SUCCESSOR AGENCY TO
THE REDEVELOPMENT AGENCY
OF THE
CITY OF RIVERSIDE
LONG RANGE
PROPERTY MANAGEMENT
PLAN
DATED: FEBRUARY 25, 2014
SITE 4: CALIFORNIA TOWER BUILDING
(TOTAL SITE SIZE: 1.2 ACRES)
SITE 4: CALIFORNIA TOWER BUILDING
(TOTAL SITE SIZE: 1.2 ACRES)
I. PROPERTY PROFILE
Address: 3737 Main Street
APN: 213-262-006
Acquisition Date: Early 1994
Acquisition Amount: $29,111,500
Acquisition Purpose: Economic development
Current Use: Retail and office space
Lot Size: 1.2 acres
Estimated Current Value: $1
Current Zoning: Raincross District
General Plan: Downtown Specific Plan
Redev. Project Area: Merged Downtown/Airport Industrial – Hunter Park / Northside
Rent/Lease Revenue: Yes
Proposal History: Yes – Proposed leases
Environmental History: No
Transit-Oriented Use: No
Proposed Use: Use of the property to fulfill an enforceable obligation
II. PROPERTY BACKGROUND/HISTORY
In order to stimulate economic development within the Merged Downtown/Airport Industrial – Hunter Park/Northside Redevelopment P roject Area (Project Area) in early 1994, the City Council and the Redevelopment Agency authorized the purchase of the former vacant Security Pacific Bank Tower located at 3737 Main Street (Property – California Tower). Shortly after acquisition of the Pr operty, the Redevelopment Agency began renovation and leasing of the Property to retail and office users in an effort to re - energize Main Street Riverside.
On April 26, 1994, the Redevelopment Agency entered into a lease agreement with the State of Califo rnia – Department of General Services (DGS). The Redevelopment Agency agreed to lease to DGS the 160,000 square foot office tower with 22,400 square feet of ground floor retail and office space (Ground Floor) for the term of thirty years (Lease Agreement).
Pursuant to Section 25 (C) of the Lease Agreement, DGS may assume ownership of the Property at the conclusion of the Lease Agreement, on October 1, 2024, for $1.
Additionally, DGS may purchase the Property prior to 2024, but would be required to repay all bonds associated with the purchase of the Property, currently estimated at $31,000,000.
Furthermore, pursuant to the Lease Agreement, the Redevelopment Agency agreed to leaseback from DGS the Ground Floor of the Property until October 1, 2024. Howeve r, the Redevelopment Agency also has an option to extend the Leaseback Agreement for a period of ten (10) years, which would extend the Leaseback Agreement until October 1, 2034. The Successor Agency intends to exercise this option at the appropriate time.
Via the Leaseback Agreement, the Redevelopment Agency also agreed to pay for all maintenance and repairs, tenant improvements, leasing of vacant spaces and maintaining the overall attractiveness of the Ground Floor of the Property.
Since the Property had remained vacant for a long period of time, the Redevelopment Agency approved a leasing program exclusively for the Ground Floor of the Property to encourage foot traffic for Main Street Riverside. The establishment of the leasing program for the Property acted as a catalyst for carrying out the elimination of blight. The Redevelopment Agency’s acquisition of the Property also provided for both the removal of asbestos and securing tenants for the California Tower Building. Active tenants occupying the Cal ifornia Tower Building effectively eliminated both the physical and economic blighting conditions that had plagued the Property prior to the Redevelopment Agency’s purchase.
The acquisition and various renovation activities of the Property were financed w ith lease revenue bonds issued by the Redevelopment Agency. The term of the bonds runs through 2024 and debt service on the bonds is funded with lease revenue.
The Ground Floor of the Property currently has one vacant space totaling 1,783 square feet. The rent roll for the Ground Floor is as follows:
Tenant Name Address Suite
No.
Sq.
Ft.
Base
Rent/Mo.
Vino Veritas
(Pending DOF Approval) 3737 Main St. 100 4,962 $4,500 - NNN CBU Art Gallery 3737 Main St. 101 1,635 $2,453 - NNN
Salad Buzz 3737 Main St. 102 534 $899 - NNN
Room to Dance
(Pending DOF Approval) 3737 Main St. 103-A 3,017 $4,073 - M. Gross Vacant 3737 Main St. 103-B 1,783 NA
Senate Rules Committee 3737 Main St. 104 2,105 $3,157.50 - FSG Antonious Pizza 3737 Main St. 105 2,059 $2,347 - NNN
Pacific Stiks 3737 Main St. 106 1,358 $1,698 - NNN
James Accounting 3737 Main St. 107 241 $500 - FSG
Coffee Bean
3712 Mission Inn
Ave. NA 1,533 $3,100 - NNN
Elephant Thai
3720, 3740 Mission
Inn Ave. NA 3,312 $4,171 - NNN
III. PERMISSIBLE USE – USE OF THE PROPERTY TO FULFILL AN ENFORCEABLE
OBLIGATION
Pursuant to the Lease Agreement with DGS, the Redevelopment Agency entered into a Leaseback Agreement with DGS to lease the Ground Floor of the Property. Under the Leaseback Agreement, the Redevelopment Agen cy is exclusively responsible for the operation, maintenance, leasing and funding of tenant improvements associated with the Ground Floor of the Property. Lease revenue from the Ground Floor of the Property is used to pay the bond debt service.
The term of the Leaseback Agreement is co -terminus with the Lease Agreement with DGS for the Property and will expire on October 1, 2024. However, the Successor Agency has the option to extend the Leaseback Agreement for a period not to exceed ten (10) years. The Successor Agency intends to exercise this option, which would extend the Leaseback Agreement to October 1, 2034.
Additionally, Series B Bond proceeds are the exclusive source of tenant improvement funding for the Ground Floor of the Property.
Pursuant to Health and Safety Code Section 34191.5(c)(2), a successor agency may retain or dispose of certain properties in order to fulfill an existing obligation. Additionally, pursuant to Health and Safety Code Section 34167, an existing obligation may be defined as “any legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy.” On March 30, 2012, the Oversight Board confirmed that the Property is currently obligated pursuant to a third party agr eement and the DOF did not object.
IV. DISPOSITION RECOMMENDATION
Pursuant to Health and Safety Code Section 34191.5(c)(2), the Successor Agency recommends that the DOF approve the use of the Property to fulfill an enforceable obligation pursuant to the Lease Agreement dated April 26, 1994 by allowing the Successor Agency to provide property maintenance and repairs, lease vacant spaces, improve vacant spaces for re -tenanting with bond proceeds, and pay for leasing commissions for vacant spaces. At the conclusi on of the Lease Agreement with DGS on October 1, 2024, DGS has the option to purchase the Property for $1 as the contract price. The Successor Agency intends to exercise its option (when the State assumes ownership of the Property) to extend the lease term for an additional ten (10) years making the expiration of the lease no later than October 1, 2034.