alma Plaza. He was intransigent, sarcastic, and obstinate and succeeded with our developer-friendly City Council in putting in too much housing where a good shopping center was needed. I think he's building over 50 housing units there.
Big, bad, greedy sounds right.


Posted by Art Lover, a resident of Downtown North
on Oct 9, 2007 at 12:49 pm

Yes, the story was in the paper before. But what has not really come out is how much this is something sneaked over the members by a secretive board. It is very much coming off like a developer taking advantage of an art group.

They had 2 million to renovate, but burned through it on "studies". They brought in a person to raise grants, who has done nothing, while other smaller local art organizations have raised plenty.

Reasons such as handicap safe and earthquake proof and results of surveys are all made up to get us to their side.

All attempts by the members to get the word out or learn more about this are stopped. This is not some USA secret CIA project, or Enron vs shareholders. There is no reason all of this should be in secret, unless there is something to hide?


Posted by Vivian, a resident of Midtown
on Oct 9, 2007 at 1:16 pm

Not a halloween story--let's blame McNellis for the Alma Plaza issue--that is a stretch. Why don;t you blame the neighborhood people who were never satisfied with the size of the place when it was to be kept all retail. Also you can blame the person who pushed through the Charleston building moratorium and got the city council to include Alma Plaza in that. And finally you can blame the city council for not putting their foot down, telling the NIMBYists to back off and making a decision that would have kept Alma Plaza all retail.
As we have seen with the Hyatt and then Alma Plaza (Lucky/Albertsons)--large organizations only have so much patience when it comes to the PA process--we end up getting screwed by certain citizens and our ineffective City Council.


Posted by Art Lover with a Brain, a resident of Old Palo Alto
on Oct 9, 2007 at 7:36 pm

Who are these people who spread such rumors? If PAL has been sold, who is the buyer? When was the deal signed? How much did the building sell for?

That building is an accident waiting to happen. I would send my kids there for anything. I hope them make it safe. It means a lot to my family but not the way it's all rundown today.

[Portion removed by Palo Alto Online staff.]


Posted by Guernica, a resident of Menlo Park
on Oct 9, 2007 at 7:52 pm

I am a longtime member of Pacific Art League. I love the League. The League is not the building. It is people sharing their art. I've learned so much in my classes and even put some pieces in some fo the shows. I always to to First Fridays and I love the new high profile shows.

The staff works so hard but many times I see members and even teachers treating them with little or no respect. There's been a renaissance in the past couple of years and the energy is great except for these few, angry people who are always complaining and writting letters to stir things up. I don't want to keep opening my mailbox to see surveys and reports from 'Concerned Members.'

My guess is that there are many more of us who are just as concerned about the trouble a few people are causing with all there letters and emails. I don't want to get one more piece of mail from anyone other than the staff or the board. I trust them and I see how much they care about the future of Pacific Art League. It's so much more than an old building. It's a great place for art except for a few miserable people who are spoiling it for the rest of us.


Posted by Guernica, a resident of Menlo Park
on Oct 9, 2007 at 8:36 pm

I care about PAL.

I've been impressed by how much they've shared with all of us. I like the Palette Chat. I thought the letters from PAL explained everything very well.

This seems like a no brainer to me. Sell the top two floors, create a great gallery space and put all the classrooms under one roof.


Posted by artist, a resident of Downtown North
on Oct 11, 2007 at 11:06 pm

the building is not being sold, this is just a bunch of scare tactics

so why is it listed for sale?

kcunningham@ccarey.com

Web Link


Posted by Artist with business and common sense, a resident of Palo Alto Orchards
on Oct 12, 2007 at 12:50 am

Read the listing ... buyer retains ownership of first floor. This is no different that the information conveyed from management and the board in letters, emails, newsletters, conversation, town halls.

The trouble is that a handful of members and former members don't want change, even a change that makes great sense and thoughtfully addresses the needs of the members and visitors to PAL.


Posted by Rational PAL member, a resident of Menlo Park
on Oct 12, 2007 at 12:53 am

Another misleading message.

