BY MAIRE O’NEILL
Two Los Alamos County Councilors, David Reagor and Sean Williams, have been very open in their opposition to a purchase agreement approved by Los Alamos County Council in December before the two new councilors took their seats. The purchase agreement is for two properties on Central Avenue – the CB Fox building and the Reel Deal Theater – for $4 million and the County is close to the end of a 90 day due diligence period as part of the agreement.
Councilor Reagor asked during a presentation by staff for a recent Council meeting, what the County adds to this whole thing.
“You have a developer who has CB Fox now, so he goes down a path where he’s going to try to identify his market and do his thing. What do we know extra that we can use to make a big contribution to it? I just can’t picture it. It’s a commercial property to be developed by commercial people, and we don’t want to turn it into something civic, we want to do something there,” he said. “The Reel Deal building is a little different. That is a gem. It’s a wonderfully built place. I would hate to see that thing go away permanently.”
Reagor speculated that the developer might will just flip it to one of the theater chains meaning he bought the theater at a good price during the lockdown and that maybe when things go back to normal, he can flip it to a theater chain that has money,
“What are we doing in the middle of this real estate flip? I don’t see how that happens that we add anything to that system of real estate speculators by being another person in the mix,” he said.
Reagor told the Los Alamos Reporter Thursday that the County should not own the building but should instead help developers out there to do something for the community.
“We could help the developer make money on the upper floors of the building but it is not our job to tell him the community needs certain kinds of things. It’s none of our business but we can give him a carrot,” he said. “We can waive the height waiver for the building which will allow the developer to add a floor in return for agreeing to add retail to the ground floor.”
Reagor said he is also concerned about the “anti-donation trap”. He said paying a nice healthy price for the building raises all appraisals in the area which could result in the County trapping itself into owning the property because it can’t find buyers.
Reagor said the Council has two more important problems – the former Hilltop House Hotel property and the Marimac Shopping Center area. He said the County needs to save money for those two properties and push for that area.
“We need to build a parking structure near that area and assist people who want to develop it by bringing people in – by making it easy for people,” he said.
Councilor Sean Williams, a realtor, has also been vocal with his concerns.
“I appreciate- the value and allure of owner occupancy but I think if the economics for owner occupancy worked out, I would have expected a business owner coalition to have formed and purchased some of the oversized, overpriced property and ‘condominiumized’ it already. CB Fox is not the only example of property like this, so why hasn’t a business owner co-op formed to pursue exactly this project. I suspect the reason is that it doesn’t pencil out. It’s not going to fly,” he said at a recent Council meeting.
Williams said he doesn’t think there’s any way the proposed purchase makes sense.
“My personal preference would be to stop spending money on due diligence,” he said.
At the same meeting, Williams questioned Public Works Director Anne Laurent about a comment she made that commercial development would not pay for itself.
“Isn’t that illegal? Isn’t that anti-donation?” he asked.
“When I say commercial doesn’t pay for itself, what I’m saying is a developer is very unlikely to purchase a property in our community for the purpose of retail use. It’s too risky and it’s a very difficult situation to be in as a property owner and very difficult to be in as an operator of some of these businesses and I think we’ve all heard different scenarios from people in the community who work in that industry,” Laurent responded. “What I’m saying is that the County has an opportunity to deal with things like remediation, like potential demolition, to remove some of those burdens of the existing structure to make it more feasible as well as I think the condominiumizing into smaller pieces. I think if you’re a small business owner, I think 22,000 square feet in its current condition would be a lot to take on. If it was offered to different businesses at a certain market value in smaller pieces, it might be something that’s doable. It all has to do with some of that stuff is speculative and risk. All we have to do is basically offer it at market value. It doesn’t mean that the County recovers all their costs for remediation or demolition or things like that.”
Williams asked if it was not a requirement that the County recover all its costs demolition or remediation and that “the burdens have to be passed off”. Laurent responded that the County could make land available for residential at a market rate.
“You don’t have to keep a tally of how much the County has invested, you have to do an appraisal or look at what the sale value is per square foot for either the residential per square foot or the commercial per square foot and demonstrate that you’re not out of the ballpark for that,” Laurent said.
Williams noted that cost is one of the bases for appraisal.
“If the County does condominiumize, the way the Condominium Owners Association with a developer, is the developer has ownership of the COA and divests themselves after there’s a certain amount of uptake. Retail is a risky thing to do particularly with prices,” he said. “Doesn’t that mean that with this project is that if there is insufficient uptake of condo units, then the County becomes a long-term owner of a COA?”
Laurent responded that there a lot of ifs involved and that unfortunately the County is limited to 90 days.
“My suggestion would be to do a call for interest and look for these partners before these investments are made, not after they’re built or divided up. There needs to be some context or input of what the end product would be and what the interest is,” she said. “The best we’re going to be able to do in this timeframe is know that there’s options and maybe certain things are not going to work out but other options are there as back-up plans if we can’t make our first priority and goals work for the project.”
Councilor Williams told the Reporter Thursday “the road to CB Fox is paved with good intentions”.
“This comes from a place of good intentions but my concern is that the intentions are not going to carry over into reality,” he said.
Williams, who joined the Council in Jan. 1, said during onboarding meetings for newly-elected councilors in December, he received a copy of a memorandum from County Attorney Alvin Leaphart to Council as part of a packet.
“I thought, ‘This deal is dead’,” he said. “It made it a bit perplexing that we’re continuing down the road of considering this project with an enormous legal issue in the way.”
Williams said the memo is certainly clear. He said to his knowledge, a closed session of the Council has not been held to discuss the memo, so to his knowledge, Leaphart has not addressed the full Council on it, although he expects such a meeting before Mar. 16. He is also concerned that the way the purchase agreement is written is that the County can terminate in 90 days or extend the contract by increasing the earnest money by $10,000, which along with the initial $25,000 will be lost unless the County closes the deal on the property.
Williams noted that the Anti-Donation clause is the key reason municipal governments tend to avoid getting into “the business of business”. The County’s Public Works staff and the contract architect have produced renderings for the due diligence process but that the due diligence was not really to determine financial feasibility but to determine if the property is suitable which is the reason they had to come with proposed use ideas.
Williams doesn’t think there will be enough buyers for the parts of the building of the County buys it and flips it. He said commercial property is very expensive in the County and expects the CB Fox property will appraise higher than people are expecting.
“As a business owner, my mind goes to what it is going to cost a future buyer. If the appraisal is low, it will affect other property owners in the community,” he said.
The bottom line, Williams said, is that the County should be setting policy, and not intervening directly in the real estate market.