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Presentation by Mitchell Schneider, President, First Interstate Development Company
to the Avon, Ohio, Planning Commission on June 25, 1998

MR. BURIK: The next two issues deal with referral from council on the rezoning of the property south of I-90 East of 83.

Just for the record, Mr. Piazza is abstaining from any discussion.

MR. PIAZZA: That's correct.

MR. BURIK: All right. We received a correspondence from Mr. Phillips indicating objection to this meeting and also indicating that there wasn't sufficient time for scheduling of this meeting. I would like to explain that briefly. Our rules of the Planning Cmmission required two days. I believe we complied with that. The matter was referred to us on Monday. The notices went out Tuesday all of this in light of the fact we're approaching the summer holidays. People are leaving on vacation. It's hard to get a quorum, and, frankly, there are a number of meetings scheduled today, so everybody was going to be here today anyhow, so it's a matter of efficiency.

Having said that, I would like to go to Item 4. In thinking about the issues before us and thinking about this meeting, it seemed to me that we could -- this is a serious matter that requires consideration and maybe issues that we may not be aware of.

In that light, I thought it would be proper that we solicit input from a professional planner. Mr. Hartt has been involved in this project. I believe he is also involved in the City of Avon Lake nearby, so he is quite aware of this part of Ohio, what is happening and what the original picture is. We do have some money allocated for consultants. I think this is the time to maybe spend it because I think this is a serious enough matter to consider input from a professional.

Any comments or discussion on the matter of hiring D.B. Hartt to provide synopsis of his opinion on matters of rezoning, the impact it may have on the community, answers to all questions that the -- that any of the members may have just using his resources as one of the considerations in our discussion.

MR. GRACZYK: When do you plan on having him be here?

MR. BURIK: Well, good point. The thought was, and I have spoken to Mr. Hartt when he is available, Monday is a good day because it's the fifth Monday of the week, as you know, so a lot of the typical meetings are not scheduled. The council is not meeting. He doesn't have any scheduled meetings either because of the uniqueness of that Monday. What I would propose is -- and I checked with him that there would be sufficient time for him to get prepared and he clearly thinks so. Our funding isn't that great, so he'll have to do this work in a brief period of time, and, yes, he will be here Monday. So the proposed meeting scheduled would be Monday at 7:30. How is that with everybody? Is that good with everybody?

In that case, I have a motion to suspend the rules on the matter of hiring D.B. Hartt as a consultant for the Planning Commission.

MR. WEARSCH: So moved.

MR. GRACZYK: Seconded.

... Motion passes.

Item 5 is referral from council for rezoning of property as requested by First Interstate Development Company. We do have the applicant here. I think what I would like to do is get the applicant to make a brief statement about his intentions and his requests for rezoning. We can ask any questions as you please.

Also, if you have any questions that you think you would like Mr. Hartt to address, let me know and I will pass those on that he comes prepared specifically to deal with those.

Mr. Schneider.

MR. SCHNEIDER: I wish I could say that I was delighted to be back in front of you all, but the facts being as they are, I do welcome the opportunity to work with the Planning Commission again and to have a full, fair discussion with respect to First Interstate's request for the rezoning on the property that is zoned C-2 and that is included in the proposed Avon Commons that was processed through the Planning Commission over the past many months.

As all of you are aware, the C-2 zoning classification was challenged and Judge Janas, at least at this point, has ruled that in order for the Avon Commons project to proceed, the property would have to be zoned C-3. To be clear of the status of that court case, we have filed a motion for reconsideration with Judge Janas indicating the arenas in which we feel errors in the legal opinion were made. The judge has not yet ruled on that motion for reconsideration and should the judge rule not to reconsider, we will appeal that decision as well because as we have proceeded through this project, and since this question of zoning was raised, we have held the opinion based upon our legal research and based on the reading of the ordinances that the project as proposed is in fact permitted in C-2.

But at a parallel track, it seems to be prudent to proceed with the request for rezoning. The legal system can take time and toll, and we thought that given the quality of the project we would propose to the community that proceeding down a track toward rezoning might be another opportunity for us to proceed on a quicker time frame.

