Consultants Say Sears Site Sale Won’t Recoup Costs
The city will fall at least $1.8 million short of recouping its $9-million investment in the former Sears store site in Hillcrest, even if it replaces rental and elderly housing with more profitable stores and condominiums in its development plans, two consultants reported Wednesday.
The consultants’ report, commissioned by a special committee studying the site, shows that sale of the 12-acre site on Cleveland Avenue to create a retail center, condominiums and a community center would bring the city $7.2 million or $6.8 million, depending on the size of the shopping center.
That is more than the $6.22 million anticipated when the consultants presented plans Sept. 8 that also included rental housing and elderly housing, but far less than the $9 million that the city paid for the site or the $10 million that the Sears Site Review Committee wants from the sale of the land.
“I can’t make magic,” said Larry Williams, financial consultant with Williams-Kuebelbeck and Associates Inc., an Irvine-based consulting firm. “I can’t meet their challenge and do it legitimately. All I can tell them is what my best estimates show me” under the guidelines imposed by the committee.
The city purchased the property last year as a possible site for a new central library, but rejected that idea in December. In May, the committee began the task of determining how to dispose of the land and decided that it wanted a mixture of stores and homes in the area.
Opposition to Plan
As they did Sept. 8, the consultants recommended that the city reserve a tiny parcel for the community center, lease a large chunk for a shopping center and sell the rest as private homes--a strategy that would net the city $12.3 million or $10.8 million, depending on the size of the shopping center.
But many committee members expressed opposition to the lease-sale plan at the earlier meeting, because the city has already budgeted $9 million from the sale of the property in its fiscal 1988 capital improvements program. A typical lease would last 50 years, according to the consultants’ report.
City Manager John Lockwood said that he would stick with his recommendation that the property be sold to fund the capital improvements this year, a decision that the City Council ultimately will have to make.
“If it brings less than $9 million, you fund what you can with the revenue that you receive from it,” Lockwood said.
Paul Downey, press secretary for Mayor Maureen O’Connor, said that if the consultants’ projections are true, council members are going to take a long look at what to do with the site.
“I think, at this point, we have to look at all of our options. I think the mayor is going to have to sit down with the other members of the council, with the manager and fully ascertain what will happen if we lease it and what will happen if we sell it,” Downey said. As a mayoral candidate, O’Connor opposed the purchase of the site.
Complicating the decision are three offers for the site, ranging from $9.85 million to $10.3 million, that the city has already received from developers. But all three developers would use the entire site for retail space, a plan opposed by Hillcrest residents and merchants, and by the site review committee.
Earlier Report
Because of those offers, Williams said that he “cannot conclude that the city paid too much” for the land. Instead, it is the decision to put a combination of stores and condominiums on the site that is holding down the value of the site, he said.
An earlier report by the consultants agreed that any retail center with more than 80,000 square feet of stores would take business away from existing Hillcrest businesses.
Joyce Beers, executive director of the Hillcrest Assn., also said that such a move would create traffic problems and thwart the efforts to redevelop Hillcrest’s core as a pedestrian shopping area.
“If a new shopping center developed of the size of Sears that had a lot of easy parking, shoppers might take the line of least resistance and drive there,” she said. “And it would undermine all the effort to make Hillcrest a pedestrian shopping area.”
Williams and architect Gerald Gast presented two development options in Wednesday’s report. Both include a 9,500-square-foot community center and 10,000 square feet of second-floor office space.