Address: 668 Ramona Street
Unit/Suite:
City: Palo Alto
Cross Street: Forest Avenue
Market Zone: Downtown Palo Alto
APN: 120-27-016
To Show: See Agent
Major Use: Office
Comments:
Call agents for pricing details; Prime downtown corner location; Possible bonus square footage based on historical building status, and potential seismic upgrades; current owner to retain ground floor condominium interest in property.

"CURRENT OWNER TO RETAIN GROUND FLOOR CONDOMINIUM INTEREST IN PROPERTY" - How hard is that to understand?????????????????


Posted by Sane artist, a resident of Duveneck/St. Francis
on Oct 12, 2007 at 7:49 pm

Art Lover doth speak with forked tongue.


Posted by donnasue jacobi, a resident of Menlo Park
on Oct 24, 2007 at 12:48 pm

Guernica's remark about getting lots of letters is not true. The fact is all members by our own Bylaws are allowed a member list which is to be used for communication. However they have incorporated a new rule where by violating the Bylaws is OK and therefore we have not been able to contact other members. So rest assured no one has been mailing out "lots of letters" to unsuspecting members. if we could, you'd have more facts. So no need to worry about lots of letters.

The sweet deal is that the building itself will be sold and PAL gets to buy back their downstairs space but we don't know what that will cost. Sweet for a developer to purchase an historic place, gets lots of square footage to add on, and he gets a return on his investment by reselling the bottom floor back. It's so lovely that the community subsidizes local businesses.


Posted by Just the Facts, a resident of Downtown North
on Oct 25, 2007 at 11:02 am

It is a sweet deal - good for the members, good for the community, and yes, good for the developer. It's a win/win.

PAL gets over $3M net AND ownership of the bottom floor. PAL pays nothing for the bottom floor. PAL gets over $3M net, clear along with title to the ground floor condominium. PAL does NOT pay the developer. How hard is this to understand?!

The community is not subsidizing local businesses. [Portion removed by Palo Alto Online staff.]


Posted by Just the Facts, a resident of Downtown North
on Oct 25, 2007 at 11:03 am