I guess I would like to preface my comments by saying that I understand fully that no rezoning is to a particular project. However, without creating any contractual obligations on any party's part, I would like to say that First Interstate came to this community many months ago, almost a year ago now, and presented itself to the community, both Council and the Planning Commission as an entity and a corporation and consisting of people who are committed to acting with integrity, who are committed to working within the statutory framework of this community and who are committed to presenting the highest quality product that we can addressing concerns and needs of the community and hopefully creating a situation in which everybody is a winner. We felt that we had done that with Avon Commons and largely believe that this property should be rezoned in order to effectuate what we believe is a win-win situation.

The request for the rezoning is for the exact 86 acres that were contained in the prior proposal for Avon Commons. We have not added or changed the legal description of the C-2 property to incorporate any of the adjacent residential property. We felt that in processing this with the city, that to change the area defined by the commercial zoning would -- might be criticized and, therefore, felt that the fairest and cleanest way to proceed would be to propose a legal description for this rezoning that did not include any of the adjacent residential property. That is the proposal that's in front of the Planning Commission for recommendation.

I think that if I -- can I take a few minutes and just go over some of the differences between C-2 and C-3 and what it is that we're talking about?

MR. BURIK: Yeah.

MR. SCHNEIDER: ... The only thing that I could utilize for the C-3 comparison is the Avon Commons project because that's our intention. Given Judge Janas's ruling, this C-3 Avon Commons project could be -- the Avon Commons project is an example of what could be developed in a C-3 category. This is a comparison project of what might be developed in a C-2 category. Each of the buildings is 20,000 square foot or less. There may be some issue with respect to the connection of separation between these lines that would be worked out, but at the end of the day something along the lines of many smaller buildings provided in 10-acre tracks would be the result of a C-2 development in this area.

To briefly point out some of the differences which may not be obvious from just looking at these two drawings, I would like to present a few of those.

First of all, Chapter 1276, which applies to C-3 zoning, would require for any development in excess of 70,000 -- in a building in excess of 70,000 square feet that there be 30 percent green space.

Whereas, in a C-2 district, the green space requirement is 20 percent. What this would mean is that in a C-3 zone there would be roughly 25 acres of the 86 acres remaining green versus roughly 16 acres in the C-2 district.

In addition, as the developer of the Avon Commons project, we have committed that the adjacent residential acreage consisting of roughly another 10 to 12 acres or so would also remain as permanent green space along Middleton Drive and in other certain areas that we have designated on the site plan. If this were to be developed as C-2, one might expect that the residential land adjacent would then be developed as a residential development.

In a C-3 zone or in the C-3 plan, and I will call it Avon Commons for purposes of the record and this presentation, the project could incorporate and utilize the green space to create amenities of the nature that we provided in the Avon Commons project like a five-acre festival market walkway that could house art festivals and antique festivals and farmers markets various weekends throughout the summer and like the two-acre gazebo area that could provide for Sunday afternoon concerts and so forth.

In a C-2 district where parcels are of ten acres, no such amenities would be provided because each party would be working with a much smaller scale development and no conglomerated or aggregated amenities of that nature could be provided.

The C-3 project that we have proposed most importantly along Old Center Road is roughly 80 feet of green area and then a driveway and then buildings. Most of the buildings are more than 120 feet away from the rear property line.

A C-2 district requires the buildings be 20 feet away from the rear property line along the residences along Center Road -- Old Center Road.

With respect to Detroit Road, we worked very hard on this project in protecting the integrity and character and green nature of Detroit Road. Clearly in a C-2 district, buildings could and would be constructed along Detroit Road. The reason that a large project and an integrated project cannot address Detroit Road is because the scale and magnitude of the project itself would draw people into the development.

In a C-2 district that divided all of those properties, the presentation would need to be made to Detroit Road in order that people knew the commercial development was located there, and as a matter of fact, I believe the first buildings that would be built would be built along Detroit Road, and the character of Detroit Road would be forever changed.

As a C-3 integrated project, a project like Avon Commons can commit to and develop the architectural design or theme that can be committed to a body like a Planning Commission and can make an overall presentation that is architecturally compatible for a full 86-acre development.

A C-2 characterization of this 86 acres would result in many -- at least eight and possibly many more individual developments with individual potentially -- potentially individual developers, individual building users, a variety of building uses and certainly not enough opportunity to provide for an architectural theme and to develop the same aesthetics that an integrated project like the Avon Commons project would provide.

