Consultant calls Home Depot a financial gamble

Acorn Staff Writer


Whether or not the Agoura Hills anti-big box initiative, Measure H, passes on March 5, the proposed shopping center containing Home Depot might already be doomed financially, according to consultants close to the project.


A letter obtained by The Acorn dated last May informed Home Depot Real Estate manager Gregory George that in order to meet the company’s pro forma development requirements, the 140,000 square-foot retail store would need a $1.5 million annual subsidy from the city over a 10-year period.


"Given the fact that the store will only generate $408,000 in sales taxes to the city the first year and $544,000 in the fourth year, that level of assistance seems problematic," said consultant Mark Briggs in the letter to George.


Home Depot constitutes phase one of a proposed 255,000 square-foot shopping center along Agoura Road’s redevelopment zone. Phase two of the 24-acre center would include shops and restaurants.


Both the Home Depot consultant and a former advisor to shopping center developer Dan Selleck said the $23 million big-box store would produce annual shortfalls that would be difficult to overcome unless public monies are committed.


"If they build phase one, he’s $15 million under, if they build phase two, he’s $15 million under," said Ed Ball, a former minority partner who was fired by Selleck last year.


"The city doesn’t know about these costs," Ball said. "They haven’t seen this."


Selleck said Home Depot has a strong interest in Agoura Hills and has since revised the numbers.


Ball and Selleck are battling over several issues, including a commercial real estate deal in Moorpark in which Ball claims he never received a promised share of ownership. The former partners also clashed over development of Centerpointe, a proposed Agoura Hills office complex.


"You have a disgruntled person basically trying to create problems," said Selleck, who sought a restraining order against Ball last week, an action later mirrored by Ball.


The Agoura Hills City Council—under increasing pressure by Measure H proponents to give full negotiations—denies that any Home Depot subsidy is forthcoming.


"There is no proposal on the table for this city to make any type of annual payment," said Agoura Hills City Attorney Craig Steele.


Nevertheless, an unsigned development agreement last year between Selleck and Agoura Hills includes reference that the city would contribute at least $1.5 million toward the Home Depot project.


Steele said the agreement is outdated and has been superseded by more recent negotiations between Selleck and the city.


"The reason the redevelopment agreement never got finalized is because the costs are moving and the proposed improvements could change," Selleck said. "We’re trying to get up-to-date costs to figure out what the project share should be."


Agreements involving public-private partnerships are common in commercial real estate development. One transaction might involve a city acquiring private property through eminent domain and later selling it to a redevelopment builder.


Because it occupies part of the Home Depot site, Agoura Equipment Rentals on Agoura Road has been the target of an eminent domain takeover. But Ball said he was instructed by Selleck to stall the relocation of that business because the moving costs would be too high.


But Steele said, "The city would be legally required to relocate that business, not make it disappear."


And even though he was asked to negotiate with Los Angeles County over the relocation of the Animal Shelter for phase two, Ball said he was told "repeatedly" that the second phase would never get built because of cost overruns.


Ball said phase two would trigger the full widening of Agoura Road at a cost of greater than $5 million, and that Selleck wants to contain his costs by developing Home Depot only.


"I have been asked to keep quiet with respect to my projected costs on the project to keep Home Depot interested in the project, even though I knew that the development costs were substantially greater than their estimates," Ball said in a prepared statement to the city council last week.


He recommended to the council that Selleck be required to post a bond to ensure relocation of the Animal Shelter and the widening of Agoura Road to four lanes.


Selleck said it’s the city’s obligation to make certain road improvements on Agoura Road and Roadside Drive whether Home Depot is built or not, and that his own contributions to the improvement of infrastructure will play an important role in the safety of the road.


Further signs the overall deal might be crumbling came when Selleck fell out of escrow on two parcels needed for the second-phase shopping center: a five-acre lot owned by Litton Industries and a seven-acre lot to relocate the Animal Shelter.


Contrary to Ball’s allegations, Selleck said he wants to build phase two and relocate the shelter.


Developers have tried for more than five years to bring retail to the Agoura Road site, considered by local politicians to be an eyesore because of its mish-mash of building materials, rental equipment facilities and portable machinery that are visible from the freeway.


At one time there were negotiations to put a Target store at the site, but citizen opposition was miniscule compared to the outcry over Home Depot.


Measure H opponents say the move to ban nation’s largest home improvement chain has been prompted by local businesses fearful of competition.


City councilmembers oppose Measure H because it bans all retail stores greater than 60,000 square feet.


"I’m not in favor of Home Depot generally, but they’re entitled to their hearing," said City Councilman Dan Kuperberg. "Measure H doesn’t give anybody a hearing."


Measure H proponents charge the city has been committed to Home Depot all along and that previous dealings haven’t been publicly disclosed.


"Negotiations have been going on in some way, shape or form for a long time," said Dan Crisafulli, a critic of the development. "If Home Depot had not been encouraged by the city, they would not have been going on this long."





Leave a Reply

Your email address will not be published. Required fields are marked *