HomeMy WebLinkAboutPalms to Pines East Remodel CITY OF PALM DESERT
DEPARTMENT OF COMMUNITY DEVELOPMENT
STAFF REPORT
TO: Honorable Mayor and Council Members
FROM: Philip Drell, Director of Community Development
DATE: February 22, 2001
SUBJECT: Status of Palms to Pines East Remodel
BACKGROUND:
The question has been asked, when will improvements occur at Palms to Pines East?
Despite all outward appearances, the principal property owner/developer has been
diligently pursuing his overall property revitalization plan and is slowly making some
progress toward implementation which should begin in May or June. Unfortunately
a complex series of legal and economic obstacles created by the fragmented
ownership pattern and financial turmoil of a major tenant has delayed the project.
The following summarizes those obstacles and the developer's progress toward
overcoming them.
The project had three owners. The developer, who owns the old Sprouse Ritz
building on the east end, the bank on the west, the small shops up to Big Five, and
the El Paseo shops. Big 5/Staples and Rite Aid are separately owned. Since the
developer only receives income from half the center, he needs cooperation and
participation of the other owners and tenants to accomplish the project.
The project includes complete restoration and relandscaping of the parking lot,
demolition of the bank and small shops, the construction of a new 20,000 square
foot west end building and new facades for all the existing buildings.
Prior to their financial problems, Rite Aid executed a ground lease for the pad to be
created by the demolition to relocate and expand their store. Under terms of the
lease, Rite Aid was required to expeditiously demolish the building and proceed with
construction. While Rite Aid's financial problems prevented them from proceeding,
the developer's lender refused to allow termination of the ground lease without an
equivalent substitute tenant. The developer then negotiated a back up lease with
Staples who has also submitted building plans for City approval. A termination notice
has been sent to Rite Aid which if accepted would pave the way for Staples to
initiate demolition and construction. In the meantime, we currently have both Rite
CITY COUNCIL STAFF REPORT
STATUS OF PALMS TO PINES EAST REMODEL
FEBRUARY 22, 2001
Aid and Staples in plan check. Within 60 days, one or the other will be coming
forward with control of the property to begin construction. If Rite Aid proceeds with
the new building, Staples will move to the old Rite Aid space.
The developer has prepared and received approval from the City for the parking lot
reconstruction and landscaping plan. The plan on El Paseo will vary depending on
who gets the new building since Rite Aid has a drive-through pharmacy. The
developer has completed his landscape working drawings and will have cost
estimates for both the parking lot, landscaping and facades by March 9. As property
manager, he can unilaterally proceed with simple maintenance of the lot. He has
committed to fill all pot holes or other health or safety problems immediately.
Since the proposed revitalization project goes far beyond simple maintenance, he
needs agreement from the other pad owners to proceed. The turmoil concerning the
major tenants has prevented this agreement. With the imminent resolution of the
tenant problems, he will be presenting a cost estimate for the entire revitalization plan
including the parking lot to the pad owners for their approval in March.
Here is where the economic problems surface. The developer only receives income
from half the center. The other pad owners' income is constrained by their existing
leases. While the improvements will be beneficial to all concerned including the City
in the long run, it may be difficult to finance in the short run.
The developer has been in discussion with the Redevelopment Agency for over two
years concerning financial assistance to fill the near term economic gap. The tenant
uncertainty had prevented him from completing his financial proforma to justify
assistance. With the tenant issue nearing resolution he will be presenting his request
to the Agency before his meeting with the other pad owners.
II. SUMMARY AND RECOMMENDATION:
While we can force the developer to proceed with basic maintenance (i.e., crack
sealing, slurry coating, restriping etc.), much of this work would be wasted when the
major renovation occurs. Redevelopment of old commercial centers is usually very
difficult, time consuming, expensive, and often requires some public assistance. As
long as the developer can provide evidence of progress, we should try to give him a
little more time to put together the ultimate program. If we conclude that he cannot
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CITY COUNCIL STAFF REPORT
STATUS OF PALMS TO PINES EAST REMODEL
FEBRUARY 22, 2001
achieve the program, then we should direct him to proceed with the basic
maintenance plan. Hopefully by May we will know the answer to this question.
Prepared by: Review and Concur:
PHILIP DRELL RICHARD J. FOLKERS
DIRECTOR OF COMMUNITY DEV. ASSISTANT CITY MANAGER FOR
DEVELOPMENT SERVICES
Re 'ew and Con r:
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SHEILA R. LLIGAN
ACTING CITY MANAGER
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CITY COUNCIL ACTION:
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