A C-2 development would take years to develop. It would mean construction traffic on Detroit Road for I don't know how many years, I would say that at least five, probably more, as each one of these projects was undertaken and developed. Whereas, the construction interference of a single development on these 86 acres would be 18 months of construction traffic and the project would be completed and open to the public and the infrastructure improvements would be installed and the community would be done with.

I think another major point is the off-site improvements that are associated with the Avon Commons proposal as well as with the opportunity to develop this parcel as a C-3 parcel as opposed to a C-2 parcel. When a developer comes to town, and maybe First Interstate has gone to the extreme in this regard, but certainly any community would have the community to begin to extract certain infrastructure and other improvements from a developer and the larger project as an integrated role that is proposed, the larger pool of moneys are available from the developer to then share with the community and make an investment in the infrastructure of the community, and, in fact, through the various negotiations and conversations that we have had on this project, First Interstate has devoted roughly two and a half million dollars to the infrastructure improvements.

When a C-2 parcel of this magnitude were to -- were a C-2 parcel of this magnitude be broken into 8 or 10 or 12 or 15 smaller projects, certainly the sum total of what might be extracted from the development of those individual projects would not approach the level of improvements that First Interstate has proposed be made in connection with the development of Avon Commons.

Further, whatever improvements might be extracted from developers along the way in connection with the C-2 development would be extracted over a period of years as this project unfolded phase by phase by phase, and, again, not only would there be construction traffic for the improvements constructed, but also for whatever infrastructure was added along the way to address the additional development that would take place from each phase of construction.

Finally, because of the 30 percent green space requirement as well as the integrated nature of the project of Avon Commons on the 86 acres, we have limited the building area to approximately 600,000 square feet, in the low 600,000 square foot range. This plan shows approximately 750,000 square feet for a C-2 area and it's over-parked in comparison to the requirements of the code and specifically an example of what might be here, I believe, that by simply looking at a set of numbers and relationships of land and green space and potential building area of parking, that more than 850,000 square feet of building area would actually be permitted by the ordinances in a C-2 category.

Finally, as part of this rezoning, I just wanted to remind the Planning Commission, and I would like to pass these out even after this presentation, of some of the economic impacts that a project in a C-3 district or a project of this kind can bring to the community.

After this project is up and constructed, the real estate taxes alone from this project would total over 1.2 million dollars per year to this community with roughly $750,000 of those real estate taxes going to support the schools. The personal property taxes are another $650,000. The payroll taxes to the city are another $187,000. Cinema taxes would be in the range I think minimally of $170,00 and the addition to the general revenue fund of the community, the city, would be over $600,000 a year.

As an example of the addition that this project would add to the tax base of the community, my understanding that of the current assessed value of all of the property in 20.5 square miles of Avon today is roughly 233 million dollars. This project's assessed value is approximately 22 million dollars or just under a ten percent addition to the assessed value of land in the community, and by my calculations, and I believe they're right, the development of this project would reduce the real estate taxes for all of the other property owners in this community by approximately eight percent upon its completion. That's a winning situation as far as I can see it given the fact that we have addressed every major impact that this project might have on the community by the way of infrastructure improvements and otherwise.

That's our case in a nutshell. I am happy to hopefully prepare to answer any questions that the Planning Commission has regarding our request for the rezoning of this property.

MR. BURIK: I would like any of the council members to ask questions. I would like to refrain from voting on the financial impact. I am not quite sure that's really within the scope of review in terms of analysis or consideration with respect to the land use and traffic and things like that, so does anybody have any questions?

Mr. Wearsch?

MR. WEARSCH: Actually, it was pretty well addressed in your comment. My concern and the question I had was the amount of development that could occur fraction wise if it was developed as C-2 as defined by the courts, and you did answer that question.

When you use that 850,000 square feet, is that what you considered a real estate figure or was that a max figure?