FAQS About Art League Building Plans
October 18, 2007
1.
Why is Pacific Art League (PAL) partnering to change the building?
The needs of PAL's membership, staff, students and visitors have evolved over time. So that PAL will remain one of the premier arts organization in our community, PAL's Board of Directors has spent a significant amount of time studying ways to provide the best possible experience for users of PAL facilities. The Ramona Street Building and the rented studio space on Alma do not adequately meet reasonable expectations regarding parking, lighting, temperature control, and safety for PAL members and property. The single exception to this statement is the wonderful visibility of the first floor gallery and Studio One on Ramona Street.
Because the membership has made it clear that maintaining a downtown location is essential, the League has explored a variety of scenarios to create or obtain improved downtown space. After a significant study of multiple alternatives, PAL concluded that it could not, on its own, finance the cost of retrofitting or rebuilding the Ramona Street property. Similarly, the possibility of purchasing other finished space in downtown would have been cost prohibitive and the visibility of the first floor spaces could not have been duplicated. Some of the key facts are as follows:
•
The building is one of the few unreinforced masonry buildings left in downtown Palo Alto. It is constructed of hollow clay brick, one of the most vulnerable materials in an earthquake zone. In some municipalities throughout California, the local government has made upgrading such facilities mandatory.
•
An upgrade to correct the building's problems, including ADA compliance, restroom deficiencies, heating and air conditioning systems, a needed elevator as well as stairway
reinforcement, will trigger the requirement of a cost-prohibitive full upgrade of the building.
•
One substantial unrealized asset of PAL's is the ability to add significant additional square footage to the building under the Palo Alto Municipal Code for historic preservation as well as seismic and accessibility upgrades, even if PAL does not have the capacity to leverage this asset on its own. The essential function of the Ramona property for PAL is to provide a highly visible downtown gallery space, which will be dramatically improved under the proposed plan.
•
Space for administration and improved class space can be leased or acquired in surrounding areas at a greatly reduced rate.
2.
What are the terms of the offer?
After balancing all of the competing factors listed above, PAL's board came to the conclusion it should look for a strategic partner to improve the Ramona Street property. PAL envisioned creating a pair of condominium spaces on the property with the League retaining ownership of the entire first floor, while a third party pays a substantial amount of up-front money, improves the entire building and then takes ownership of the remainder of the building (including the untapped development rights of up to 5,000 additional square feet for historical preservation of the exterior as well as seismic and ADA upgrades to contemporary standards). Because of the desirability of the downtown location, there were several interested parties. While much of the negotiations must necessarily remain confidential, here are the key terms of the successful arrangement:
•
We will be partnering with Premier Properties and Sand Hill Property Company.
•
If approved, the purchase price to be paid to PAL upon closing is $3,400,000 (net of commissions to real estate brokers Cornish & Carey)
•
We expect the transaction to be completed no later than early 2008.
•
PAL will have ownership of 3,250 square feet of fully renovated and much more usefully configured space on the first floor of the building along the Ramona frontage.
•
PAL plans to use this space for an expanded and improved gallery and one classroom/exhibition space – Studio One.
•
PAL may occupy the building until the end of 2008, with supplemental provisions, if necessary, to pay below market rent thru June 2009 if necessary.
3.
How will PAL use the proceeds from the sale?
PAL intends to use approximately $2,500,000 of the proceeds to purchase and finish another larger facility for classes, a members' gallery and administrative offices. We are looking for a building with between 8,000 and 10,000 square feet within 10 miles of the Ramona site. Of course, selecting a site with improved parking and a convenient location will be of paramount importance. If the membership approves this visionary plan, then PAL will be well situated for another 85 years of growth with ownership of two up-to-date properties and an additional substantial deposit into our reserve account.
4.
What will happen to the downtown gallery during the interim?
PAL intends to make every effort to locate and lease a downtown gallery space during the construction period. The cost of downtown space is substantial and negotiating a short-term lease adds another layer of complication. PAL will have to be prepared to move quickly once an acceptable space is found. In the event that we cannot find additional space we will locate the gallery in the new facility until the Ramona site is ready for occupancy.
It is impossible to begin serious negotiations about leasing such space until the membership has approved the plan. The board will seek that approval at the annual membership meeting in November. If and when that approval is received, then the board will begin in earnest locating both the new teaching facility and a downtown gallery space.
5.
Will PAL pay property taxes or capital gains for the new space?
No
6.
What additional steps are required to complete the transaction?
The parties signed a Letter of Intent (LOI) today confirming the basic outline of the deal discussed above. All parties to this transaction understand that it is contingent upon membership approval. A special election on this issue will be included in the annual membership meeting on November 29, 2007. Because some members may not be able to attend, arrangements are being made to allow members to vote by signed proxy in advance of the meeting and mail-in ballots will be accepted up to close of business on November 29th.
Over the next few weeks due diligence will be performed by the parties and a final contract will be negotiated. This is an incredibly time consuming process, and the Board will greatly appreciate both your cooperation and understanding that many of the components of this process will be confidential.
7.
What's the timing of everything?
The anticipated timeline of events is as follows:
•
A preliminary effort to survey available alternative properties has already started.
•
As soon as the transaction is approved and completed (no later than January, 2008), separate subcommittees will simultaneously begin looking for both an additional PAL building to purchase and a short-term lease of gallery space in downtown Palo Alto for use during construction.
•
PAL intends to move out of the Ramona Street property by the end of 2008, although there is a contingency plan that allows for six months of additional occupancy.
•
PAL will continue its lease of the Alma studios during the transition.
•
While the details and schedule for construction are not under PAL's control, the start date will be directly linked to when PAL vacates the building. The estimated duration of construction will be one year. PAL will plan to reoccupy the first floor of the Ramona property in Spring 2010.
####


Posted by Just the Facts, a resident of Downtown North
on Oct 25, 2007 at 11:07 am

October 18, 2007

To Members and Supporters
of the Pacific Art League

Greetings:
We have a very exciting announcement to make.
By unanimous vote of the Pacific Art League (PAL) Board of Directors, and after extensive study and negotiations, the PAL has entered into a Letter of Intent with a team of highly-regarded local real estate developers that will result in a creative partnering arrangement. This partnership will provide a broad range of benefits to PAL, and will ensure PAL's future place as a hallmark of artistic and cultural excellence in Palo Alto.

