The Challenge.
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.
The Solution.
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.
The Result.
Due to our tact, creative and logical problem-solving skills we were able to successfully complete the project. We ultimately sold each individual asset as a net lease investment to private investors who paid a premium for both the Buffalo Wild Wings and Chilis due to the quality of the project and real estate. We later sold the IHOP to the owner of the restaurant.
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