In November 2009 the City of Los Altos went into a huddle with a single developer — Morris Group — to explore preliminary negotiations for the sale of City-owned property at First and Main, apparently shunning all others, with one exception.
Safeway – Godhead of the Developer Pantheon
The only developer not shunned after the “City” got the hots for Morris Group was – Safeway. The Anne Stedler MemoFIRST AND MAIN dated Feb. 14, 2010 suggests that City Staff — City Manager Doug Schmitz — approached Safeway, for the umpteenth time, AFTER receiving the Morris letter of proposal dated Nov. 2, 2009. On the other hand, the Burke reports says that it was actually Council on November 10,2009, who directed staff to “contact Safeway to ascertain if Safeway was still interested in the land swap idea…Safeway committed to expedite analysis and consideration of the potential land swap transaction.” [Burke, p. 4]
Why was Safeway so important to the “City,”
while other potential developers like Passerelle were not?
For about ten years, on and off, the city had tried to coax Safeway into rebuilding. It had even offered Safeway the First and Main property before. The prior proposals always seemed to turn on Safeway’s redevelopment proposals being around -50 parking stalls short of city parking requirements for the expansion. There they stalled. Pun intended.
In 2009 it seemed to be written in stone that a renewed Safeway was essential to downtown. If fact, it was probably a key goal for the new City Manager, Doug Schmitz, whom Ron Packard helped hire back in the fall of 2007. You know, the kind of goal the HR department writes down on your plan.
From the Town Crier June 6, 2007 in an article about the search for a new city manager — “Ron Labetich, a real estate broker and member of the Chamber of Commerce, said he’s looking for a ‘proactive’ [sic City Manager] who will complete major projects speedily, including the proposed downtown hotel at First and Main streets, and Safeway and post office renovations on First Street.”
Mo projects, mo fasta, mo betta
Doug Schmitz’s TODO list for downtown eventually was rewritten more along the lines in the table below. The emphasis was on PROJECTS, lots of them, especially Safeway, especially fast. Lalahpolitico: Before council members termed out?[table cols= “Doug Schmitz , TO DO” data= ” 1 ,a new Safeway, 2, a building on First & Main, 3, a building on the post office site, 4, make First Street a Great Street, 5, start a new Civic Center, 6, parking plaza ‘ opportunities'”] [/table]
The “City” passion for Safeway was probably renewed back in 2005, when “Los Altos loosens laws to encourage more chain stores to open downtown” according to the Town Crier, Jan. 12, 2005. The back story here is that Walgreens downtown bought its Second Street parcel and building from stationery store – McWhorters – in bankruptcy a little earlier. At first the drugstore Walgreen’s arrival and remodel was resisted by Main and State landlords and merchants. But after the fait accompli, and some passage of time, they admitted that Walgreens actually brought them traffic, rather than competing with them. Pharmacy owner, Bart Nelson, is the poster child for extolling the benefits of big chains for Mom and Pops. Thus, the new economic wisdom among City Staff and Council was that the Big Brands rule! Bring’em on. LALAHPOLITICO: So the love of Safeway — a big brand — only intensified among downtown owners… even though for 10 years Safeway had bucked Los Altos parking requirements…arguably being the less than perfect good neighbor.
Morris Group – 1st String developer god
In November of 2009, it was clear that Jeffrey Morris was not as beloved a potential development partner as Safeway. We learn from the Burke Outside Legal Opinion that the City was apparently willing to toss aside the Morris Group … working to cut a deal with Safeway for city-owned First and Main, even as the City staff and City council were in closed session negotiations with Morris in November about the same parcel. If Safeway said it needed First and Main to redevelop, the city would see they got it.
So “City” plan A was: the most important goal is a Safeway remodel; let’s not screw that pooch by dealing with Morris. If Safeway wants/needs the city owned parcel, Morris is toast.
So “City” plan B – parallel track : let’s talk to Morris, “as if” Safeway does not want/need First and Main. Let’s hope these tracks will converge.
Morris Track Record
Lalahpolitico first googled Jeffrey A. Morris and Morris Group about a year ago. There was virtually nada at the time about the entity at that time. Today there is a bit more to glean. Mostly because the City of Los Altos agenda of Feb. 23, 2010 an Sept. 14, 2010 referred to two buildings — with addresses — that Morris built. I have looked those up on Google maps.
As far as LALAHPOLITICO can tell these are the only two projects in his developer resume. His dad was Mr. Mervyn’s Department Stores…but the son may not have been part of that business. He got a BA in economics from Stanford in the mid 70′ and now presents his LLC as a financial advisory firm. It seems that the real estate endeavors are sidelines to his mostly financial investment activities? His offices are on Sand Hill indicating he his managing his own and perhaps other people’s monies in tech ventures?
LALAHPOLITICO: Morris is is not unqualified to be our development partner for First and Main, but was he really the best choice, the “bluebird of happiness”as far as the public benefit is concerned? When I look at the resumes of the principals at Passerelle, or of the 12 of so “known” Los Altos developers, I ask just how did Morris get to the top of the heap?
