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Home My WebLink AboutPier Plaza Project - Duke's Surf City Restaurant - Mayer Pro ��- _ ---- CityCouncil/AgencyBeac h Front Development Study Session Monday, December 9, 1996 5:00 PM HB Civic Center, Lower Level Meeting R--m-$-8- C 014 n/C T L- Attendees Mayor/Chairman & City Council/Redevelopment Agency Members C A r"8 me_ City Staff and Respective Consultants Contact Dept. Economic Development Department- 536-5582 Outline Topics... 1. Presentation by Sedway Kotin Mouchly Council/Redevelopment Agency Group Staff 2. Presentation by Shea Business Properties Council/Redevelopment Agency Staff 3. Presentation by The Waterfront Council/Redevelopment Agency - Staff 4. Closed Session Council/Redevelopment Agency Waterfront Real Property Negotiations Staff Attachments: 1. Market Overview of Three Beach Sites r SEDwAY KOTIN MOUCHLY GROUP Real Estate and Urban Economics MARKET OVERVIEW OF THREE BEACH SITES IN HUNTINGTON BEACH Prepared for: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Prepared by: SEDWAY KOTIN MOUCHLY GROUP Date of Report: NOVEIIBER 21, 1996 4 / SEWvAY KOTIN MOUCHLY GROUP Real Estate and Urban Economics November 21, 1996 Mr. David C. Biggs Director of Economic Development City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Re: Market Overview of Three Beach Sites Dear David: Sedway Kotin Mouchly Group (SKMG) is pleased to submit this report entitled "Market Overview of Three Beach Sites in Huntington Beach." The report includes a review of the three sites to identify the key factors that will affect their development, a detailed survey of existing and near term competitive developments in Orange County, a definition of the competitive position of the three sites,and a definition of the most feasible near term development for the three sites. We were particularly pleased to be able to meet with the Mayer Corporation and Shea Vickers Development to review our analysis and their development proposals in some detail. In sum, SKMG projects that the sites have considerable market support, and will be successful in the near term in the highly competitive Orange County markets for the initial elements of entertainment/retail space, resort hotel,timeshare,and high density residential. It has been a pleasure working with you on this assignment. Please do not hesitate to contact us if you have any questions or comments about this report. Sincerely, 1 Lynn Sedway, CRE ael Conlon, CRE Principal incipal NP:SK/nam Enclosure S.)a F,.u•ci,co lhicc Frl 41; 7S1-`Q00 Lk- .\n;;r!k- `:11 1 r,in 1,co, C,1111";m.i '41111 Fa\,l; ;S1-Sl lti TABLE OF CONTENTS Executive Summary Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Overview of Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Robert L. Mayer Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Shea Vickers Development LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Pier Plaza Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Description of Uses Analyzed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Entertainment/Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Hospitality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Competitive Position of Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Sources of Market Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Competitive Developments in Market Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Comparison With Other Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Summary of Competitive Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Development Potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Thematic Orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 MerchandisingMix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ASSUMPTIONS AND GENERAL LIMITING CONDITIONS . . . . . . . . . . . . . . . . . . . . 22 LIST OF EXHIBITS Exhibit1: Map of Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Exhibit 2: Summary of Uses Currently Permitted on Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Exhibit 3: Survey of Competitive Orange County Developments . . . . . . . . . . . . . . . . . . . 16 Exhibit 4: Survey of Selected Comparable Developments . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Exhibit 5: Summary of Near Term Development Potential . . . . . . . . . . . . . . . . . . . . . . . . . 20 f ExECUTivE SUMMARY Sedway Kotin Mouchly Group (SKMG) was retained by the Redevelopment Agency of the City of Huntington Beach (the Agency) in August 1996 to prepare a focused market over- view that examines the near-term potential for regionally oriented commercial uses on three beach sites: (1) the balance of the Robert L. Mayer Corporation property, (2) the Shea Vickers Development LLC property, and (3) the Pier Plaza Area. The purF_.use of the market overview is to identify the conditions under ivhich large-scale, regionally oriented commercial development(including hotel,resort, conference, retail, and entertainment uses) on the three sites could attract the market support needed to make the beach area in Huntington Beach a regional destination. SIC�IG analyzed an array of uses within two broad categories: (1) entertainment/retail uses, and (2) hospitality uses. Hence, the market overview focuses on creating places for people to shop, eat,and be entertained; and places for them to stay near the beach while they take advantage of these regional amenities. Competitive Position of Sites Entertaininent/RetaiL Most of the market support for the entertainment/retail uses on the sites will come from the area within a 10-mile radius of the sites. To assess the strength of demand,SKMG prepared a detailed demrgraphic profile of the market area population and employment base. The profile shows a very large, affluent,well-educated market area with considerable discretionary income in relation to the scale of the uses that could be proposed on the sites. The incomes available in the market area will provide a very strong level of support for any amount of entertainment/retad space that could reasonably be proposed on the site. SKMG concluded that entertainment/retail development has adequate market support to be successful on the beach sites, and will compete effectively as an entertainment/retail location, even in the current crowded environment in Orange County. Hospitality. Huntington Beach's hospitality industry is well positioned to compete with other locations in the county, based on the unique amenity of its beaches and the strength of its 11,000,000 visitors who come to the beaches and the summer beach events. The current limited hotel and meeting/conference capacity in Huntington Beach restricts the city's ability to compete