HomeMy WebLinkAbout2023-03-14; City Council; ; Authorization to Explore Options for Potential Uses of the City-Owned Parking Lot Properties at The Shoppes at Carlsbad Shopping MallCA Review CKM
Meeting Date: March 14, 2023
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Curtis M. Jackson, Real Estate Manager
curtis.jackson@carlsbadca.gov, 442-339-2836
Subject: Authorization to Explore Options for Potential Uses of the City-Owned
Parking Lot Properties at The Shoppes at Carlsbad Shopping Mall
District: 1
Recommended Action
Adopt a resolution identifying the city’s project team and future negotiating agents responsible
for exploring options for potential uses of the city-owned parking lot properties located at The
Shoppes at Carlsbad, which includes compliance with the Surplus Land Act and may include
working with representatives for Brookfield Properties or other parties identified through the
Surplus Land Act process toward the lease or sale of the properties.
Explanation & Analysis
The owners of The Shoppes at Carlsbad regional shopping center, Brookfield Properties,
submitted a letter to the city on Jan. 20, 2023, asking to negotiate the terms of either a lease or
purchase of the 67.27 acres of city-owned parking lot properties that surround their shopping
center (Exhibit 3).
These parking lots are not as heavily used as they were in past decades with more people
shopping online, and these properties amount to a significantly large parcel that could be the
site for future residential and/or commercial development. However, before the city may begin
negotiations for the lease or sale of these properties to Brookfield Properties or other parties,
the city must comply with the Surplus Land Act.
Staff recommend the City Council identify the city’s project team and future negotiating agents
who will be responsible for exploring options for potential uses of these properties, which
includes compliance with the Surplus Land Act and may include working with representatives
for Brookfield Properties or other parties identified through the Surplus Land Act process
toward the lease or sale of the properties.
The resolution provided as Exhibit 1 would identify the City Attorney; Deputy City Manager,
Community Services; Real Estate Manager; Community Development Director and the law firm
of Procopio, Cory, Hargreaves & Savitch LLP as the city’s project team and future negotiating
agents.
March 14, 2023 Item #7 Page 1 of 12
This item is being presented to the City Council in accordance with California Government Code
Section 54956.8, which requires that a local agency “hold an open and public session in which it
identifies its negotiators, the real property or real properties which the negotiations may
concern and the person or persons with whom its negotiators may negotiate.”
Explanation & Analysis
Property history
The Shoppes at Carlsbad Parking Lot properties surround the regional shopping center, now
known as The Shoppes at Carlsbad, located south of Highway 78, north of Marron Road, east of
Monroe Street, and west of El Camino Real, including the southwest corner of El Camino Real
and Marron Road. The city-owned parking lot properties consist of numerous parcels totaling
67.27 acres.
The City of Carlsbad, or the Carlsbad Parking Authority, acquired the parking lot properties from
the developer, Plaza Camino Real LP, in two phases, the first in 1969, when the first phase of
mall was built; and the second between 1975 and 1981, when the center was expanded to its
current configuration.
• In Phase 1, the Parking Authority acquired about 30 acres on the east side of the mall
and south of Marron Road to financially assist Plaza Camino Real in developing the
regional shopping center within the city, and to operate as a public parking lot.
• During Phase 2, in 1975, the city entered into a lease agreement with an option to
purchase with the City of Oceanside for an additional 9.99 acres within the City of
Oceanside to expand the parking lot.
March 14, 2023 Item #7 Page 2 of 12
. .., "' -= , ..
CITY Of CARLSBAD Other (6.JSac)
(S/,39ac J'I Car1sbcKI; MJDGESTOI«! RfTAJL
10.10.C ki Oceanside) °"AAllONS u<
R P I CARLSBAD lP
(14.19oc)
NSCU.C:
r-w:;:l'$~i:t£M. ESDTl![UC:
~NNl;Y~M HOU)"'"""
• In 1992, the city exercised its option to purchase the 9.99 acres from the City of
Oceanside. Of the 9.99 acres, only five acres is used as parking for the mall, with the
remaining acreage, located in the creek channel, left as open space.
• Between 1978 and 1979, the Parking Authority acquired an additional 3.26 acres south
of the mall.
• Then, in 1981, the Parking Authority acquired 23.7 acres on the west end of the mall
within the City of Carlsbad and an additional 0.31 acres within the City of Oceanside.