This partnership will enable PAL to enjoy a long overdue modernization and safety upgrades of its facilities, while at the same time allowing PAL to continue as the owner of the first floor of its downtown Palo Alto facility and a separate building for classrooms, an additional gallery, studios and administrative offices. Due to its continued ownership position of the first floor, PAL's financial future will continue – as it has for decades – immune to the dramatic increases in commercial rents which, unfortunately, occur in our area.

The Board's decision will lead to a purchase agreement that will be subject to PAL Membership approval. The transaction will be placed on the Agenda of PAL's Annual Meeting on November 29, 2007.
The developers are Premier Property Management and Sand Hill Property Company. Both companies have established track records for creating tasteful and innovative real estate development projects in Palo Alto and elsewhere in the mid-Peninsula. Jim Baer (Premier Properties) has distinguished himself over many years in local developers. Baer who works closely with the City of Palo Alto
building and planning staff and one understands, listens carefully to and respects the sentiments of the Palo Alto community.

Highlights of the Letter of Intent are as follows:
•
The purchase price upon closing is $3,400,000 (net of commissions to real estate brokers Cornish & Carey) will be paid to PAL in cash by January 2008. There will be no income tax.
•
Our Ramona Street building will be subdivided into commercial condominiums. PAL will own its own condominium unit consisting of the majority of the existing first floor of the building totaling approximately 3,250 sq. ft.; this will be used for PAL's main gallery and classroom space. All improvements to the PAL space will be delivered to, at no cost, to PAL.
•
Our Ramona Street building will be entirely upgraded to contemporary standards of earthquake safety, as well as modernized in every respect, including full building code compliance, ADA-compliant bathrooms, modern wiring, heating, air conditioning, lighting and security.
•
PAL will not be required to move out of 668 Ramona until December of 2008. We have an option to extend our move date for six months if needed to accommodate PAL's relocation. Once we have relocated, the major reconstruction process of our Ramona Street building will begin, and PAL will move all of its facilities into the newly-purchased building. PAL's Ramona Street condominium will be ready for occupancy approximately eighteen to twenty-four months after construction begins.
•
The developers will construct and zone the upper floors of the Ramona Street building with a separate entrance from PAL's for possible office occupancy. Their plans will include using and/or renting this space, or possibly selling commercial condominium units.
•
PAL will also receive significant financial benefits in the form of limitations on future maintenance costs in the Ramona Street building. We expect that our condominium space (as well as any purchased alternative facility) will also be exempt from real estate taxes.

PAL intends to identify and purchase, at an estimated cost of $2.5 million, an additional facility within approximately ten miles of downtown Palo Alto area consisting of 8,000 or more square feet. Any such facility will meet building code standards, and will provide expansive, highly functional, and inviting facilities for our classrooms and studios. It will also offer ample parking. A search is currently underway for that space.

We hope that you share our excitement about this opportunity. Our Ramona Street building has served PAL well over the decades, and is a downtown landmark of which we can be proud. But our building is antiquated, lacking air conditioning, elevators and most of the modern amenities that we take for granted in today's commercial structures. The space is not optimally configured to best fulfill our mission. With this plan we will have a 'blank slate' on which to design a thoughtfully planned ground floor space for classes, exhibition and/or special events for the community.

partnering arrangement will enable PAL to fully upgrade our Ramona Street building, while mainlining the historical character of the building. It will also allow us to obtain additional classroom and studio space, and retain full ownership of its first floor space and thus be in full control of our financial future.

We have enclosed a list of "Frequently Asked Questions" about the Project add to your body of knowledge about the project:
And please feel free to come by PAL's offices and view a binder on October 31, 2007, which contains additional information about the project.

