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Redevelopers persevere in Santa Rosa, Rohnert Park, Napa projects
Jeff Quackenbush, Business Journal Staff Reporter
Monday, June 2, 2014, 6:06 am
Categories: Construction, Industry News, Napa Report, Napa Report 3rd-level stories, North Bay News, Sonoma Report, Sonoma Report newsletter 3rd-level stories | No Comments
Projects in Santa Rosa, Rohnert Park and Napa are poised to transform properties long an asterisk on the ledgers of real estate that drives the local economy.
At the Business Journal‘s Construction Conference on May 21, developers in the midst of redeveloping the vacant former AT&T telephone switching building in downtown Santa Rosa, the vacant State Farm Automobile Insurance campus in Rohnert Park and former Napa Pipe Co. plant south of Napa explained to more than 150 construction industry professionals and public officials what attracted them to the project, how the ventures weathered significant obstacles and why they have stuck with it.
In the past 15 years, Hugh Futrell Corp. has shifted real estate development interests to urban core areas such as Santa Rosa to better compete.
“One of the niches we have developed is core-area development,” Hugh Futrell told the conference audience of more than 150. “There is far less competition, the CEQA process and entitlements are somewhat easier, and opposition is mostly nonlitigious.”
And one of the company’s key projects for several years has been the redevelopment of the former AT&T telephone switching building at 100 B St. that has been vacant for more than a decade. The building was originally built to accommodate eight more stories and handled U.S. distribution of calls from trans-Pacific cables that entered the structure.
Yet that renovation project, called Museum on the Square, has weathered a string of major challenges: statewide dissolution of city redevelopment agencies to back the project, loss of the anchor commercial tenant, the economic recession that eroded the market for the five additional stories of planned housing, reluctance of lenders to participate in a complex financing structure and of title companies to insure a transaction with uncertain ownership, expensive interior upgrades needed for the approved exterior design, and loss of Sonoma County Museum as the namesake tenant.
“We were left without an anchor tenant, lenders and a building we could build, and we were about to lose the museum too,” Mr. Futrell said.
Housing was dropped, leaving the building with the five existing above-ground stories and a basement. But a planned glass curtain wall with large sections of the windowless building opened the outside of five above-ground stories would have required interior structural upgrades that busted the project budget. TLCD Architecture, which will be a tenant, developed an aesthetic alternative with perforated aluminum panels.
The project cost was shaved to $16.1 million from an estimated $40 million in the previous design. The new-market tax credit financing structure that made lenders cautious was dropped, and the project partners kicked in more funds, including $1 million more requested by a mezzanine financier.
“The total cost is well under $200 a square foot, which in our market is critical,” Mr. Futrell said.
That’s because the construction costs for building type 1–3 multistory buildings is roughly the same in Santa Rosa as it is in more populated areas of the Bay Area, but the rents and property values are much less, he added.
The project picked up two key tenants. Santa Rosa-based Luther Burbank Savings plans to move its headquarters there, and the proposed California Wine Museum is raising money to launch in the 15,000-square-foot bottom floor.
The revised project went back to the city for review and was approved late last year. Demolition — including sawing out windows in the 9- to 16-inch-thick walls — started in April. The renovated shell of the building is set to be ready for tenant improvements to begin by the end of this year.
“We’re hoping that this would be a catalyst for development,” said Don Tomasi, a TLCD principal architect. “There is a perception out there that it is difficult to get things built in downtown Santa Rosa, but that is far from the truth.”
Still, the Museum on the Square project survived the economic recession and other obstacles, while several other multistory projects around downtown Santa Rosa were tabled or scuttled.
“My reputation and that of my firm was wrapped up in this,” Mr. Futrell said, when asked why he has persisted with the project. “A lot of people contributed to this, and the city devoted a lot of time to it.”
SunCal Companies, the largest developer of master-planned communities in the U.S., hopes to give Rohnert Park what it has long wanted — a heart.
“What the city of Rohnert Park made very clear is it does not have a downtown, and it wants a downtown,” Joe Guerra, who oversees SunCal’s Northern California acquisitions and entitlements, told the conference audience.
In late December, an affiliate of the Irvine-based company purchased the nearly 30-acre former State Farm Mutual Automobile Insurance claims-processing campus at 6400 State Farm Dr. The insurer had 1,100 employees working there at the peak, but a shift of employees to other offices started 10 years ago. The Rohnert Park workforce dwindled to 350 workers occupying only 35 percent of the building when the facility closed three and a half years ago.
Though the size of the project is on the smaller side of SunCal’s projects nationwide, the developer’s plans for it are big. Drawing on input from the City Council, planning staff and the citizen-based Central Rohnert Park Priority Development Area committee, SunCal affiliate developer Northern California Communities, LLC, submitted its redevelopment plan last month.
