Though Yardi is a commercial software developer, real development is much riskier. That business has moats, history, customer lock in and competitive advantages. Redevelopment and reuse of these old buildings is a total crapshoot. No one, including them would be able to tease out what will really happen here. They have the deep pockets to sustain plenty of errors in judgments and assumptions. And there will be plenty no doubt. The question of how much something is worth always has the same answer: What the highest bidder is willing to pay for said asset. Since Macy's has been vacant for 10 years, the answer is zero. No large retailer would ever lease that kind of space in SB. So the building either has to be demo'd, meaning it actually has negative value, or repurposed which is very expensive and likely makes it also worth zero or even below zero. If it were raw land that would be worth a lot - if there not a ground lease with lots of life left in it. But this overground bunker known formerly as Macy's is not surface land ready to go and it's not free and clear. I know it's always tempting to ask 'Did we extract enough money out of these brave folks?' Or, 'Could't they have paid more?' Reminds of the JD Rockefeller answer 'I just want one more dollar...' Instead, be happy. We're getting a revitalized downtown. Look at the big picture. The city was smart enough to do so years ago to lease this land for zero dollars. And it looks like they were smart enough to do so again. It's a huge win in the long term. The present value of an asset if the value of it during it's useful life. For the next 35 years, this property is worth zero due to the gratis ground lease that is in place. Try to sell land that has zero future income for 35 years and you will find, uh, zero interested parties. A smart friend of mine years ago told me to just make deals that I think are a wi. A deal that makes you happy. Don't try to assess the other party and then try get more because you think they might pay a higher figure. That is not the way to make good deals - or any deals. Accept the bright future ahead, don't dream the pennies, nickels or even dollars that could ruin a great thing. I'm not affiliated in any way but Yardi seems to be one of the better companies around. They seem to care about their employees and the community. And they are local. It's okay to scrutinize a big transaction and look at details, but we should just accept the win here and look at the big pic. Megan is a real estate attorney, seems like she and the City Admin drilled down. It's such a better development than the current owner proposed which was 7 stories tall.
You should remember that where you're sitting right now used to be a tree, a field, or open land at some point. You benefit every day from development that required change. Just because you're comfortable with the changes that happened before you got here doesn't mean everyone else should be denied the opportunity to benefit from improvements today.
Instead of just complaining, go to a nursery, buy some trees, and plant some trees. There are solutions beyond typing comments online. Take action.
Trees are important. The cypress tree removed from the middle of the freeway is a huge loss, But sometimes that's what progress looks like when you're trying to improve transportation and make things flow smoother for people.
Just because you got yours doesn't mean everyone else doesn't have a right to get theirs.
That's the mentality people criticize when they talk about privilege and NIMBYism. It's easy to support growth when it benefited you and then oppose it when it might benefit someone else.
We need more transportation infrastructure, not less. We need things to move more efficiently, not stay frozen in time because change makes some people uncomfortable.
Also, relating every issue to MAGA is bizarre and honestly says more about your mental health than the topic being discussed. Not every disagreement is political, and not everyone who disagrees with you is part of some culture war. Constantly forcing everything through that lens just diminishes the conversation while feeling righteous to discriminate and hate against others. Not cute.
Hopefully you can understand the lesson here. Trees matter. Transportation matters. Growth matters. The answer isn't to stop everything. The answer is to build what we need and replace what we lose whenever possible.
And more importantly never forget, just cause you already got yours, doesn't mean that nobody else gets to get theirs.
It is kind of complex to tease out who bears the risks and benefits in these projects that have public and private parties involved. I do not believe that the city was a guarantor on the financing that AB Commercial provided for the previous owner (I certainly hope not!) so that was a private business risk that ABC took on, and as it turned out, it was over-leveraged. I don’t think we really need to worry about bailing out ABC, though, as losses on some of their investments are built into their business model. Just to put this into perspective, they have over $200 billion in assets under management. So whatever deal they manage to work out with Yardi, good for them. It is just important not to mix that private-to-private transaction into the value that the land and removal of encumbrances is adding to the deal.
As for Yardi’s investments, they will be investing money into their own property, not into public property. The proposed agreement is also very light in terms of public benefit commitments beyond the one-time fund contributions when the deal closes. For the DSP portion of the deal, there is the 10% 90-year affordability covenant, and primary residence occupancy / no short term rental provision. On the Yardi side, Yardi would be required to offer only as many public parking spots in Lot 1 (the basement lot) as Yardi holds permits for in city lots 2 and 10. Beyond that there is just a 7-year commitment to maintain the current spaces for the arts (MOCA, Center Stage Theater). After 7 years, they would be under no obligation to maintain them. They will be under no binding commitments at all to maintain the inline shopping, or any other community benefit purposes for the property, so the agreement definitely leaves the door open for any sort of development and closure for private use (with the exception of the DLG easement), as far as I can tell from the documents on the project website. If anyone sees any other binding public benefits commitments in the agreements that I've missed, please point me to them.