With these purchases, the City of Carlsbad and the Parking Authority owned the combined
67.27 acres surrounding the regional shopping center: 56.97 acres in the City of Carlsbad and
10.3 acres in the City of Oceanside.
During Phase 2, the Parking Authority entered into a lease agreement with the city under which
the city would have control over the Parking Authority’s parking lot properties and repay the
bonds the Parking Authority used to acquire the properties. The city and the Parking Authority
subsequently entered into an agreement with Plaza Camino Real in 1981 that required Plaza
Camino Real to operate and maintain all 67.27 acres of the city’s parking lot properties. The
agreement also mandated that the properties could only be used for public parking for the
adjacent regional shopping center, and contained a reciprocal requirement that established
that if any uses other than public parking were desired, both parties would have to provide
their permission for the requested alternate use.
The city dissolved the Parking Authority (Resolution No. 96-294), leaving the city and Plaza
Camino Real as the sole parties to the agreement. Thereafter, in 1997, the Parking Authority
transferred its interest in a majority of the parking lot properties to the city.
Plaza Camino Real has since sold its interests in the mall to Westfield, LLC, who sold its interest
to Rouse Properties in 2015, who were predecessors in interest to Brookfield Properties, the
current owner.
The city-owned parking lot properties have been used as parking lots for the regional shopping
center since the city acquired them.
Parking revenue bond
The parking lot properties the city acquired in Phase 1 of the mall’s construction were acquired
from the proceeds of a 1969 parking revenue bond for a total of $1,535,000. The bonds held tax
exempt status, so the parking lots had to be used for a public purpose and the city could not
profit from the parking lot properties until the bonds were paid off.
The parking lot properties the city acquired in Phase 2 were also paid for with the proceeds of
the 1969 parking revenue bond with the exception of the 9.99 acres leased from the City of
Oceanside. These acres were leased in 1992 for $70,000 per year, with the subsequent $1
option to purchase, which were paid from the General Fund.
The Parking Authority leased the parking lot properties to the city at an initial annual lease rate
of $142,250, which was subject to adjustment until the bonds were retired in full at a total cost
of $3,133,275, which occurred in 1995. Because the bonds are paid off, there are no longer any
fiscal restrictions upon the property.
March 14, 2023 Item #7 Page 3 of 12
Deed restriction
All of the grant deeds for the acquisition deeds during Phase 1 and Phase 2 contained a
restrictive covenant under which the land was to be dedicated perpetually to public use as a
municipal parking lot. Additionally, the grant deeds contained a reversionary interest clause
that would automatically and immediately revert the policies back to Brookfield or its
successors if the city did not maintain the lots as a municipal parking lot. However, the 9.99-
acre city-owned parking lot property located in the city of Oceanside is not subject to any grant
deed reversionary interests.
Land use designation
The city-owned parking lot properties located in Carlsbad have a General Plan land use
designation of Regional Commercial (R)/Open Space (OS) and a zoning designation of General
Commercial (C-2)/Open Space (OS) and are subject to the Westfield Carlsbad Specific Plan (CS-
219, approved in 2013).
The city-owned parking lot properties located in Oceanside have a General Plan Land Use
designation of Special Commercial (SC)/Civic Institution and a Zoning designation of
Industrial/Special Commercial Highway Oriented (SC-HO). The two properties located in
Oceanside are not subject to the Westfield Carlsbad Specific Plan.
Real Estate Strategic Plan
The City Council approved the Real Estate Strategic Plan in 2017 with the intent to take a more
strategic approach to how major city-owned real estate assets were managed, both to
maximize the return on the investment of public dollars and to leverage properties for the
greatest public benefit. Regarding the city’s parking lot properties, the plan recommended that
the city should explore options for entering into a long-term lease agreement for the properties
with the regional shopping center owner (Exhibit 2). Generally, the city’s stated preference in the
Real Estate Strategic Plan is to retain ownership and lease assets on the properties it owns,
given the long-term value of on-going revenue versus the one-time revenue from a sale.
However, in regard to the parking lot properties, the plan identified both a lease and a sale as
options to pursue.
Brookfield Properties’s request
Throughout the last 15 years, previous mall ownership groups have proposed various land
exchanges, ground leases, or purchases of the parking lot properties in an effort to revitalize
the shopping center. None of the previous negotiations resulted in an agreement. On Jan. 20,
2023, the owners of The Shoppes at Carlsbad regional shopping center, Brookfield, submitted a
letter to the city requesting to negotiate the terms of either a lease or purchase of the parking
lot properties that surround their shopping center (Exhibit 3).