MR. SCHNEIDER: Well, look. I think that's a maximum number. We have laid this out. I didn't spend -- I didn't spend a lot of time on this. It was just an example of what could be done. This has 740,000 square feet on it. I know that there is more parking on this drawing than is required by the code. Now, this is ugly enough I thought for purposes of the presentation that I didn't send the guy back to go start trying to do more. I think as a developer that more building area would probably be squeezed on here. I think this is probably a 750,000 square feet range. It's probably more accurately the range of square footage that would end up developed as a C-2.

MR. WEARSCH: The reason I wondered about that figure and the question I had I did a rough calculation on that and it showed that approximately a million square feet could be potentially developed on that property based on our requirements in the city. That would be a concern of mine when a development could increase by, you know, in essence, 40 percent or somewhere around that and be (inaudible) on top of that.

That, obviously, was not a concern of ours before because we had the recommendation from the zoning enforcement officer and ZBA that the property was properly zoned. Now the question occurs I believe that we have to look at the potential of what could be developed on that property and what impact it would have on the city. I feel the points that you made were right on.

MR. BURIK: I have a question. I am sure it will be sort of a -- you will not be able to give me a truly objective answer, but I guess my concern is the leasability of the smaller units. As much as everybody says we hate the super stores, most people go to shop there because it is cheaper and more selection and they do end up making -- serving and doing well because the people support them.

On the smaller scale, I want to ask you and I know that your answer will be somewhat skewed because you obviously are presenting -- requesting rezoning, but you certainly have experience in the retail industry. Can you comment on the leasability and the percentage of lease space and vacant space in smaller versus larger units?

MR. SCHNEIDER: I would like to thank you. While I am an advocate, I am also a professional and I hope that I have demonstrated in the past before this Planning Commission that I am prepared to be straight forward. This is a talk that I have actually given in several public environments, and I think that while it may be -- I am biased that the facts will bear out what I have to say about them. What has happened in the retail industry over the last decade more and more has been a shift away from small shop retailing to large box retailing, and this is evidenced by several factors.

First of all, if you look at the retail product that's been developed anywhere in Northeastern Ohio over the past five to ten years, what you will find is that the ratio of small shop space to large box space has consistently shifted so that it used to be that people would develop a supermarket of about 40 or 50,000 square feet and maybe a discount store of 80,000 square feet and then about 60 percent of their space would be small shops that would be lined up. There were many small shop developments that were taking place that had a 20,000 square foot tenant or a 15,000 square foot tenant and a whole bunch of space for the Ma and Pa local retailers as well as the large number of national and regional chain stores that were operating in the 3,000 or 4,000 or 5,000 square foot units.

What has happened over the last decade is that slowly, but surely, first the individual small store retailers have gone out of business. The Ma and Pa retailer is the oddity today whereas 15 years ago they were the primary tenant in retail facilities. What the primary tenant is today is large box stores. Even the chains of 3,000 and 4,000 square foot tenants like Ten Below have gone out of business. They can't compete well with the Wal-Marts, the K-Marts, the Targets, the Home Depos, the Kohl's Department Stores, the Office Max, Staples, Pet Smarts and other operators of these stores that exist across the country.

First Interstate proposed a shopping center that is roughly 620,000 square feet or something like that on the site plan, and if you note, we have one space of 7,200 square feet for small shop retail in a 14,000 square foot building. The rest of these stores are single tenant operators that are 23,000 square feet or larger other than the individual restaurants that would be on the outlining areas. The reason for that is that there are no tenants to occupy those small spaces today with the financial credibility and financial statements that we as a property owner would care to get in to.

What does that say about a proposed retail development of a bunch of small spaces in a C-2 district? First of all, I have heard comments not only in Avon but in other communities about the vacancy that's out there and whether or not a project like this is merited or any project is merited. And if you look around, the primary vacancy that exists in the marketplace today around the country is small shop spaces, not the large shop spaces, so that the long term viability of projects like this on acreage like this is for the national publicly traded corporations that occupy shopping centers of this kind.

We also live at this point in an economic environment where money to real estate development is flowing rapidly, and just as we went through a cycle in the 1980s where a project didn't have to be economically viable and could be speculative in order to be built, the same thing is happening today in that real estate speculators are building products in many different places around Cleveland as well as the country that may not have long term economic viability because they're getting in bed with any number of tenants to fill the space that don't have the longevity of national publicly traded retailers, so most of the vacancy that gets -- that we see on the street today is in small shop spaces. That's not precluding banks from funding projects from developers that include significant percentage of small shop space. And I think that clearly the economic vitality for the long term of retail in this portion of C-2 would see a lot more turnover, a lot higher percentage of vacancy than retail with the large box on a C-3 that we're proposing.