with other county locations for larger regional and national business groups for trade shows and conferences. When the capacity is expanded, resort facilities and timeshare units on the beach sites will compete effectively with established hotels and meeting facilities in Long Beach, Anaheim, and San Diego for a portion of the smaller groups and national business visitors coming to Southern California. Development Potential The near-term development focus of the sites should be to expand hospitality facilities related to the beaches,while beginning to create some key elements of entertainment/retail activity strong enough to stand alone as regional destinations in an initial phase. SKMG recommends the three sites be developed in a coordinated program designed to create a unique beach-oriented destination and attract support from a broad regional market. The most feasible near-term products include the following: • A 500-room resort hotel with approximately 60,000 square feet of conference/ meeting space on 12 to 14 acres at the southern end of the Mayer property, as proposed by the Mayer Corporation on the Mayer site. This development is the key initial step to creating an image for the location. • A 200-unit timeshare on 4 to 7 acres at the southern end of the Shea Vickers site, adjacent to the Hilton. Of the available hospitality products, timeshare developed and managed by a strong branded entity is the most feasible in the current financing market. • An initial entertainment/retail development with 30,000 to 45,000 square feet on 2 to 3 acres at the northern end of the Shea Vickers property, based on two to three branded theme restaurants. • Up to 100 units of timeshare on Blocks 104 and 105, developed in conjunction with supporting street-level retail and service uses. This will support the Main Street area. • Duke's in the Pier Plaza area, which will support both the three sites and the Main Street area. INTRODUCTION Sedway Kotin Mouchly Group (SKMG)was retained by the Redevelopment Agency of the City of Huntington Beach (the Agency) in August 1996 to prepare a focused market over- view that examines the near-term potential for regionally oriented commercial uses on three beach sites: • the balance of the Robert L. Mayer Corporation property, where there is a proposal for additional hotel rooms with conference/meeting space, and residential development; • the Shea Vickers Development LLC property, where the new owners are currently developing plans for a mix of commercial and residential development; and • the Pier Plaza Area, where the planned restaurant and public beachfront uses could support the Mayer property, the Shea Vickers property, and the downtown. The purpose of the market overview is to identify the conditions under which large-scale, regionally oriented commercial development(including hotel,resort, conference, retail, and entertainment uses) on the three sites could attract the market support needed to make the beach area in Huntington Beach a regional destination. During the assignment, SKMG completed the following tasks: • Reviewed the three sites to identify the key physical,legal,and regulatory factors that will affect their development potential. These included their sizes and conf::.:,-urations, permitted uses,other regulatory controls,access and traffic issues,other infrastructure issues, relations to adjacent uses, and relevant ownership issues. • Conducted a series of interviews with community leaders, business and property owners, representatives of local business and professional organizations, and City/ Agency staff, as well as a focused review of numerous documents, to frame the major land use options for the sites and provide background for the overview. • Defined the regionally oriented uses to be assessed in the market overview. Based on recent and c—,-ent proposals for the sites and the results of SKMG's initial interviews and document review, these were focused on entertainment/retail (specialty retail, restaurants, cinema, music clubs and similar activities), and hospitality (hotel, resort hotel, small-scale hotel/bed and breakfast, timeshare, hotel-related conference and meeting facilities). • Surveyed the existing and near-term planned destinations in the central Orange County market area that will be most directly competitive with the uses assessed on the sites. SKMG initially reviewed approximately ten regional destinations in central Orange County, and prepared focused assessments of three that will be among the most directly competitive. HUNTINGTON BEACH SITES I NOVEMBER 1996 1 • Surveyed four additional successful regional commercial destinations — two in Southern California and two in Florida — that can serve as models for elements of Huntington Beach's market position, and assessed the successes and shortfalls they have experienced. • Defined the competitive position of the three beach sites in the central Orange County market based on the strength of their demographics, supporting business activity, their supporting retail and entertainment space, supporting hospitality facilities, and relative ease of access. • Defined the most feasible near-term development potential for the three sites, taken as a coordinated resource. This concise report presents a summary of the principal findings and conclusions of the market overview in five sections. Following this introduction, the second section of the report contains a brief overview of the sites to identify.the key physical, legal, and regulatory factors that will affect their development potential. The third section defines the uses assessed by SKMG and describes the potential for elements for the sites' development, based on examples of successful entertainment/retail developments and related hospitality facilities from around the country. The fourth section surveys three of the most competitive develop- ments in the central Orange County market area,reviews four other comparable develop- ments to assess the successes and shortfalls they have experienced, and delineates the competitive position of the sites. The fifth section defines the most feasible near-term development potential for the three sites. OVERVIEW OF SITES The balance of the Robert L. Mayer Corporation property, the Shea Vickers property, and the Pier Plaza area together contain approximately 77 acres of key beach locations, and represent an irreplaceable resource for Huntington Beach. For reference, Exhibit 1 on the following page shows the sites. Exhibit 1 outlines the districts defined in the Downtown Specific Plan that regulate the permitted uses, parcel sizes, densities, building heights, site coverages, setbacks, and open space requirements. This overview refers to the Districts to calculate permitted uses and densities, and to structure the definitions of development potential by subareas. Together, current land use regulations will permit the development of up to approximately 3.7 million square feet of commercial space and approximately 1,355 residential units on the sites. While these maximum densities are unlikely to be attained, the sites have the potential to be developed at a scale that would transform the beach area. The uses and densities permitted in the Downtown Specific Plan are summarized in Exhibit 2. HUNTINGTON BEACH SITES ,,.