Chili’s / Buffalo Wild Wings
Revitalizing FG Arden: A Sacramento Redevelopment Saga
Development Case Study: For years, developers tried to purchase the FG Arden shopping center in Sacramento, a property held by one family since the 1980s, but were unsuccessful. The acquisition challenge entailed not just buying the center but also terminating the current leases, keeping only the freestanding IHOP. Once acquired, the new owner had to secure lease agreements with prominent national or regional tenants. The complex process also demanded replacing the existing CC&R’s, managing entitlements for the parcel map, site plan, and signage. Additionally, they faced unexpected challenges with SMUD to address improperly installed shallow utility lines.
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Acquire the value-add shopping center in Sacramento, California known as “FG Arden” which was in desperate need for re-development. There had been many developers over the past decades that made attempts to purchase the shopping center; however, since it had been in the same family since the 1980’s their attempts were unsuccessful.
The challenges were:
1. Acquire the Sacramento FG Arden shopping center from a family that has owned it since the 1980’s
2. Terminate the existing leases in the center to allow for the demolition of the two major structures while keeping the freestanding IHOP in tack
3. Secure ground leases or build-to-suit agreements with national or strong regional tenants,
4. Disentangle the existing CC&R’s and replace them with a new set of CC&R’s that allow for more of a true triple-net structure for each separate legal parcel / tenant, process the entitlements for the parcel map, master site plan, and signage, and
5. Work with SMUD on the relocation of major utility lines that were later discovered to be very shallow and initially installed by SMUD improperly.
In order to acquire the property, it took establishing a certain level of trust and rapport with the ownership which was established over a period of time by really being direct and transparent with our plans. It was also necessary to be able to address the various owners’ concerns to craft an agreement that they would find acceptable, but that would also allow us the protections and flexibility necessary to facilitate the complex transaction.
Next we created a number of site plans designed to utilize the depth of the property, which was not previously being used, and this allowed us to increase the parking to satisfy the parking requirements necessary for national restaurant users. Through our marketing efforts and relationships, we were able to secure a ground lease with Buffalo Wild Wings, a ground lease with Chili’s to relocate them from the shopping center across the street, and we retained the existing IHOP thus creating three separate stand-alone buildings on separate legal parcels.
We then began the complex process of terminating the existing leases in the shopping center to allow for the eventual demolition of the structures. At the same time, we were negotiating the ground leases with Buffalo Wild Wings and Chilis as well as working to replace the existing CC&R’s with new CC&R’s conducive to the new project. I should also point out that this shopping center was mid-block; however, we were aware the shopping center across the street was required to install a new traffic signal as part of their conditions of approval and thus our project benefitted from that new signal giving our project full access via. a new traffic signal.
While demolishing the shopping center to make way for the new improvements it was discovered that the 12kv lines feeding the project that ran through the middle of the site were only several inches under the service and should have been several feet under the service. It was also discovered that an additional 12kv line which was surveyed by SMUD and that should have been in an easement was in fact several feet outside the easement and on our property vs. the neighboring property. We had to shut down the job site because SMUD would not allow us to terminate the power lines since they fed multiple properties in the area and it prevented us from completing our grading activities. We worked with a utility consultant to help navigate the red tape and on-top of it we had an open site during one of the wettest winters in the past decade. This resulted in us having to cement treat the soils in the middle of winter to be able to complete the site improvements.
In the complex world of commercial real estate, successfully navigating the myriad challenges of redevelopment projects can be daunting. This was evident in our endeavor with the FG Arden shopping center in Sacramento, a project many had attempted and failed. Armed with Capital Rivers Commercial's hallmark traits of tact, creativity, and logical problem-solving, we transformed this once-elusive opportunity into a tangible success.
The challenges ranged from negotiating with a family who had maintained ownership since the 1980s, to intricate leasing matters, and unforeseen utility line complications. Our dedication led to the lucrative sale of each individual asset as a net lease investment to discerning private investors. Assets such as Buffalo Wild Wings and Chili's commanded premium prices, testament to the quality of both the project and the real estate. Further highlighting our commitment to stakeholder value, the IHOP was later sold directly to its restaurant owner.
The FG Arden project serves as a testament to Capital Rivers Commercial's expertise in commercial real estate. It underscores the power of a strategic approach, deep market insight, and an unwavering commitment to stakeholder needs and value creation.