Just to add to it because thinking through what I am saying it sounds pretty much subjective, but we're just finishing a 500,000 square foot center in Willoughby, Ohio 480,000 some square feet, and by way of comparison, we have 9,000 square feet of small shop space in line like this. We have an 11,000 square foot odd lot building on one of the odd lots like this and that's the entire amount of space that we have devoted to small shop space, and the same is true with our prior -- immediately prior project as well. It's such a small percentage.

MR. BURIK: Any questions? Any questions for Mr. Hartt?

MR. WEARSCH: The project in Willoughby, is that the one with the Target?

MR. SCHNEIDER: Yes.

MR. WEARSCH: I was just there last week.

MR. SCHNEIDER: Good. It's not quite completed, but --

MR. BURIK: Does anybody have any questions they would like Mr. Hartt to address?

MR. GRACZYK: If this 86 acres were to remain C-2, what would be the likelihood that would develop at all this 86 acres? Okay? I can't believe that anybody would stick money into putting in all those shops without an anchor there to take and draw the people. I mean some small shop may draw people but generally speaking it's the anchor that draws a group of people and they have a tendency to shop in the area where they would shop, okay? I don't think that will ever happen, okay? I think I need to know that answer from him.

MR. BURIK: Okay. Any other questions for Mr. Hartt?

MR. MALLOY: I would like his opinion on how he thinks the whole thing being developed between 83 and Center Road and the BP gas station in there and see if he feels that's warranted or he feels that should be developed in some other way?

MR. BURIK: Are we going to say Detroit and 83?

MR. GRACZYK: Actually, you ought to ask that question all the way to Middleton Avenue, all the properties down Detroit Road.

MR. MALLOY: That whole area, I would like to see what his opinion would be for retail parks.

MR. WEARSCH: Hope we can do that in six hours.

MR. BURIK: Detroit and 83 Middleton. No zoning.

The question I had for him and I would like him to kind of deal with is in in the process of reviewing this proposal in the past, often we hear the comment "We don't need it," and I think I would like him to address that in light of -- as a planner, you know. We're here in '98 and this population, what does he think in 5, 10 years. My question would be is it needed, is it needed it in Avon.

The follow-up question to that would be if the answer is yes, if he says yeah, because of your population, there is need for so many hundreds of thousands of square feet of retail, then where should it be. Where should this place be?

MR. GRACZYK: Well, you know, you kind of made me do a little thinking. Maybe as part of that question you ought to ask him is it needed in Avon because of the development that's going on around us. On every boarder we have similar developments going on.

MR. BURIK: By the way, I would like to maintain our agreement that there be no contact between you and Mr. Hartt even as far as the drawings go.

MR. SCHNEIDER: That's fine.

MR. BURIK: Anything else?

MR. WEARSCH: Well, the question that you were raising about is it needed and the only comment that I would make is that council adopted a code calling for different types of zoning, and C-3 zoning was one of the classifications that was developed. That was developed for a specific purpose. Obviously, it was intended or thought that at some point in time the city would have a need for C-3 development, so that in itself is telling me that our forefathers before us decided it was needed and what happened when it came is we would have a vehicle to control it. Now we're down to a situation deciding where. I think the question is not if, but where.

MR. BURIK: We'll let him take those questions.

MR. SCHNEIDER: I just have one other comment that I would like to make, which is in connection with the question of is this needed. In light of what may or may not be happening in surrounding communities, a project that's announced is not a project that's moving forward, and if Mr. Hartt is taking into consideration the surrounding area, I think that what is actually under construction or developed in surrounding areas is the standard and not what has been announced, because a lot of projects get announced and don't move forward.

MR. BURIK: This is not a public hearing, but we do have a city councilman that wants to ask a question and the councilman does carry weight, so, please.

MR. KAISER: I have a couple of quick comments I would like to make. The first one is when our forefathers did this sort of design for the city, it was done many years ago. These type of shopping centers were not popular and were not the main stream as they are now. I would like to make that comment.