}.,... 2 NOVE\IBER 1996 a 1 • r , ��awrut® ®�® y��`°°ee��QO eee♦�� !�i�.1 II ,.�` `♦�`°'` 0♦° ♦ems e°♦°°@°�♦.fie ° � °°ems �v '� e�n�� '�� e e e ♦� � ��e ® tea■ __ e '� �.! elm - ■ �■ ul ♦♦♦ ' � !� u1e19 nulA s■� IillQ�ii mom Em ♦� � ,e6E e®u4 �Iu4 relurrl E4�te4� e®._ 4r1 ♦�Q♦♦Q`\♦� dAIB sumil BUSH woo 816ee10 8iT@II� 04�� ♦♦♦♦ ��°� quin 11111i4 ♦` @a♦ ae ee �� @4tE�G man nnm ��ii4 - : 141 1 �e�� '��/�amae � A�dl►1 1� Im4rn4 ■IHrI �� Sir rra u rr 4n4 I�� 411■B ®D4 rlili:ll ■IIR� ula�l a n4net ®®1 14911A @ � • 1 ■ 114ri Irl�u ru ■ uanue ems® ulsl■ 41mu ar__ 4� lasrlr4 41i1 - r� _-� ■ IYI� ®lu■ � �14D41 u■e - 00o enelmn nano ■Q14JH r■41Ui —� ., I1o1141 1lenlrl tl1f4C41� uulll m, ■ � ®r�l Ilairl■ traoal IIIO�q �um ri uwu � u�uu � m !4nu rs�■ i row r �� ono � • r EXHIBIT 2 USES CURRENTLY PERMITTED ON SITES MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Site Uses Maximum Maximum Property Size Permitted FAR/Density Development Mayer Property District 9 18.01 acres Commercial Recreation 3.0 FAR 2.3 million SF District 8 24.70 acres High Density Residential 30 DU/acre 740 DU (50 foot height) Shea Vickers Property District 7 10.50 acres Visitor Serving Commercial 3.0 FAR 1.4 million SF (8 stories height) District 8 20.50 acres High Density Residential 30 DU/acre 615 DU (50 foot height) Pier Plaza Area District 3 2.25 acres Visitor Serving Commecial 2.0-3.0 FAR 250,000 SF (Blocks 104, 105) (3-4 story 35-40 foot height) District 10 +/- 1.00 acre Pier-Related Commercial None None (2 story or 25 foot height) Totals Commercial Space 30.76 acres Commercial 3.0 FAR 3.95 million SF Residential Units 45.20 acres Residential 30 DU/acre 1,355 DU Pier-Related 1.00 acre Commercial None None Total of Sites 76.96 acres Source: Sedway Kotin Mouchly Group. 21-Nov-96 D:\MTX HNT2.WK4 Robert L. Mayer Property This property contains two.very distinct areas, District 9 and the portion of District 8 that extends roughly from Huntington Avenue to Beach Boulevard. District 9, which includes the 290-room Waterfront Hilton parcel and an additional approximately 18 undeveloped or underutilized acres, is a strip of land with about 2,000 feet of frontage on Pacific Coast Highway (PCH), averaging about 350 feet in depth until it broadens substantially at Beach Boulevard. The portion of District 8 on the property contains some 24.7 acres in a roughly triangular form, and includes the Driftwood Mobilehome Park. The City of Huntington Beach owns the property, and the Robert L. Mayer Corporation has a ground lease that extends to 2010. SKMG has not reviewed the terms of the lease for this assignment. The Downtown Specific Plan (and related coastal and other regulations) currently permits commercial recreation uses on the District 9 portion of the property, with a maximum 3.0 floor area ratio (FAR), and no height limit. This FAR would permit just over 2.3 million square feet of additional space on the 18.01 undeveloped acres. The District 8 portion of the property permits high-density residential uses to a maximum of 30 units per acre and a maximum building height of 50 feet. These development regula- tions translate to a maximum of 740 units developed on the 2-:.7 acres. Several infrastructure issues related to the property will affect its near-term development potential. These include the extension of Walnut Avenue (Pacific View Drive), the environ- mental rem-,ediation of wetlands on portions of the property, reabandonment of oil wells, the acquisition and relocation of the remaining mobile homes, and the demolition of several improvements on the property. The costs for these activities,which are currently the subject of negotiations between the City of Huntington Beach and the lessee,were estimated to be approximately$11.3 million in early 1996. Shea Vickers Development LLC This 31-acre property is essentially undeveloped except for a motel and restaurant. Similar to the Mayer property, it contains two distinct subareas, District 7 and the portion of District 8 that extends roughly from First Street to Huntington Avenue. District 7, which includes approximately 10.5 undeveloped or underutilized acres, is a strip of land with about 1,000 feet of frontage on PCH,averaging about 350 feet in depth. The portion of District 8 contains approximately 20.5 acres from First Street to Atlanta Avenue to Huntington Avenue in a roughly rectangular form. Shea Vickers Development LLC, a joint venture between Morgan Stanley and Shea Business Properties, owns the property and is planning for its near-term development. HUNTI\GTON BEACH SITES 5 iNOVEMBER 1996 The Downtown Specific Plan (and related coastal and other regulations) permit visitor- serving commercial uses on the District 7 portion of the property, with a maximum 3.0 FAR and a maximum building height of eight stories. This would permit almost 1.4 million square feet of additional commercial space on the 10.5 undeveloped acres. The District 8 portion of the property permits high-density residential uses to a maximum of 30 units per acre and a maximum building height of 50 feet. These development regulations translate to a maximum of 615 units developed on the 20.5 acres. Two significant infrastructure requirements are related to the property's near-term develop- ment potential: the extension of Walnut Avenue (Pacific View Drive), and the remediation of oil production on portions of the property. There are no estimates for these costs. Pier Plaza Area The Pier Plaza Area,as shown on Exhibit 1,is defined in this overview as approximately 3.25 acres in the vicinity of the pier. The area includes three sites: the approximately one-acre restaurant pad just south of the pier to the west of Pacific Coast Highway; 1.6 acres of Block 104; and 0.65 acres of Block 105. The restaurant pad is developed with a now vacant restaurant, which is proposed to be replaced by Duke's Surf City. It surrounds the pier and has over 1,000 feet of frontage on Pacific Coast Highway in the heart of the beach area. The uses currently permitted on this property by the Downtown Specific Plan(and related coastal and other regulations) include pier-related