Fact-Based Decision-Making at Alma Plaza
Original post made
by Karen White, Duveneck/St. Francis,
on Mar 23, 2007
Good decisions by policy-makers are based on good information. What information is important to know at Alma Plaza? Facts that should be considered in decision-making include these:
1. Cost of land. This has been a source of question for some time now. The developer has claimed that any additional retail would bring a financial loss. In reality, the purchase price of the land was far below market rate. The Santa Clara County Assessors' Office website shows that on October 12, 2005, parcels at 3401, 3417 and 3445 Alma were transferred as follows:
Parcel 132-28-009, 3445 Alma: Land $3,390,000; Improvements $2,000; Total $3,392,000.
Parcel 132-28-073, 3407-3437 Alma: Land $2,240,000; Improvements $3,000; Total $2,243,000.
Parcel 132-28-074, 3401 Alma: Land $365,000; Improvements $0; Total $ 365,000.
In short: the developer paid $6 Million for the entire Alma Plaza site, a price-per-acre that has not been seen in Palo Alto for a very, very long time.
2. The nature of Greenbriar Homes' projects.
According to the company website, current and past Greenbriar developments are 100% residential. This sheds light on the developer's wish to subdivide Alma Plaza, eliminate most of the retail services provided now, and replace retail with housing even at ground floor.
3. The cost to build housing.
Professionals in real estate development report that the actual cost to build housing (excluding land and site improvements) averages somewhere in the range of $190 220 per square foot. Greenbriar has a development in Dublin, "Riva," of homes similar in size to what are proposed for Alma Plaza. At Riva, Greenbriar bought the land, made site improvements, constructed the homes, and now is selling them profitably for $669,000 to $769,000 far, far below the range of $1.5 Million these same homes would sell for in Palo Alto, with a similar cost basis as in Dublin.
4. The sales price for homes in Palo Alto.
According to Alain Pinel Realtors and others in real estate, the average selling price for homes in the area of Alma Plaza in 2006 ranged from $740 per square foot in South Palo Alto to $835 per square foot in Midtown. Applying the more conservative multiplier to 39 housing units proposed for Alma Plaza, at an average of 2,000 square foot each, totals $57,720,000 total from the sale of residences.
5. The "benefit" of public benefit
The value of the in-lieu public benefit for affordable housing should be based on the actual anticipated selling price of homes at market rate, not the lower "asking price" that has been suggested by the developer.
Separately: Apparently the Pacific Art League intends to sell their downtown building. The second and third floors, now used as studio and gallery space, would be converted to condos; the Art League would buy the first floor back for their own use. Would space for the Pacific Art League at Alma Plaza represent net additional space for this non-profit, as a public benefit? And why is this space being identified for three separate uses: non-profit, as private meeting space for residents, and as retail space? Each use is different, and only retail space is "retail."
6. Finally: what "process"?
We have seen in the recent past situations where a developer proposes a massive over-build and blames community members for delay and "process" when they merely ask that the Comprehensive Plan and reasonable zoning be applied. Jim Baer wrote an eloquent Guest Opinion published in the May 26, 2004 edition of the Palo Alto Weekly. His words are as relevant to Alma Plaza as they were in the context that they were written.
The full opinion can be read at Web Link
. An excerpt follows:
"The unpredictable bumps of the Process will not defeat a project if -- and this is critical -- the project has a sense of gravity (momentum) and downhill direction, meaning whether a project is "approvable," as consistent with community policies.
Here is where Hyatt created its own fully predictable failure. Experienced persons in the community predicted that more than 300 housing units would never be approved.
This was made clear to Hyatt as early as 1997, when Solit interviewed more than a dozen Palo Alto insiders (names familiar to Palo Alto readers). City staff, Chamber of Commerce leaders, council members, developers and residential activists advised Hyatt that its project was effectively dead on arrival.
The hotel was not the problem. A project with 200 housing units would have been approved within two years. Hyatt's proposed 300 housing units plus hotel could have received a denial within the same time. Hyatt prolonged the Process rather than (1) accept certain denial for its 300+-unit project or (2) cut back to 200 units.
We cannot know whether Hyatt's refusal emanated from Hyatt's Chicago headquarters, overconfidence from past successes, or local arrogance. In any case, Hyatt created its own Process -- for failure."
Palo Altans will be proud of a development at Alma Plaza that incorporates true mixed-use, retaining ground-floor retail to serve the center's neighborhood and beyond.
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Posted by Jeremy Loski
a resident of Ventura
on Mar 24, 2007 at 3:07 pm
Kudos to Ms. White for her for doing her homework…some comments…
What bears repeating is that the entire kit and kaboodle known as Alma Plaza is representative of process run amok. Thank goodness that our current crop of policy makers are up to changing the conditions that have in the past permitted that "amokness".
About process run amok:
Why shouldn't residents use various tactics to get their way, especially if their past similar actions have been reinforced by past policy-making groups? Residents have, in short, learned a bad habit.