Very interesting. If Yardi is paying anywhere near $120M + $35M + $5.7M for almost 250k empty square feet, this is going to take a very long time to work out (if ever). I can see why the city considers this a miracle. I hope it works out for everyone.
I think some folks who would consider this is a windfall for Yardi may be overlooking two things: 1)The cost to Yardi to buyout AB's lease position. I read that AB was into their position for $120M when the prior owner defaulted. No idea how much Yardi is paying AB to recoup some of that lost investment. 2) Renovation Cost. Estimate the cost of a 135K sqft adaptive reuse office conversion on a 40 year old department store and you'll quickly see the cost is easily $35M-$55M. So Yardi's potential all-in costs are way in excess of the $5.7M contribution to the City's housing and parking funds. In exchange, they get the land under the mall and bring their hundreds of employees downtown, which it seems will be a net benefit to the downtown small business, nonprofit and hospitality community. A cherry on top is the aesthetic benefit as the office conversion will be more attractive than a windowless department store.
Just realizing I did not address your first point. The buildings on the property have been up for sale, and their value is also depressed by the fact that they come with a lease that expires in less than 40 years. That doesn't leave much time to recoup investment in new improvements, and so makes financing those improvements difficult. What has never been up for sale is the complete property that includes both land and improvements, and no encumbrances of any sort. The 'genius' of this deal is that it unlocks the value of the property by removing the encumbrances on each side, instantly increasing the value of both. That is what needs to be accounted for in assessing what value the city is contributing to this transaction.
I think that the city's representation of this land as having ‘zero value’ is confusing because it sums together the value of 2 distinct things — the value of the land itself, and the value of the long-term lease that ‘encumbers’ it. The value of the land itself is something that is quite straightforward to assess. The county assessor’s office does that all the time, and if you have received a property tax bill, you see the assessed value broken out into land and improvements. The value of the *lease* is less than zero, though, and presumably some sort of calculations were done to determine that the costs of keeping the lease going are greater than the land value, so that’s how we get to zero? Would be great to see these numbers. In this deal, Yardi and DSP will receive the land without the lease encumberments, so that negative value needs to be removed from the calculation to come up with the actual value they are receiving.
That is a separate issue, however, from the SLA *exemption*. The exemption is not tied to the alleged zero value, but to the real constraint in the (since failed) negotiations with ABC in that they were the leaseholder and so it was not possible to entertain bids from competitors. It might be possible to get the surplus land designation for the current deal, but almost certainly not the exemption from competitive bidding that is required to get the maximum return in terms of affordable housing development.
No idea whether this is a good deal for Yardi or not. Paseo Nuevo has been available for sale since 2020 with no buyers - so probably not a slam dunk otherwise it would have traded already. The surplus land act exemption was granted because the encumbrances on the property render the value to the city at close to $0 (its actually less when you consider the expenses the city is burdened with). That, however, doesn't mean it will be worth $0 in ~38 years when the lease expires. And its a great point - the city might be better off just waiting this out for 38 years.
I wish this same logic worked for Thrifty ice cream! According to the BLS inflation calculator, something that cost 5 cents in 1970 should cost 44 cents today. For $2.49, I should be getting five scoops!!
I'm unclear how bike lanes are related to maga. For that matter please explain how freeways and rail lines are remotely maga in a state that has been run, for decades, by democrats.
Worth knowing about the Paseo Nuevo deal: the city is skipping the required competitive bidding process for this public land transfer by using the state-approved "Surplus Land Act exemption" that was originally obtained to enable negotiation with AB Commercial (the current owner of the Macy's building, underground parking, and inline shopping) to develop hundreds of units of housing (including affordable) on the property. The exemption was needed because AB Commercial holds the ground lease on the property, so competitive bidding for that project was impractical. That original deal fell through, but the exemption remained on the books and is now being used for a completely different transaction — one that includes an undisclosed private sale between AB Commercial and Yardi that happens simultaneously with the city's transfer of the land. Under the standard process, multiple developers would have competed to offer the best affordable housing terms in exchange for the opportunity to purchase public land. What the community is actually getting here is only 8 guaranteed “moderate income affordable” units as part of DSP's redevelopment of the Nordstrom building and a $5.7 million contribution to the housing trust fund. In exchange, the community permanently gives up ownership of prime downtown land with no cash payment for the land itself. Is this a case of Yardi generously “saving” downtown, or swooping in to snatch a super sweetheart real estate deal? You tell me…
This write up is such a biased take that sides with a handful of people. I imagine the people groaning about this project have a larger ecological footprint then all the train riders combined.