commercial,with no maximum FAR,and a maximum building height of 25 feet or two stories. The public improvements to the Pier Plaza Area, which are out to bid, are projected to be approximately $5 million; the private investment in Duke's is projected to be an additional$5 million. Block 104 and Block 105 contain approximately 2.25 acres in District 3 of the Downtown Specific Plan,designated for a wide range of visitor-serving commercial uses. The maximum density ranges from 2.0 to 3.0 FAR, depending on lot size,with height limits of 3 to 4 stories (35 to 45 feet) based on lot size. Both blocks have existing development; new development must blend with existing structures. Block 104 is bordered by Pacific Coast Highway and Walnut Avenue, from Main Street to 5th Street. Block 105 is bordered by Pacific Coast Highway and Walnut Avenue, from 5th Street to 6th Street. DESCRIPTION OF USES ANALYZED The purpose of this market overview is to identify the conditions under which large-scale, regionally oriented commercial development on the three sites could attract the market HUNTINGTON BEACH SITES 6 NOVEMBER 1996 1 � Kom support needed to make the beach area in Huntington Beach an exciting regional destination. During SKMG's interviews with community leaders and City/Agency staff, all the interviewees stressed the importance of creating high-impact, regionally oriented retail and visitor-serving uses on the three beach sites. SKMG's summary of the interviews revealed that the community leaders and City/Agency staff sought to creatively explore a wide range of uses and activities for the beach area. In response, SKMG analyze(; an array of uses vvithul L%vo broad categories: (1) entertainmen the tail uses, and (2) hosp,,,,,hty uses. Hence, the market overview focuses on creating places for people to shop, eat, and be entertained; and places for them to stay near the beach while they take advantage of these regional amenities. In addition to the two principal uses assessed, there are other supporting uses also addressed, including office space targeted to the services sector and residential units planned for development on the sites. SKMG anticipates that there will be a nominal increment of service office developed; but office is not likely to be a focus of the program. Orange County has a total office space inventc:7 of approximately 64 million square fee-t, with the largest single focus being the 25- million-5quare-foot regional cluster in the Airport area. The office markets in central and west Orange County have experienced lease rates well below replacement cost, low occupancy rates,and high tenant turnover until recent months. Although overall conditions are improving, the office markets in the county will not support significant new development in the near term, except for build-to-suits. Huntington Beach represents an insignificant share of the existing office space inventory in Orange County. Currently, there is an inventory of approximately two million square feet of non-owner occupied office space in Huntington Beach, most of it clustered on the major arterials near the I-405 freeway. With a few notable exceptions, the users are local-serving firms and back-office locations. These users are cost-sensitive and will not support the development of new office space. As a result, SKMG does not expect a substantial change in the office markets in the Huntington Beach area in the near term, and does not anticipate development of significant office space on the three sites. Residential development will be feasible where permitted on the sites, given the proven strong demand for a wide range of medium and higher density residential products in the areas near the beach. SKMG anticipates that the principal issues related to the development of residential uses on the sites will not be market issues but policy issues regarding ownership, density, amenities, and pricing. Hu.`. '\GTON BEACH SITES 7 NOVEMBER 1996 11 � Entertainment/Retail Entertainment/retail development represents a very dynamic blend of new entertainment technology and new retail technology designed to create exciting and constantly changing environments for shopping,eating,and recreation. Entertainment/retail has evolved during the past several years, as the distribution systems for retail merchandise and entertainment products have been converging rapidly, producing creative new alliances between retailers and entertainment companies. On the retail side,the recent evolution of retail technologies (including the sudden and very successful development of category killers, power centers, big boxes, and outlet malls) has dramatically altered the retail landscape, increasing competition and forcing managers of many types of retail facilities such as regional malls to look for new ways to continually energize retail environments and attract shoppers looking for new experiences. In the entertainment industry, changing technologies and access to much larger amounts of capital have opened possibilities for retail distribution of products beyond the traditional theme parks, cinemas, and video cassettes. These new retail distribution channels include improved licensing methods,direct selling of branded merchandise, smaller scale rides, and games based on new computer technology. Components of Entertainment/Retail. As entertainment technologies have swept into retail- ing, several new types of retail space have begun to appear in major urban markets, sometimes as new tenants in regional malls and, increasingly, as new types of anchors in new centers driven by entertainment. Because these new technologies are not yet assimi- lated into retailing patterns, they are still called "entertainment/retail." The entertainment/ retail components that have had the most impact on retail activity to date include the following: • Cinema megaplexes with 12 to 24 screens of up to 100,000 square feet and 6,000 seats; some include large-screen,high-definition film formats such as IMAX, Cinetropolis by IWERKS,the Sony Theatres at Lincoln Square in New York, and Cinemania Showscan at CityWalk in Universal City. The megaplexes draw substantial traffic from regional markets, and have become the hottest new anchors for many malls. • Heavily themed, large, high-volume restaurants with brand name appeal that can draw from wide regional trade areas; they include Hard Rock Cafe, Planet Hollywood, Dive% Rain Forest Cafe, B. B. King's Blues Club,Jekyll & Hyde, Wizardz Magic Club and Dinner Theatre, Front Row Sports Bar, All-Star Cafe, Country Star American Music Grill, Harley Davidson Cafe, Motown Cafe, and Marvel Mania. The heavily themed restaurants are designed to entertain their customers, and often focus