Sincerely,
The Board of Directors
Of The Pacific Art League


Posted by a long-time member of PAL who has bee involved in real estate, architecture and construction for ove, a resident of Mountain View
on Nov 5, 2007 at 9:53 am

Many so-called facts stated by the Pacific Art League are just plain not true or are deceptively misleading.

It is NOT true that adding an elevator and making the restrooms ADA handicapped accessible would trigger the necessity of doing a complete seismic retrofit. Just go down to the City of Palo Alto Development Center on the corner of Hamilton and Bryant and ask and you'll find out the truth for yourself.

It is NOT true that PAL is retaining the first floor of Ramona. They currently have 4170 sqaure feet on the first floor as you can verify for yourself with the listing agents, the online listing on Cornish & Carey Commercial's website, or with the City of Palo Alto's records also viewable at the Development Center. They will only be getting 3250 square feet as per their own admissions in their press releases.

The main problem is that they want to push this sale through before they have arranged for another building and they have not done their homework on other buildings.

The truth is that if they find a warehouse of 8,000 - 10,000 to buy, most probably, it will need a complete seismic retrofit before they can move in because the change of use to classrooms will require it. Also, many warehouses are in zoning areas that allow the legal use of very hazardous materials and most communities won't allow a change of use to classrooms where children and the elderly will be using the classrooms if there is a building using hazardous materials within 1000 feet.

They have also not considered the higher operating costs of having classrooms in a converted warehouse where, most likely, there will only be windows on the front side without the possibility of adding windows to the sides or back, so there will be higher utility costs for artificial lighting.

So, I urge you to check these things for yourself and not rush into voting to sell the wonderful downtown building on November 29 but waiting until a new building is found to be a viable alternative.

Committing to move out of the Ramona building by December 2008 or staying until June 208 at a cost of $15,000 per month and then having to move out when another building has not yet even been identified and probably cannot be ready for occupancy by then is irresponsible on the part of the management of PAL.


Posted by Duh, a resident of Downtown North
on Dec 11, 2007 at 5:47 pm

WRONG.

LOOK AT THE LETTER FROM THE CITY ON PAL'S WEBSITE. IT GIVES THE CEILING FOR UPGRADES BEFORE TRIGGERING A FULL SEISMIC RETROFIT. TO INSTALL A SAFE ELEVATOR AND FULLY ACCESSIBLE RESTROOMS ON BOTH FLOORS WILL COST TOO MUCH.

THE PLAN CALLED FOR PAL TO KEEP 3250 SQUARE FEET. THE 4170 THIS GUY CITES INCLUDES CURRENTLY UNUSEABLE AND ILL USED SPACE. THE PLAN WAS ALSO TO SHARE ADA RESTROOMS WITH THE OCCUPANT OF THE NEW SPACE TO BE BUILT ON THE GROUND FLOOR LEVEL IN THE ALLEY. THIS WAS NOT A SECRET.

THERE'S BEEN A LOT OF HOMEWORK DONE. THE PUSH WAS TO SATISFY THIS PARTICULAR DEVELOPER'S TAX EXCHANGE SCHEDULE. THAT'S WHY THE OFFER WAS MORE THAN $1,000,000 MORE THAN THE NEXT LOWER OFFER.

THE TRUTH IS THE BOARD IS NOT STUPID. THEY WOULD NOT CHOOSE A SPACE THAT NEEDS SEISMIC UPGRADES TO FACE THE SAME CHALLENGES OF THE CURRENT BUILDING AND THEY WOULDN'T PLACE THE MEMBERS IN DANGER OF A HAZARDOUS WASTE SITUATION. WHEN DID IT OCCUR TO FOLKS TO ASSUME THIS IMPRESSIVE BOARD ARE A BUNCH OF IDIOTS?

AGAIN, I GUESS THIS BUNCH OF BOZOS WOULDN'T HAVE THAT, TOO. LIGHTING FOR ART CLASSES AND GALLERIES? WHAT A CONCEPT?


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