Secondly, Mr. Schneider, my biggest concern is that retail trends do change. You have commented yourself that they have. What is to say they're not going to change again? What guarantee does the city have that you're going to stay the owner of that property and that you will maintain a rented situation in those centers? The biggest problem that I have is when you see something like Severance Center that's gone out of business which was a whole small basically and not to mention a few others like Randall Park that is struggling and so forth. What sort of guarantees do we have? I don't think the question so much is if. I think the populous is wondering why should we. We have got it going on all around us. Why should we have white elephants that are empty in our town as they are in so many others?

MR. SCHNEIDER: Thanks. I am glad you asked the question and I am glad to have the opportunity to answer it.

Like everything else, things are always in a state of change in the retail industry as in every industry. But what is helpful in connection with a guarantee of the long term viability of a shopping center like this, Mr. Kaiser, is that the retailers are making incredibly large commitments to paying a stream of rental income over a period of many, many years to the developer in order to occupy the space that they're occupying, so that a retailer that occupies a space of 100,000 square feet at a rental of $8.00 a square foot has a long term obligation generally in the range of 15 to 25 years, a good average of 20 years for these kinds of leases, to pay $800,000 a year in rent. Those retailers are by and large publicly traded corporations. They have you and me and anyone else that owns a share of stock in those companies to answer to and they have got an obligation to perform and to make money off of the rental obligation that they have got. That is a very large impetus for large store retailers to continue to remain profitable on through the years, so that's number one.

But notwithstanding that, certainly spaces will go dark over the course of the life of -- the useful life of a facility like this. What are the guarantees that the community has regarding that? I think there are several.

Number 1, we agreed to post a bond with the community, a cash bond, to make sure that if any building is dark for any period of time, that it's properly maintained and that if the owner, whether it's First Interstate or any other owner, because it runs with the project, not with First Interstate, wasn't doing its job to maintain that facility, the city had a fund to step in and to maintain that out of that cash reserve. I think the number was $50,000 that was on reserve and it was also provided that if that $50,000 was spent at any time by the city or any portion of it that the then current occupants of the entire shopping center have a liability to replenish that fund with the city, so there are many occupants of this facility and all of them will be subject to that obligation over the entire life of this facility.

MR. BURIK: Can I jump in for a second? I want people to know that wasn't some kind of grand gesture from you. That was a C-3 requirement that was written in the code several years ago when we anticipated large box stores and those kind of problems, so that was some forethought to plug in for planning.

MR. SCHNEIDER: And then I would like to finish because it's a good question and things do change, but you mentioned Severance Center, for instance. You know, I grew up at Severance Center with my mom when I was a little kid and it was a mall and it was one of the early malls and there was a fountain in the middle of it and today it's empty. As a matter of fact, most of it is torn down. What happened there is that it's at its useful life and it's a piece of properly zoned property in the right location and it is being redeveloped into an asset for the community.

I think that if you got in touch with the Mayor in Cleveland Heights and talked with the city officials regarding the redevelopment of Severance Town Center, that they would tell you how pleased they are with the reuse and redevelopment of the shopping center and how the owners/developer has worked with the nationally changed retail environment to reconstruct and redevelop that facility to again be a productive and positive asset for the City of Cleveland Heights. And the same is now beginning to happen with the North Randall Mall. Talk about a white elephant. I think when it was built 20 years ago was the largest mall built in the United States. Today it's up 40 percent empty or more, but what are they doing? I read in the Plain Dealer, I imagine it was in the Lorain County edition over the weekend, that they are making a 20 million dollar investment into that mall and adding a theatre and adding other entertainment uses and revitalizing it. They announced expansions within the mall of some additional 10 or 15 retailers, and, again, by capital infusion by the ...

MR. BURIK: ... There are two other meetings, and we are going to move on to things like sewers. It doesn't sound but it is important, so having done this, I would like to schedule a meeting for Monday at 7:30 here in the council chambers -- there is no council meeting, for the Planning Commission to have the second reading of the referral from council, and I will call Mr. Hartt tomorrow. He indicated to me he is available unless something changed in the last 48 hours, and that should be no problem. We'll see each other then. ...

More Documents Relating to the June 8, 1998, Decision Against Avon

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