more on selling entertainment and branded merchandise than food. HUNTINGTON BEACH SITES S NovE\IBER 1996 / 5 • Large new entertainment-oriented retailers selling very powerful brand name merchandise directly; these include Sony, Nike Town, Coca-Cola, Disney Stores, Warner Bros. Studio Stores, as well as several large music and book stores such as ' Virgin Records megastores, HMV, Barnes & Noble, and Borders. These new retailers create exciting environments, based on entertainment, to attract shoppers from regional markets. • Large-scale live entertainment venues with several nightclubs and other mu is-based ac"vities; they include House of Blues, Wild Horse Saloon, Dave & Busters, cafe @play,Billboard Live. Most of these, like the themed restaurants, have developed national merchandising plans based on the creation of a themed, often interactive, environment. • Computer-based video entertainment facilities; these include Sony Wonder in New York,Virtual World,Magic Edge, Fightertown,and several new concepts that will be rolled out during the next few months. These facilities have not yet been generally successful to the same degree that the megaplexes, theme restaurants, branded retailers, and live entertainment venues have been. Types of E�:tertainment/Retail Developments. SKMG researched entertainment/retail developrnent nation.:iv to find elements of a thematic orientation and merchandising mix that would be appropriate for the location of the beach sites. To provide a structured perspective on the wide range of existing entertainment/retail developments, SKMG arrayed the existing developments into four broad categories: (1) urban mixed-use areas that have come to focus increasingly on multiplex cinemas, other entertainment venues, and restaurants rather than specialty retail as their principal means of attracting activity; (2) major national tourist destinations and vacation locations that are using large-scale enter- tainment venues (both live and electronic)and branded restaurants to create excitement and provide new inducements for repeat visits; (3) cinema-based developments and other related entertainment venues where the anchor is the entertainment; and (4) recent suburban adaptations of entertainment retail in the form of regionally oriented entertain- ment/retail developments vhich are generally focused on multiplex cinemas and branded restaurants. Because the trend is so recent, new entertainment/retail developments include a broad r-nge of projects, some familiar and others very experimental. Urban mixed-use developments have increasingly come to focus on entertainment activities such as multiplex cinemas, nightclubs, live entertainment venues, and branded restaurants to attract market support. As shopping has become a more routinized activity, with many urban retail centers nationally having essentially the same merchandising mix and often the same tenants, shoppers have tended to look to entertainment activities for excitement. HUNTL\GTON BEACH SITES 9 NOVEMBER 1996 L Examples of urban mixed-use centers that have focused on entertainment activities include the following: • The Inner Harbor in Baltimore: more than 20 attractions built around Harborplace, including a children's museum, an entertainment center in the Power Plant, and the Disney Imageering marine biology exposition. • Third Street Promenade in Santa Monica: a marketplace with 120 total tenants, 50 restaurants, an adjacent regional mall, and three cinema complexes with 17 screens and 5,000 seats. - The huge Chelsea Piers family sports/entertainment complex: on four piers in New York, where there is a wide choice of activities involving sports and entertainment. • Old Town Pasadena: based on restaurants, specialty retail, and then movie theaters; this area has been in process of revitalization for several years. • Power & Light District in Kansas City, Missouri: a proposed 600,000-s uare-foot � q entertainment center located next to the major hotels,live theater district, and conven- tion center; will include a 30-screen AMC multiplex, several restaurants and live entertainment venues. Many of the best-known entertainment/retail developments completed to date are really very large-scale, tourist-oriented attractions in major cities and national vacation locations such as New York,Los Angeles, Orlando, and Las Vegas. Many of these venues depend on visitation by millions of vacationers looking for unique experiences. Examples include the following: • E Walk on 42nd street in New York: planned opening in 1998 for approximately 200,000 square feet of entertainment/retail space, with a 13-screen 90,000-square-foot Sony complex and Vegas! as anchors, and interest from many key tenants, in addition to a large hotel and possibly a smaller timeshare for subsequent phases. • Yerba Buena Gardens in San Francisco: planned opening in late 1997 of the Sony Retail Entertainment Center, a 15-screen multiplex with an IMAX theatre as the anchor; retail space based on unique San Francisco-themed shops; several highly themed restaurants, and clubs with live music; the central concourse to be called the Gateway, with large projection screens to display live events or create shows; to open in late 1997. • Several developments in Orlando, based almost exclusively on national tourism related to the theme parks and other large-scale destinations (Disney World, Church Street Station, Pleasure Island). Proposed is Pointe Orlando, a 450,000-square-foot HUNTINGTON BEACH SITES 10 NOVEMBER 1996 l � R entertainment/retail center with a 23,000-square-foot FAO Schwartz and a 23-screen multiplex with an IMAX. • Several developments in Las Vegas, based on casinos and very large hotels, which need to create continually changing attractions for vacationers (Treasure Island, Circus Circus, Luxor,MGM Grand, the Forum Shops, the proposed Star Trek, the Experience at the Hilton). • CityWalk in Universal City: a 220,000-square-foot entertainment/retail center on 6.25 acres next to Universal Studios theme park containing approximately 40 retail shops, restaurants,and entertainment venues; opened in 1993; 1,500-foot-long street with 21 vintage neon signs and a stadium-sized Astrovision video screen, previously existing 18-screen 6,000-seat Universal City Cinemas (opened in 1987); several large local brand name restaurants; regular planned events; 10,000 people working on site; develop- ment and management by MCA. A third type of entertainment/retail is cinema-based developments that market a major multiplex (12 to 30 screens) with a large format venue (such as an IMAX), theater-based entertainment venues that are updated with technology to provide flexibility for several types of events. These