Why shouldn't past potential policy makers cater to certain "key neighborhood influencers", as it's those influencers that have helped them get elected? This is a universal political reality that will never entirely disappear; the only times we see alterations to this reality is when current political paradigms begin to fall apart, as is the case in Palo Alto (and many other municipalities in California).
Why shouldn't developers use the various tactics that they use (including the developer that Ms. White quotes) to game the system. After all, developers talk to each other; they know what wheels to grease; they can compute perceived time delays as a component of the cost of doing business, and so on.
Going back to Mr. Baer's article, and Ms. White's use of it, Mr. Baer's "formula" is mostly common sense - i.e. use the power of hard work, deep knowledge of process (learned from taking hard knocks followed up by persistent new learning, and persistence in action), political gaming (an understood reality not a bad thing…city officials, staff, and key residents), and so on. Mr. Baer has build some nice projects, has worked hard in accomplishing his goals, and we should all be happy for him.
But again, what part of "understood terms" has the McNellis group been introduced to that would have resulted in having something already built at AP? Another way to ask that question is "what kind of city development demeanor would deliver an easily decipherable and firm message to both developers and residents about how our city is going to grow and if that demeanor had been in place when McNellis bought the AP property, would we be where we are today?"
A measured answer to the above question is that "Palo Alto doesn't have such a demeanor, yet". Thus, the AP problem.
Thus, my preference for the current McNellis plan. Just build the darn thing - now!
How much money has delay cost our city in terms of property tax and/or retail sales receipts? Answer: a LOT! Will this project ever be "perfect"? No. Might it end up better from the resiodent's POV? Maybe. Might the developer be making too much money? What's "too much money"? And on and on it goes, with arguments on both sides concessions back and forth, gaming the system from both sides, more talk, new Council members with different ideas (elected with support of more "key" residents, and so on).
All this is a normal part of process, unless it is permitted to become the kind of municipal cancer that we have let it become i.e process that - like a caner cell grows out of control, and stymies development, people (on all sides), and progress.
Another thing: most "key" residents weighing on retail development have a dangerously ignorant idea about what it takes to make a go of it in Palo Alto as a retailer, or what deleterious effects the development of some retail has on other, existing retail.
For those who want to take a 100 yard stroll to a market at AP: Has ANYONE considered what effect a supermarket at AP will have on JJ&F, or Piazza's. Has anyone asked those vendors? if you haven't go ask them. How about the done deal for Trader Joe's at T&C? This is going to *hurt* JJ&F, big time.
Do those who are angling for "convenience stores" at Alma have any idea what a small, non-chain, retailer faces when per sq.foot prices rise above $2.50?
My argument is not pro-developer, or pro-resident. Rather, my argument is for more accurate, comprehensive information that is not biased, or used in a biased way all that, and a deeper reality check on the realities of what certain kinds of costs commercial markets (retail, property development, etc) can bear.
My quarrel with Ms. White's use of Mr. Baer's formula for success is to imply that Mr. Bear "gets it", and Mr. McNellis doesn't. It's Ms. White's way of saying "I think McNellis is wrong". I think that's a bit disingenuous, because if what Ms. White represents Mr. Baer's "formula" as "the secret sauce" for getting things done here, what developers other than those who are very inbred with our system have a chance to accomplish anything here in any sort of efficient way? In fact, that's the case.
Might other local developers who are better in the know than Mr. McNellis about "the way things work" here let it be privately known that if this project is held up to a point where McNellis has to sell it, that they will take it on?
Another thing that bothers me about Ms. White's post is that she appears to have a problem with the fact that Mr. McNellis is selling homes in another community (a much lower priced and less-well-known community) for less than he would sell them here. My question to Ms. White, and others is "why shouldn't Mr. McNellis do that?
Why doesn't Ms. White point out that the developer she quotes chooses to develop property in Palo Alto, thus generating more profit to that developer than similar developments in other communities? What's the difference?
Without mentioning names, I have spoken to local developers who have built retail, and who *know* from experience that the businesses they sign in for leases are going to fail. But then, that's the retailer's problem, isn't it? Because the retail space will be there, ready to rent to the next small-time entrepreneur, with that entrepreneur taking all the risk. This is not to paint the developer as insensitive. It's rather to point out that there are certain realities at play that most residents don't consider when they cry out for certain kinds of "comfort" retail.
How about the hue and cry for certain kinds of retail here that when once built, doesn't get supported in a way to maintain profit? That happens a LOT in Palo Alto (retail churn is a reality here), and will continue to happen until most of our retail space gets built out to serve very high end retail, and chains. Long-term, a lot of small-time boutique retail is going to exist mostly as a hobby-horse enterprise, by those who can afford interminable losses, or barely marginal gains. There are several of these kinds of businesses popping up in Palo Alto already; they don't make money, and exist only because a well-heeled owner wants to maintain them.
What will ultimately be built at AP? Who knows? What we know for sure is that the interminable process that has made this project go on for years needs to be redone, and that something needs to be built at AP, ASAP.