CASE STUDY. Southern California s New Regional Shopping Center azalea in South Gate, CA 4/15/2015

Transcription

1 CASE STUDY Southern California s New Regional Shopping Center azalea in South Gate, CA 4/15/2015

2 the azalea project City of South Gate, CA Population ~95,000 - most dense community in County 95% Hispanic or Latino The Project 370,000 SF regional shopping center on 32-acres 37 retailers and restaurants 98% currently leased Groundbreaking September 16, 2012 Grand opening August 23, 2014 Accomplishments Created 1,400 jobs with ~50% jobs filled by South Gate residents Local hiring and apprenticeship program Delivered public amenities which include: 1.5-acre public event space and plaza, self sufficient vertical gardens, recycled water features, electric car chargers & free Wi-Fi Economic Development results Over $2.5 Million in sales tax per year to South Gate Over $10 Million in infrastructure improvements to Firestone & Atlantic 2

3 before: 32-acre brownfield site

4 the azalea project the challenge The Site Formerly a pipe manufacturing plant, the 32-acre site lay fallow & blighted for years Located on the City s main thoroughfare (Firestone Boulevard and Atlantic Avenue) Regional Challenges / Demographics Project unfolded during a crushing recessionary cycle Other Southern California cities filing for bankruptcy / wading through financial debacles City s general fund in a deficit situation City losing sales tax to neighboring cities before azalea City had unemployment rate of 16% at project approval City Strategy Not an RDA project. City purchased land from LACCD in 2006 to revitalize the community with a quality regional retail & entertainment center City initiated final clean up and sought a private sector development partner Initial developer lost property in downturn. Primestor saw opportunity & purchased the property, despite lack of entitlements Kosmont repped the City. Negotiated public private & secured infrastructure financing 4

5 after: retail and community amenities

6 the azalea project the non-rda solution The Process Worked closely with the City of South Gate and Primestor (developer) to fulfill City s objectives while minimizing project gap Successfully negotiated an Infrastructure Financing Agreement (IFA) to fund necessary public off-site improvements, thereby reducing developer risk Created additional project funding through the use of New Market Tax Credits (NMTCs) Off-site improvements: widening & realignment of Firestone Boulevard and Atlantic Avenue Improvements made without using South Gate s general fund revenues Infrastructure Financing Agreement City leveraged value of water and wastewater systems to gain access to capital markets Leased utility systems to South Gate Utility Authority Issued $34.17M in Utility Lease Revenue Bonds; City s general fund not at risk Proceeds used for refunding prior outstanding bonds and offsite infrastructure improvements Bonds achieved rating of A- which substantially reduced borrowing cost General fund revenues from azalea 44% greater than debt service on bonds Shifted South Gate s general fund to a consistent positive balance after years of reserve depletion 6

7 after: P3 results

8 the azalea project the outcome The Outcome azalea celebrated its formal grand opening in August 2014 Center remains over 98% leased and performs above expectations Over $2.5 Million to South Gate General Fund annually. Created 1,400 jobs with ~50% jobs filled by South Gate residents Public Amenities Local hiring and apprenticeship program 1.5-acre public event space Public plaza Numerous community events (fitness, arts, film showing, concert, mariachi, Halloween) Over 35 national credit tenants and retails Over 900 square feet of green living walls (largest installation on the west coast) Recycled water features Electric car chargers Free Wi-Fi 8

9 example: azalea design and living wall

10 example: tenant mix

11 Original Developer AND New Developer AND Old Equity Partner AND New Equity Partner AND City AND [Major A] AND A bunch of tenants AND Construction Lender AND New Markets Tax Credit CDE AND NMTC Tax Credit Investor AND Litigious Neighbor AND Title Company AND... Their lawyers! Pulling it together

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13 Infrastructure Financing Fee Waiver Agreement ( IFFWA ) IF -- Infrastructure Finance FW -- Fee Waivers Art Fees Sale of City Remnant Parcels IFFWA

14 City Sale of Land to Developer Frontage Parcels Condemned for Street Widening Consideration: Land Swap Other Widening Parcels Developer Commitment to Build Developer Commitment to provide Public Plaza, City Hall Annex and other Public Project Amenities Developer Commitment to Maintain and Program public spaces Future Consideration for Present Sale Remedies Damages Capped Option to Purchase City Land Sale

15 Lessons from azalea Coordination is Key Avoid Legal Challenges Sensitivity to other Parties concerns Lessons