projects, which are attracting increased interest, are designed fcr large regional markets. Examples incluue the following: • Lincoln Square in New York:Sony Theatres 12-screen multiplex with an IMAX theatre in an area of restaurants and other theatres. • Foxwoods Casino in Connecticut: the location of the prototype Cinetropolis facility by IWERKS. • Sundance Square, Fort Worth: an 11-screen AMC multiplex opened in 1993; several major national retailers and restaurants opened following the cinema; in May 1996 a second 12-screen AMC theater opened. • Th- $38 million. Sony-Blockbuster Amphitheatre on the waterfront in Camden, New Jersey: an amphitheatre seating between 1,600 and 25,000 people designed for smaller concerts, ballet, opera, and big name entertainers. The emerging trend in more suburban locations is a loose entertainment/retail standard similar to CocoWalk, which includes approximately 100,000 to 200,000 square feet of total space,with about tzvo-thirds containing entertainment and heavily themed restaurants, and the balance specialty retail.11ne retail uses are expected to generate the majority of the sales; as a result, the retailers must contain a high percentage of strong, highly productive credit tenants. HUtiTINGTON BEACH SITES 11 NoVEMBER 1996 ► G I Suburban entertainment/retail developments are still difficult to structure and to finance, and tend to be very management-intensive due to the need to be continually kept current. Because these developments are still unproven as longer term investments, the current lending criteria for entertainment/retail projects emphasize strong balance sheets, high levels of equity, substantial preleasing to credit tenants, and experienced, innovative management. Examples include the following: • Entertainment Center at Irvine Spectrum: a 271,000-square-foot entertainment/retail center on 35 acres; themed as a Moroccan village,with a 21-screen, 6,400-seat Edwards Cinema and an IMAX theatre; 50,000 square feet of restaurants with 1,700 seats. • CocoWalk in Coconut Grove,Florida:a 120,000-square-foot entertain men t/retail center in the heart of the traditional bohemian area, with speciality shops, restaurants, and live entertainment venues; opened in 1993; 10-screen multiplex cinema is the major anchor; several large local and national brand name restaurants; regular planned events. • Beach Walk in Fort Lauderdale: a 150,000-square-foot center based primarily on restaurants and live entertainment venues, designed for beach visitors; there is no cinema; scheduled to open within the next two months. This overview will define the conditions under which elements of a suburban entertain- ment/retail concept can be developed successfully on the three sites and be used as an approach to attract regional market support for restaurants, clubs, shops, and related uses at a scale appropriate for the beach area of Huntington Beach. { Hospitality The hospitality industry has been through a period of significant consolidation and change during the past few years, and is just now recovering from the recession of the late 1980s and early 1990s. To respond to several years of decreased occupancy and room rates, many hotel management companies have deferred capital investments, reorganized to create operational efficiencies,and reflagged properties. There has been very little development of traditional full-service hotels during the period. In fact, room rates do not yet generally support new full-service construction in most markets. However, the development of a few new hospitality products (including limited service hotels, extended stay facilities, and timeshare projects) has enabled some hotel management companies to gain market share in spite of increased competition. Three types of new hospitality products have had the most success: • Limited-service hotels (sometimes distinguished from no-service hotels, where there is no restaurant in the facility) provide basic accommodations at very competitive HL"NTINGTON BEACH SITES 12 NOVEMBER 1996 J � rates. Examples include Marriott Courtyard, Fairfield Inn by Marriott, Holiday Inn Express, Days Inn,Travelodge. • Extended stay facilities, often defined as providing for stays of a week minimum (but sometimes defined to include suites hotels where many of the guests are on extended stays). Examples include Homestay, Homestead Inn, Summerfield Suites, Residence Inn. • Timeshare (now often referred to m s interval ownership) facilities provide limited time ' periods of occupancy in resorts. Examples include a number of independent develop- ment and management organizations. Although Marriott is the largest by a wide margin,several other major hotel management companies are rapidly increasing their inventories. COMPETITIVE POSITION OF SITES This overview assesses the competitive position of the three sites by evaluating the portion of the market area's unmet demand that they must capture to be successful. SKMG concludes that the cites should be developed as a coordinated program that can be used to create a destination and attract support from a broad regional market. Sources of Market Support Entertainment/Retail. Most of the market support for the entertainment/retail uses on the sites will come from the area within a 10-mile radius of the sites. To assess the strength of demand, SKMG prepared a detailed demographic profile of the market area population and employment base. The profile shows a very large, affluent,well-educated market area with considerable discretionary income in relation to the scale of the uses that could be proposed on the sites. The total 1996 market area population is approximately 944,838 residents and approximately 316,300 households,based on projections from the 1990 U.S. Census. Since the market area is essentially developed, the population is expected to increase very slowly. The 1996 average age is 34.3 years,with a relatively large portion of families with children by regional and national norms. The 1996 market area per capita, average household, and median household incomes were quite high, at $21,533, $63,825, and $53,733, respectively, with relatively large numbers of households/families in the higher income brackets. This is well above national and even regional norms, and indicates a very affluent market base. HUNTING TON BEACH SITES 13 NOVEMBER 1996 The incomes available in the market area will provide a very strong level of support for any amount of entertainment/retail space that could reasonably be proposed on the sites. SKMG estimates that there will be approximately$1.1 billion expended by residents of the market area for eating and drinking places, and some$1.1 billion expended in department, apparel, and