Passerelle Track Record
Passarelle has three principals. Amanda Tevis, MBA Stanford grad, is a career retail leasing specialist with many years at the top firm Terranomics. Among other things, she was part of the group that turned around Palo Alto Town & Country – where Sergey Brin is an investor as he is in Passerelle Investments. Taylor Robinson, another Stanford grad, is a civil engineer, with experience as a construction manager at big time construction firm Cahill. Brooke Ray Smith also has prestigious degrees, and brings skills and experience with urban planning. (Visit linkedin)
[table cols= “Nov. 2009 decision criteria , Morris, Passerelle ” data= ” own financing + ,YES, YES, relevant projects +, 2, many, in house expertise +, NO, YES, fast time to contract +, NOW, six months, public benefit?, LOW, HIGH, relocate Safeway -, NO, YES, buying up downtown -, NO, YES, a land banker -, NO, unclear, big brand retail +, Allegedly, boutiquey “] [/table]
VIDEO: Megan Satterlee shows the state of mind of the city council in September 2010, when they approved the Morris Group option to purchase. Paraphrasing – He’s not a land banker, he’s fast, he’s more than just interested, and he’ll get us that big retailer (2 minutes in).
3rd string nymphs or 800-pound gorilla?
LALAHPOLITICO: I find it hard to believe that the “City” ever perceived Passerelle as noneity, as developers with little substance. As I argued in Passerelle Retail Paradise Lost, the “City” — whoever they are — were more likely threatened by the idea Passerelle would succeed with parcel assembly along First Street and with a Retail Vision which was NIH – “not invented here.”
Watching out for Land Bankers
At the Sept. 14, 2010 meeting where City Council approved the Agreement for a Option to Purchase with Morris, Ron Packard explains why the agreement was structured as a option to purchase…with a timetable. He says he wanted a developer who would actually build a project in a finite amount of time, not one that would fiddle around like Roxxy did with the hotel project, or worse, be a land banker, like unnamed parties. Was he thinking of Kim Cranston? Was Mr. Packard thinking Passarelle was a land banker?
VIDEO: Ron Packard explains that Morris is not a land banker….”not someone who will just buy land and sit on it for years…if you have $200 million in the bank…you can afford to be a land banker…”
Secret Working Law
Kim Cranston’s lawsuit asks if the “city” might have had some “secret working law” that dictated how to dispose of the city-owned land. Lalahpolitico doesn’t know about that.
But it does seem that Doug Schmitz’s job goals, as first anticipated in the Town Crier by Ron Labetich, were the 2009 “City” vision for revitalizing downtown. Mr. Labetich was on one or more of the Downtown Development Committees launched and chaired by Ron Packard and Val Carpenter. Mr. Labetich was also on the “Downtown Opportunity Study” that hoped to put parking structures on the city-owned plazas. Those committees did a good job of getting input into the “Vision” from selected major downtown stakeholders-developers, prominent property owners, key city council members, etc. Executing that “Vision” was Doug Schmitz’s job goal. Ron Packard and Val Carpenter were prominent in the selection of Doug Schmitz.
A city council is elected by us to set Policy and Vision on our behalf – A City Manager just implements it.
VIDEO: Feb. 23, 2010. Kim Cranston expresses disappointment that the Citizen Visioning Process was postponed by City Council at the same meeting that approved the Morris Exclusive Right to Negotiate.
In 2009 activist citizen groups were asking for broader based community input into the Vision for downtown. [Besides the Downtown Development Committees.] There had been one visioning session in the fall of 2009. There was $60,000 funding for a second one for early 2010. Lalahpolitico does not know what the findings of the first community meeting were. But it is noteworthy, that at the very same city council meeting of Feb. 23, 2012 – when Morris was granted the Exclusive Right to Negotiate with the City for 120 days – the second 2010 Community Visioning meeting was postponed to another budget year.
This Feb.23, 2010 City Council meeting was essentially the culmination of the 5 closed door meetings in in from Nov. to Jan. about sale negotiations with Morris — meetings which were noticed as being about leasing the property. The “exclusive” meant that the city would not be talking to any other developer for at least 120 days… and maybe never… if a deal with Morris emerged, which it did at the City Council meeting on September 14, 2010.
It does not appear there was any “earnest money” attached to the February 2010 “Exclusive Right to Negotiate.” However, the September 2010 Option to Purchase, required Morris to pony up $100,000 rising to $400,000 option money over about six months. He had up to 2 or 3 years to jump through planning and construction hoops before he would have to produce the other $2.7 million cash for the land. The close of sale has not occurred yet.
VIDEO: Sept. 2010, Dave Snow says amend the Option to Purchase agreement. Let other developers see that Morris has put $400K at risk to lock up at $3M property for 3 years, and there will be other better offers.
As Dave Snow explains in the video above, Morris got control of this $3.1 million dollar parcel, for around 3 years, with $400,000 down and at risk and no interest to carry it. The “city” is carrying it. Perhaps, as Ron Packard says, this deal is the way to avoid land bankers. Lalahpolitico defers to better real estate minds.