And if the anti's are worried about pollution, the answer is obvious. Electrify the entire LOSSAN Corridor. Cleaner, quieter, and allows for faster trains.
And perhaps the reason service at the northern end of the corridor has not risen is that service in the southern end is more frequent, and dependable.
Is MAGA in the room with us now?
Remember this: Frequency is Freedom, and for a line like this, siding projects are essential to improving frequency. (Draw some stringlines yourself, or model it out with some toy trains if you'd rather, and you'll get what I mean)
Like most NIMBYism, environmentalism is just the excuse used to block something the neighbors don’t like
You win the prize for seeing past the City/County lines! The train serves all of California, just like the 101 freeway does, so what might inconvenience those who reside along the tracks, is fine by those who continue to wait for improvements to the overall system.
This article feels very shortsighted. It seems to heavily cater toward the viewpoint of Montecito residents instead of a broader audience. This project also affects the people who use the train as their primary mode of transportation.
I am a regular rider of the Pacific Surfliner who owns a car, but chooses to take the train for long distance travel. I am a Goleta resident who uses the train to visit friends and family who live in Orange County and Los Angeles. It is the most stress-free way to travel in California hands down. However, I cannot tell you how many times I have been delayed in Santa Barbara or Seacliff due to a delayed train running in the opposite direction. There have been times we have had to wait for a train running in the opposite direction for up to 30 minutes while everyone on the 101 freeway speeds by with no issues.
I have been waiting for this project to be built for a very long time. The article does not emphasize enough on the point that the Ortega siding will reduce the likelihood of these types of delays. Instead of waiting for 30 minutes to let a train pass, we can continue past Seacliff and meet the train instead at Ortega, significantly cutting down on how long we have to wait.
The one thing I have learned is that transit riders heavily value service reliability. If a train often arrives at its destinations over an hour late, fewer people will want to take the train. This is especially important for people need to get to their destinations on time. This project would absolutely help improve reliability for the train, which will help maintain ridership and potentially attract new riders.
The points made about ridership between LA- SLO being lower than LA-SD and that the Surfliner has not returned to pre-pandemic ridership do not justify cancelling this project. You need to make a rail service convenient and reliable to get people to use it. Up in Northern California, CalTrain (a regional rail service serving Gilroy, San Jose, and San Francisco) underwent an electrification program that led to reduced travel times and a doubling of service to run every 30 minutes between San Jose and San Francisco. As a result, ridership exploded and exceeded pre-pandemic levels. I mention this because it shows that investing in fast and more convenient transit attracts people to take the train. Increasing frequency and reliability on the Surfliner will attract more riders which translates into fewer cars on the 101, making the transportation experience better for everyone.
Canceling this project is not an option. It should have been built yesterday. I completely acknowledge there are impacts to this project such as noise and the cutting down of numerous trees. I completely agree LOSSAN should be working with Union Pacific to find ways to mitigate these impacts by restoring trees and implementing sound walls. I also agree LOSSAN should have been doing this consulting sooner so this project could already begin construction instead of having to modify it now. But this project cannot be cancelled. It would only continue a history of a lack of investment in public transportation that people rely on every day.
I think this is a great project, and I think all the pearl clutching by the Padaro Lane folks is a bit premature.
LOSSAN reps said at the meeting that the designs aren't far enough along to even know if they need to remove any trees, and they said that Union Pacific, which owns the line, gets to dictate the details of the design that will affect any tree loss. Even so, removing and replanting trees to enable more, lower emission capacity to travel between Santa Barbara County and the rest of the Central & Southern coast is a net win for the climate and keeps Highway 101 moving as our population and visitor numbers continue to grow.
A NON-cierge Hotel.... gotta love it.
I don't understand the environmental argument for fighting this. Improved rail service increases ridership, which means more people opting to take the train who would have otherwise driven cars. Surely that has a bigger environmental impact than cutting down some trees, especially when new trees can be planted nearby.
Big fan of trains!
I actually agree with you, much prefer this to the freeway expansion. But the tree loss is a real bummer. Folks should remember that it only took about 25 years for LA to transform from being mostly agricultural land to the LA of the 1970’s
There's a ton of private money and land surrounding this proposal. I expect a healthy fight of might meets right.
Why on earth would we waste time and energy fighting the expansion of environmentally-friendly public transit options? Is this really how we want to be remembered by younger generations as our world spirals towards climate disaster? The fact that people are unironically citing pollution in their opposition is absurd, and reflects the reasons why we can't get anything done in this country.