shoe stores. As an illustrative example,200,000 square feet of restaurants and specialty retail space on the site, needing to generate $350 per square foot to be successful, would need to capture approximately$70,000,000 in sales, or some one quarter of 1 percent of the total $2.8 billion in expenditure potential available in these merchandise categories in the market area. Based on this very low capture rate, SKMG has concluded that entertainment/ retail development has adequate market support to be successful on the beach sites. Hospitality. The hospitality industry in Orange County is now improving rapidly after the several years of low room rates and occupancy rates, and little or no construction (except for budget and extended products) since 1989. However, most hotel development plans remain on hold or have been abandoned, and the products that continue to perform well in the county are the midprice and all-suite segments. The improving national and regional economies have mitigated the principal factors that most affected the hotel markets in Orange County—the recession, a decrease in Disneyland- related hotel bookings, a decline in corporate travel, the cutbacks in aerospace/defense activity. As the Disneyland expansion proceeds and the Anaheim Convention Center is expanded and renovated, Orange County will be better positioned to compete with the expanded and renovated convention facilities in Long Beach,Los Angeles, and San Diego. However, Huntington Beach's hospitality industry is not yet designed to serve large numbers of visitors, particularly in larger business groups, meetings, and conferences. In 1995,Huntington Beach had a total inventory of approximately 1,200 hotel rooms. Approxi- mately 40 percent of this total were in the two major hotels in the city,both of which are equipped to host smaller meetings and conferences. The ballroom, banquet facilities, and meeting rooms in the Waterfront Hilton,with approximately 21,000 total square feet of ball- room and meeting space, provide the largest conference and meeting facilities in Huntington Beach. An estimated 11,000,000 visitors came to Huntington Beach in 1995. Of this total, approximately 70 percent came from within 90 miles. Essentially all of the visitation is day trips to the beaches, with most of the activity during the weekends in the peak summer months. Two factors currently limit Huntington Beach's hospitality industry: • First is the limited hotel and meeting/conference capacity, which restricts the city ability to attract larger regional and national business groups for trade shows and conferences. HUNTINGTON BEACH SITES 14 NOVEMBER 1996 _ � • Second is the competition from established hotels and meeting facilities in Long Beach, Anaheim, and. San Diego, which are the focal points for larger groups and national business visitors coming to Southern California. Expansion of regional and national hospitality activity in Huntington Beach through a program focused on group business travel and meetings is a major area of opportunity, in spite of the intense competition from established facilities in Long Beach,Anaheim, and San Diego. Competitive Developments in Market Area Entertainment/Retail. SKMG reviewed approximately 15 developments in the central Orange County area that could be competitive with elements of entertainment/retail activities on the sites. These include Huntington Center (assuming its repositioning with a multiplex cinema), Westminister Mall, Mainplace in Santa Ana, South Coast Plaza, South Coast Town Center, Metro Pointe, the Entertainment Center at the Spectrum, Park Place, Fashion Island, plans for resort development on the Newport Coast, Laguna Beach, the Tustin Marketplace, Belmont Shore in Long Beach, Downtown Long Beach, Disneyland, and Knotts Berry Farm. Overall, SKMG has concluded that the beach sites will compete effectively as an entertain- ment/retail location, even in the current crowded environment in Orange County. Exhibit 3 summarizes the sites' market relationships to three of the mostly directly competitive developments that SKMG selected to illustrate the current retail market in Orange County. Hospitality. There are approximately 46,000 hotel rooms in Orange County, with the greatest single concentration in the vicinity of Disneyland and a second large cluster in the Airport area. Huntington Beach's hospitality industry is well positioned to compete with other locations in the county, bayed on the unique amenity of its beaches and the strength of its 11,000,000 vis:.ors who come to the beaches and the summer beach events. The current limited hotel and meeting/conference capacity in Huntington Beach restricts the city's ability to compete with other county locations for larger regional and national business groups for trade shows and confe:2nces. When the capacity is expanded, resort facilities and timeshare units on the beach sites will compete effectively with established hotels and meeting facilities in Long Beach, Anaheim, and San Diego for a portion of the smaller groups and national business visitors coming to Southern California. Ht \TI\GTON BEACH SITES ] No%,,E.%iBER 1996 EXHIBIT 3 SURVEY OF COMPETITIVE ORANGE COUNTY DEVELOPMENTS MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Beach Area Entertainment Center Newport Harbor Beachfront Huntln ton Beach Irvine Spectrum Newport Beach Laguna Beach Banc Facts Beach serving and community serving retail. New enlerta!nmonVrelail center; Major regional office center,regional mall, Small scale beach resort with specialty restaurant,and entertainment uses; 271.000 SF total;21 screen cinema; museums,conference facilities; retail,small scale hotels,and a wide 6 plex cinema: Moroccan architectural motif;In major resort and boating center variety of destination restaurants. 