Calling the project Rohnert Crossings, SunCal wants to replace the 320,000-square-foot single-story office building with roughly 300 attached homes of varying densities per acre, four “pocket” parks, 30,000–40,000 square feet of vertical retail space and two miles worth of paseos, including bike paths connecting the Copeland Creek trail with the forthcoming Sonoma Marin Area Rail Transit station just to the south, City Hall and Sonoma State University. City officials want the 3-acre-plus existing lawn with mature trees at the southeast corner of State Farm Drive and Rohnert Park Expressway to stay.
“The city suggested we take a look at the Town Green in Windsor,” Mr. Guerra said. “It was similar to what we talk about.”
Building on urban designs for projects elsewhere, the design team studied block lengths and central square sizes in Petaluma, Healdsburg and Santa Rosa. City blocks there are 350–550 feet long, and downtown plazas cover roughly 1.5 acres. By comparison, Windsor Town Green covers 2.4 acres, and the surrounding Town Green Village housing, retail and office development has block lengths of about 450 feet.
The retail space at Rohnert Crossings would be aligned along 400- to 450-foot blocks facing its green. Retail pads for a cafe and a restaurant and a gathering area for outdoor events would be incorporated into a 3.6-acre green.
The current site plan calls for a mix of stacked flats, townhomes and cluster homes off alleys. But homes in the project wouldn’t be podium-style — wood-framed construction above concrete street-level garages — because the cost of that type of construction in the current housing market is realistic mainly in Silicon Valley and San Francisco, according to Mr. Guerra.
The redevelopment plan has an “aggressive” timetable, according to Mr. Guerra. Groundbreaking is envisioned in 18 months, which is about half-way through the planned three-year Central Rohnert Park PDA planning process. The company has said it would be putting together its plans concurrently with that process. Potentially helping the project timeframe is working with a property that has an existing building, Mr. Guerra said.
“Having a big campus on a property is important, because with CEQA review there are existing entitlements,” he said.
While the North Bay is a prime market for the type of master-planned urban communities SunCal specializes in, according to Mr. Guerra. The company in May bought the former Oak Knoll naval hospital property in Oakland, a redevelopment property sold in an auction of former Lehman Bros. assets.
Before Lehman’s filing for bankruptcy in September 2008, an event key to the global financial crisis, the investment bank provided 80 percent of the SunCal’s portfolio funding. For the past few years, SunCal has been restarting projects and acquiring properties, both of which include former Lehman investments.
SunCal also is in contract to buy the 52-acre Cooke family property along Interstate 80 in Vallejo. Because that property is vacant, groundbreaking could be a few years away.
“I’m extremely bullish about the North Bay,” he said.
Yet sizable North Bay communities really need to have master-planned marketing campaigns to attract residents to outlying parts of the Bay Area, Mr. Guerra said.
SunCal’s business model is to turn projects over to builders to complete residential and commercial elements of the project then operate ownership associations and manage properties thereafter.
Nine years and $30 million in entitlement plus other “soft” costs after the $40 million sale of the 273-acre shuttered Napa Pipe Co. property on the eastern bank of Napa River just south of the city, a renovation project that would bring nearly 1,000 homes, about 380,000 square feet of commercial space and a few hundred rooms of accommodations could be closing in on a ground-breaking moment, lead developer Keith Rogal told the conference audience.
Following more than four cycles of local elections in which the Napa Pipe project has been a hot-button topic, including one ballot measure that would have made the project unfeasible, and a tug of war between county and city governments over water, tax-revenue and regional housing allocation sharing, the project received a county General Plan amendment and entitlements last year.
“Even a few years ago, polls showed the public still thought there would be tens of thousands of homes,” Mr. Rogal said.
Now, city government, which had opposed the project until near the end of the environmental review process, is working through city entitlements and a development agreement, which could take up to two years to complete.
As approved by the county, the project would have 945 carriage-style, alley-oriented dwellings, averaging 20 per acre plus a 150,000-square-foot Costco Wholesale store, 40,000 square feet of neighborhood-serving retail space, 190,000 square feet of other commercial space, a 150-room hotel and a residential care facility accommodating 150.
“As units were cut from 2,000 initially, there was an argument that the development was too small and can’t sustain retail,” Mr. Rogal said.
To encourage more residents to frequent Costco, a warehouse club store known for its sales of bulk foods and other goods, a plan has been developed for an electric-powered van to shuttle locals to the store and back. A community-supported agriculture farm is planned for the site too.
Link to article: http://www.northbaybusinessjournal.com/93029/redevelopers-persevere-in-santa-rosa-rohnert-park-napa-projects/
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