Mon09012014

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Council nixes call to halt plan for First & Main

Photo Courtesy Of Jeffrey A. Morris GroupThe Los Altos City Council reaffirmed its commitment to the Jeffrey A. Morris Group’s plan for First and Main streets, above." A majority of the Los Altos City Council last week defended its agreement with the Jeffrey A. Morris Group to buy and develop the city-owned 400 Main St. property after a resident questioned the fairness of the purchase price.

During an April 23 council update on Morris’ plans to build a two-story mixed-use project on the 0.78-acre site, Los Altos resident Robin Abrams asked the council to halt the project and re-examine whether the city received full value for the land.

Abrams noted that her research on commercial property sales in the downtown triangle revealed 13 transactions ranging from $173 to $560 per square foot, compared with the $91 per square foot the city negotiated in the September 2010 land sale to Morris for $3.1 million. Abrams added that the land-only values of the properties she researched averaged $198 per square foot. All of the sales in question, she said, occurred between May 2008 and August 2011.

“My presence here tonight is in no way intended to put anyone on the defensive,” Abrams told councilmembers. “My goal tonight is to request, based on these comparable sales … (to) suspend the approval process, take no further action until as a council you’ve had the opportunity to get financial and legal advice, (and) retain independent financial advisers and counsel to help in this process.”

Abrams noted that she brought the information before the council because she was interested in “the increased viability downtown,” and added that the project piqued her interest after Councilwoman Jan Pepper openly questioned the deal’s final purchase price during a February council meeting.

At the time, the city was negotiating the purchase of a 716-square-foot strip of land from Santa Clara County – at $125 per square foot – on behalf of Morris to complete the project. Pepper, noting that the $125-per-square-foot price would bump the overall sale price of the land from $3.1 million to $4.3 million, then asked whether there was still room to renegotiate. City Attorney Jolie Houston cautioned the council that attempts to renegotiate the sale price of the land could potentially expose the city to “some liability.”

Council reactions

Following Abrams’ presentation, Pepper reiterated her stance from the February council meeting. Pepper, who joined the council after Morris’ purchase agreement and project were approved, told her council colleagues she had a fiduciary responsibility to “make sure that we’re not making a large gift here.”

“When I see this kind of information that’s been put together, it makes me very concerned that – I mean, we definitely undersold this property,” she said.

Councilwoman Megan Satterlee, however, noted that receiving maximum dollar value for the property wasn’t the sole factor in the previous council’s decision to sell the land to Morris. Among other things, Satterlee noted the struggles of other projects getting off the ground – both in Los Altos and neighboring cities – during a time of economic turbulence.

“What we wanted to do when we sold this property was to make sure we got something built. … We wanted to make sure we ended up with a finished product,” said Satterlee, who also questioned whether Abrams’ research took into account land entitlement issues, such as land-use and height restrictions.

“The economy has changed,” Satterlee continued. “If we were negotiating this deal today, I think we’d come up with a different deal. But we’re not negotiating it today. We negotiated it two-and-a-half years ago. And I, for one, plan to stand by my word.”

Councilwoman Val Carpenter agreed with Satterlee’s assessment, adding that since the city purchased the property in 1995, “no viable projects came before us – 15 years that land sat there.”

A city-commissioned legal opinion of the agreement with Morris, completed in November 2011 by Burke, Williams and Sorensen, LLP, concluded that the city exceeded its legal obligations in selling the property, calling Morris’ offer “strong in several aspects” when compared to offers received during two previous requests for proposal (RFP) attempts.

“Given that the real estate market had declined over the year since the RFPs were submitted and was getting worse, our experience suggests there was little need to retest the marketability of the property,” the 16-page report stated. “Rather, given the carrying costs associated with maintaining the property and the lack of property taxes and sales taxes being generated by the property, acting on a viable offer during this difficult time was pragmatic.”

Councilwoman Jeannie Bruins called Satterlee’s insight into the previous council’s thinking in approving the city’s deal with Morris “long overdue.”

“There’s a lot of angst in our community over this project,” Bruins said. “It, for various reasons, has become kind of the poster child of maybe what to learn from and do better next time. But the key thing is next time.”

Morris faces a May 18 deadline to secure building permits and settle remaining matters, such as easements and right-of-way transfers. If the deadline expires without action, Morris must pay a $100,000 fee to the city to extend the timeframe an additional year.

Bruins, while acknowledging that hindsight in the form of seller’s remorse is “always 20-20,” urged Morris to get moving on his project.

“I would encourage you, again, that if for any reason an extension is required, that you work diligently and quickly to get this project moving,” she said. “Get the shovel into the ground so we can put this whole thing behind us.”

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