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Pacific Art League sells building to developer!
Original post made
by Art Lover, Downtown North,
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.
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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
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.
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.
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.
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.
Will PAL pay property taxes or capital gains for the new space?
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.
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.
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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
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.
The Board of Directors
Of The Pacific Art League