Surplus Land Act
Under the Surplus Land Act, before the city disposes of real property or participates in
negotiations to dispose of real property, including selling the property or leasing it for five years
or more, the City Council must declare the property as either “surplus” or “exempt surplus,” as
supported by written findings. Among other bases, property may be considered “exempt
surplus” if it is subject to valid restrictions not imposed by the city that would make housing
prohibited and there is no feasible method to mitigate or avoid the prohibition.
March 14, 2023 Item #7 Page 4 of 12
Unless the property qualifies as “exempt surplus,” the city must notify HCD, local public
entities, and other interested parties that the property can be used for developing low- and
moderate-income housing. The property must remain available for at least 60 days after the
notification to allow affordable housing developers and local public entities to express interest
in the property before it can be made available to other developers or the broader public.
These procedural requirements apply even if the property is not zoned for housing.
If the city does not receive a notice of interest by the end of the 60-day period, the city may
dispose of the property without following any further Surplus Land Act requirements, except
that certain affordability restrictions must be recorded on the property. If the city receives
notice of interest, the city must enter a 90-day good faith negotiation period and consider
residential use of the surplus land an acceptable use.
Before the city begins the Surplus Land Act process, the city may commission appraisals,
conduct due diligence and studies to determine the value and best use of property, have
discussions with brokers and real estate agents who do not represent a potential buyer, issue
requests for qualifications, develop marketing materials, and have discussions exclusively
among city employees and elected officials (subject to Brown Act compliance).
City Council authority
California Government Code Section 54956.8 states:
Notwithstanding any other provision of this chapter, a legislative body of a local
agency may hold a closed session with its negotiator prior to the purchase, sale,
exchange, or lease of real property by or for the local agency to grant authority
to its negotiator regarding the price and terms of payment for the purchase,
sale, exchange, or lease.
However, prior to the closed session, the legislative body of the local agency
shall hold an open and public session in which it identifies its negotiators, the
real property or real properties which the negotiations may concern, and the
person or persons with whom its negotiators may negotiate.
Staff’s recommendation
Staff recommend that the City Council identify the city’s project team and future negotiating
agents responsible for exploring options for potential uses of the city-owned parking lot
properties, which includes compliance with the Surplus Land Act and may include working with
the representatives for Brookfield Properties or other parties identified through the Surplus
Land Act process toward the lease or sale of the properties.
Fiscal Analysis
There is no immediate fiscal impact to the city from this action. The potential outcomes of the
Surplus Land Act process and any subsequent negotiations, and their potential fiscal impact, are
unknown at this time.
Environmental Evaluation
This action of identifying the city’s project team and potential future negotiators does not
constitute a project within the meaning of the California Environmental Quality Act under
March 14, 2023 Item #7 Page 5 of 12
California Public Resources Code Section 21065 in that it has no potential to cause either a
direct physical change or a reasonably foreseeable indirect physical change in the environment.
Next Steps
Staff will begin exploring options for potential uses of the city-owned parking lots and initiating
steps to comply with the Surplus Land Act.
