Item 27 - Appeal Application Nos. 2020-03 and 2020-04 - Central Pointe Mixed-Use Development

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4W THE CONCORD GROUT IV MEMORANDUM To: City of Santa Ana From: THE CONCOIRI® GkOUIP Date: October 22, 2020 Re: Viability of a Grocery Store and Market Optimal Scale of Retail for the 4th and Cabrillo Project in Santa Ana, CA In August 2020, The Concord Group ("TCG") completed a highest and best use analysis for the 4th and Cabrillo project in Santa Ana. It was TCG's conclusion that the current plan set forth by the developer, which includes 644 apartments and 15,200 square feet of retail, is the highest and best use for the property. Per preliminary feedback from the Planning Commission, we understand the City would like further explanation with regards to two key conclusions in the analysis: 1. A grocery store is not supportable on site; 2. The +/- 15,000 square feet of retail planned is the maximum marketable retail square footage that the project can support. Grocery Store A grocery store is not viable in the project. Grocery stores require: (1) a high degree of marketing visibility; (2) high density of nearby rooftops with strong incomes; and (3) and convenient accessibility. 1. With regards to point 1, the project possesses attractive visibility along 4th Street, with up to 30,000 cars passing by the site daily. However, with regards to points 2 and 3, the project fails. 2. The density of rooftops and associated incomes is insufficient to attract a grocery tenant. Within a one -mile radius of the project, there are only 9,800 households, with incomes well below the County median. 3. Only in the most urban settings (ie. downtown Los Angeles, Santa Monica), will grocery operators consider structured parking for their shoppers. Grocery shoppers seek "easy in / easy out" accessibility. The large amount of surface parking required for a grocery store would render the mixed -use character of the project financially infeasible. Scale of Retail The current scale of retail planned for the project is the maximum that can be supported on the site. There are several marketing concerns limiting the market viability of more retail on site: 1. There is limited demand for new retail in the site's trade area. Over the last ten years, only 100,000 square feet of retail has been added, with no improvements to retail occupancy during the timeframe. 2. Secondly, successful, large-scale commercial shopping destinations require anchor tenancy — typically a grocery — which is not viable on site. Anchor tenants are the "draw" that attract consumers to the smaller, in -line tenant spaces. 3. Lastly, while mixed -use retail and residential is common in the most densely populated urban settings, a large scale of ground floor retail is not viable in a suburban setting. TCG surveyed three mixed -use projects in Orange County, with ground level retail footprints ranging from 8,500 to 14,000 square feet. Two of the three projects were considered distressed, with elevated rates of retail vacancy (54% and 70%). Like the subject, each mixed -use analog lacks an anchor tenant magnet to attract consumers. In summary, TCG considers the current land plan to be the highest and best use for the 4th and Cabrillo site. The above assignment was completed Michael Reynolds and David Prokopenko. Should you have any questions regarding the data or conclusions generated by the analysis, feel free to contact us at (949) 717-6450. CITY OF SANTA ANA October 2020 4th and Cabrillo Project 20233.00