Exhibits
1. City Council resolution
2. Real Estate Strategic Plan recommendation, Oct. 17, 2017
3. Brookfield Properties letter, Jan. 20, 2023
March 14, 2023 Item #7 Page 6 of 12
RESOLUTION NO. 2023-081
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, IDENTIFYING THE CITY'S PROJECT TEAM AND FUTURE
NEGOTIATING AGENTS RESPONSIBLE FOR EXPLORING OPTIONS FOR
POTENTIAL USES OF THE CITY-OWNED PARKING LOT PROPERTIES LOCATED
AT THE SHOPPES AT CARLSBAD, INCLUDING COMPLIANCE WITH THE
SURPLUS LAND ACT AND WORKING WITH THE REPRESENTATIVES FROM
BROOKFIELD PROPERTIES OR OTHER PARTIES IDENTIFIED THROUGH THE
SURPLUS LAND ACT PROCESS TOWARD THE LEASE OR SALE OF PROPERTIES
WHEREAS, the city-owned parking lot properties located at the Shoppes at Carlsbad are
comprised of 67.27 acres, with 56.97 acres located within the City of Carlsbad, and 10.3 acres located
within the City of Oceanside; and
WHEREAS, the city and Plaza Camino Real LP entered into a public parking lot operating
agreement in 1981 whereby Plaza Camino Real LP was required to operate and maintain the parking
lot properties; and
WHEREAS, the parking lot properties are currently being operated and maintained as a public
parking lot to serve The Shoppes at Carlsbad regional shopping center; and
WHEREAS, on Oct. 17, 2017, the City Council approved the Real Estate Strategic Plan, which
recommended that the city pursue the lease or sale of the parking lot properties; and
WHEREAS, on Jan. 20, 2023, the owners of The Shoppes at Carlsbad regional shopping center,
Brookfield Properties, submitted a letter to the city requesting to negotiate the terms of either a lease
or purchase of the parking lot properties that surround their shopping center; and
WHEREAS, the Surplus Land Act requires that before the city disposes of real property or
participates in negotiations to dispose of real property, including selling the property or leasing it for
five years or more, the City Council must declare the property as either "surplus" or "exempt surplus,"
as supported by written findings; and
WHEREAS, California Government Code Section 54956.8 requires that a local agency hold an
open and public session in which it identifies its negotiators, the real property or properties which the
negotiations may concern, and the person or persons with whom its negotiators may negotiate; and
Exhibit 1
March 14, 2023 Item #7 Page 7 of 12
WHEREAS, staff recommend the City Council identify the city's project team and future
negotiating agents responsible for exploring options for potential use of the city-owned parking lot
properties located at The Shoppes at Carlsbad, including complying with the Surplus Land Act and
working with the representatives for Brookfield Properties or other parties identified through the
Surplus Land Act process toward the lease or sale of the property.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
1.That the above recitations are true and correct.
2.That the City Attorney; Deputy City Manager, Community Services; Real Estate Manager;
Community Development Director, and outside counsel (Procopio, Cory, Hargreaves &
Savitch LLP) are designated as the project team and future negotiating agents responsible
for exploring options for potential use of the city-owned parking lot properties located at
The Shoppes at Carlsbad, including complying with the Surplus Land Act and working with
representatives for Brookfield Properties or other parties identified through the Surplus
Land Act process toward the lease or sale of the property.
3.That the City Manager is authorized to take all actions on behalf of the city necessary and
appropriate to ensure compliance with the Surplus Land Act, including the execution of
documents, subject to their approval as to form by the City Attorney.
March 14, 2023 Item #7 Page 8 of 12
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 14th day of March, 2023, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN:
ABSENT:
SHERRY FREISINGER, City Clerk
(SEAL)
March 14, 2023 Item #7 Page 9 of 12
KEITH
21City of Carlsbad
2017 Real Estate Strategic Plan
The Shoppes at Carlsbad Parking Lot Properties
The Shoppes at Carlsbad Parking Lot propertiessurround the regional shopping center,
now known as The Shoppes at Carlsbad, located southof Highway 78, northof Marron
Road, east Monroe Street, and west of El Camino Real, including the southwest corner
of El Camino Real and Marron Road. The properties consist of numerous parcels
totaling 56.9 acres.
56.9 acres to financially in developing a regional
shopping center within the city. The first phase of the center was constructed in 1969
and the center was subsequently expanded in 1975. The Parking Authority entered
into a lease agreement with the city for control over the parking lots, and repayment
of the bonds used to acquire the property; the city and Parking Authority subsequently
PCR was required to maintain the parking lots. In 1996, the city dissolved the Parking
Authority (Resolution 96-294), leaving the city and PCR as the sole parties to the
Agreement. PCR has since sold their interests in the mall to Westfield, LLC, predecessor
ouse Properties
December 2015. The properties have been utilized as parking lots for the regional
shopping center since 1969 and 1975 respectively.
Acquisition Source of Funds
The parking lot properties were acquired from the proceeds of a1969 Parking Revenue
Bond
status, thus the parking lots had to be used for a public purpose and the city could not
profit from the parking lot properties until the Bonds were completely paid off. The
Parking Authority leased the parking lot properties to the city at an initial lease rate of
$142,250, which was subject to adjustment until the Bonds were retired in full, which
occurred in 1995. The city will need to continue its due diligence to confirm whether
or not a long-term lease or sale of the properties is viable.
Marron Road
Highway 78
Exhibit 2
March 14, 2023 Item #7 Page 10 of 12
The Carlsbad Parking Authority {"Parking Authority") acquired the
assist Plaza Camino Real LP. {"PCR")
entered into a Public Parking Lot Agreement {"Agreement") with PCR in 1981 whereby
in interest to RPI Carlsbad LP. and Rouse Properties LP. {"R ") as of
{"Bond") for a total of $1,535,000 on October 1, 1969. The Bonds held tax exempt
22 City of Carlsbad
2017 Real Estate Strategic Plan
Status
The parking lot properties are currently managed and maintained by Rouse Properties
pursuant to the Agreement. The parking lot properties have a General Plan Land Use
designation of Regional Commercial (R)/Open Space (OS) and a Zoning designation of
General Commercial (C-2)/Open Space (OS), and are subject to the Westfield Carlsbad
Specific Plan (CS-219, approved July 23, 2013).
Highest and Best Use
The current highest and best use and only use allowed under the Agreement is the
continued use of the properties as a parking lot to be utilized by customers of the
regional shopping center. Setting aside the Agreement, the only practical potential
long-term lessee or owner of the properties other than the city, would be the regional
shopping center owner and operator, Rouse Properties. Rouse Properties has
formally expressed an interest in a long-term lease or purchase of the properties.
Value Based on Highest and Best Use
Lease: The city could retain ownership of the properties and elect to pursue entering
into a long-term lease agreement (55-99 years) with Rouse Properties. A formal
appraisal or valuation would be required to ascertain the fair market long-term lease
value of the properties. Entering into a long-term lease agreement for the properties
would provide additional development and financing flexibility for Rouse Properties.
In addition, with a long-term lease agreement in place the properties would be
returned The city will need to continue its due
diligence to confirm whether or not a long-term lease is viable.
Sale: ownership of our properties and lease
them out long-term, rather than sell a particular property. However, the city could
elect to pursue the sale of the properties to Rouse Properties. A formal appraisal or
valuation would be required to ascertain the fair market value of the properties. The
city should, at a minimum, receive sale proceeds that exceed the $3,133,275 spent on
the Bonds. The sale of the properties would provide additional development and
financing flexibility for Rouse Properties. In addition, with the sale of the properties
The city will need to
continue its due diligence to confirm whether or not a sale of the properties is viable.
Recommendation
It is recommended that the city should initiate exploration of options for entering into
a long-term lease agreement for the parking lot properties with Rouse Properties. City
staff would return to the City Council for review and approval of documents as required
and as appropriate.
March 14, 2023 Item #7 Page 11 of 12
to the Assessor's property tax roll.
__ The city's general preference is to retain
they would be returned to the Assessor's property tax roll.
BROOKFIELD PROPERTIES
3200 Park Center Drive #1000, Costa Mesa, California, 92626
T +1 714 427 6868 F +1 714 200 1800 brookfieldproperties.com
January 20, 2023
Mr. Scott Chadwick
City Manager
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Dear Mr. Chadwick,
On behalf of Brookfield Properties, I wanted to reintroduce myself and say thank you for the City’s
continued partnership over the past several years. My name is Tony Pauker and I am the Vice
President of Land Acquisition within the Land and Housing Development Division of Brookfield. I’m
a San Diegan and am thrilled to get the opportunity to work with the City of Carlsbad. I envision
this will be a transformational and generational opportunity at The Shoppes at Carlsbad.
As the owner of The Shoppes at Carlsbad, Brookfield is excited to continue communicating and
working with the City. Jointly we can develop a shared vision for highest and best use of the
property. A vision that will be relevant for future generations, and that addresses the community’s
desires and needs as a vibrant center for shopping, housing, public open space and mobility.
As you know, Brookfield has been interested in pursuing such reinvestment for the past several
years since assuming ownership and management of the Shoppes. Our team is hopeful that we
can start negotiations with the City as soon as possible. Discussing uses, timing and the lease or
purchase of the City owned parking lots are critical first steps. This will allow us to jointly get
started on addressing the community’s needs and make a significant contribution towards
satisfying the City’s housing goals.
Please feel free to reach out anytime. My door is open to the City as this site remains my highest
priority.
Sincerely,
Tony Pauker
Vice President, Land Acquisition, Land and Housing
Brookfield Properties
Cc: Gary Barberio, Deputy City Manager
Exhibit 3
March 14, 2023 Item #7 Page 12 of 12
Brookfield
Properties