500 hotel rooms office center Demographics(10 mile radius) Total 1996 Population 944,838 819,228 8413,217 478,732 1996 Per Capita Income $21.533 $26.447 $22.361 $32.727 Total 1996 Income $20.35 billion $21.67 billion $18.97 billion $15.67 billion Business Activity Small office inventory 10 MSF office space and R&D 4 MSF office space No significant olftce space Local serving office space Regional and national headquarters Regional•national headquarters 35.000 employees on silo Airport office area(25 million SF)4 miles away Retail Activity Retail both local serving and beach-oriented 271.000 SF total Major regional mall Small scale specialty retail. Focus on food and sports apparel 50.000 SF restaurants with 1,700 seals Wide variety of specialty retail with focus on arts Enlenamment Cinemas Edwards 6 plex 21 screen Edwards multiplex 6 plex cinema No major cinema Bars/Night Clubs Several night clubs.bars 50,000 SF of restaurants(1,700 seals) 350 restaurants citywide - Very active night life Arena/Sports Team Traffic/Access - Access from Route 1 PCH Access from 1-405,1-5,Rio 133 - Access from Rle.73.Rio.55.Rle.1 - Access from Rte.133.Rte.1 1 5 miles from 1-405 500,000 ADT 3 miles from Rio.73 8 miles from 1-405 60.000 ADT on PCH and Beach 100.000 ADT on PCH and Jamboree 30.000 ADT on PCH,Laguna Canyon Hospitality Facilities Hotel Rooms 1,200 rooms citywide Several large first Gass hotels in nearby 2,600 hotel rooms citywide Several small hotels along PCH Meeting/Conference Facilities Hotel meeting facilities airport area Hotel meeting facilities Convention Centers Hotel meeting facilities Huntington Center(5 miles) Competition Westminster Center(6 miles) South Coast Plaza(9 miles) South Coast Plaza(5 miles) Irvine Spectrum(8 miles) South Coast Plaza(7 miles) Newport Harbor(9 miles) Irvine Spectrum(8 miles) Newport Harbor(9 miles) Newport Harbor(7 miles) Laguna Beach(8 miles) Laguna Beach(9 miles) South Coast Plaza(13 miles) Irvine Spectrum(17 miles) Disneyland(16 miles) Disneyland(18 miles) Disneyland(24 miles) Disneyland 17 miles Conclusions Beach Area's strengths are its location Entertainment center now draws from Newport Harbor is a major regional Laguna Beach's focus is its charm,artist on the beach,recreation facilities, nearby employment center and business center,resort and colony history,and small scale pedestrian and events. wide regional market,due to uniqueness entertainment destination. areas;wide regional draw as weekend of concept.. and summer destination. ource:Sedway Kotin Mouchly Group. 21-Nov-96 i\MTX HUNT WK4 \ v Comparison With Other Developments For comparison to the beach sites, SKMG surveyed four additional successful regional commercial destinations—two in Southern California and two in Florida— that can serve as models for elements of Huntington Beach's market position; in addition, SKMG assessed the successes and shortfalls these successful regional destinations have experienced. The developments are the Pine Avenue area in downtown Long Beach (which competitive to a degree with the beach area in Huntington Beach), the Third Street Pron.enade in Santa Monica, CocoWalk in Coconut Grove (a nationally recognized model for entertainment/ retail development), and Beach Walk in Fort Lauderdale (patterned to some degree after CocoWalk, but with no cinema, it is due to open within the next month). SKMG structured the comparison in the same format as the survey of competitive Orange County developments, and examined the market position of the four developments based on the strength of their demographics, supporting business activity, their supporting retail and entertainment space,supporting hospitality facilities, and relative ease of access. Exhibit 4 summarizes the comparison. The comparison shows that the four developments have found somewhat different ways to become successful,based on their own particular strengths.However, a few key patterns emerge from E-,a comparison (these patterns are esse;-.tially the same as these from Exhibit 3, which reviews the Orange County developments). Among them are (1) the importance of multiplex cinemas as entertainment anchors; (2) the key role of large,branded destination restaurants to attract regional market support; (3) the critical support brought by lunchtime restaurant demand from adjacent employment centers; (4) the importance of a thematic orientation to give a clear identity to the development; and (5) the need to attract large destination retailers as retail anchors. Summary of Competitive Position Strengths.The beach sites have several key market strengths,based on their location and the size and characteristics of the market area: • very strong demographics; • annually, 11,000,000 visitors, based on City data; • unique location on the beaches; • two large sites under single well capitalized, experienced ownerships; and • renovation of the pier and the adjacent area. Weaknesses. The principal weaknesses of the location include the following: • lack of an employment base to support lunchtime restaurant and daytime retail activity; HU\-TI\GTON BEACH SITES 17 NOVEMBER 1996 n l - EXHIBIT 4 SURVEY OF SELECTED COMPARABLE DEVELOPMENTS MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Pine Avenue The Third Street Promenade CocoWalk Beach Walk Long Beach Santa Monica Coconut Grove Fla. Fort Lauderdale Basic Facts Revitalized downtown with regional Festival marketplace with 120 tenants and Traditional bohemian area with smaller Main boachfront with large hotel mall,reslauranVenlertainmenl uses, 7.000 parking spaces,50 restaurants, scale specialty retail,entertainment, inventory; large hotel inventory,and convention regional mall,regional office center, very active nighUife Major tourist destination; center. ocean front location Very active entertainment and restaurant Demographics(10 mile radius) Total 1996 Population 1.359,352 975.173 1.075.602 719.736 1996 Per Capita Income $18,333 $33.613 $15,706 $19.302 Total 1996 Income $24.92 billion $32.173 billion $1G.093 billion $13.892 billion Business Activity Three million square feel of office space - 2 million square feel of office space No major employment centers Not a major employment center Major port Brickell Avenue 10 minutes away Business center 3 miles away Retail Activity Some specialty retail Full range of specialty retail Major regional specialty retail location Major regional specialty area nearby Regional mall Regional mall adjacent Entertainment Cinemas AMC 16 screens 3 large cinema complexes(6.000 seals) 10 screen cinema at Cocowalk No cinema in Beach Walk Bars/Nigh[Clubs Active badnight club area - Active night clubs,bars - Very active nightlife - Very active nightlife Arena/Sports Team Hockey team,Queen Mary,aquanum Traffic/Access Access from 1-710 Access from I-10 Access from Coast Highway Access from Coast Highway ` 160,000 ADT on 1-7 10 160,00 ADT on 1-10 75,000 ADT on arterials,coast highway 100,000 ADT on areerials,coast highway Hospitality Facilities Hotel Rooms 5.000 rooms citywide,2,000 in downtown 3,000 rooms citywide 500 rooms citywide 5.000 rooms citywide Meeting/Conterence Facilities Hotel meeting facilities Hotel meeting facilities Hotel meeting facilities Convention Centers Major regional convention center Regional convention center Competition Belmont Shore/PCH(3 miles) South Main(1 mile) Bayside,Miami(10 miles) Galleria Mall(1 mile) Lakeview Mall(6 miles) Montana Avenue(1 mile) Cerritos Mall(Smiles) Westwood(5 miles) South Coast Plaza(22 miles) Century City(6 miles) Disneyland 22 miles Beverly Hills 7 miles Conclusions Pine Avenue's strength is its restaurants The Third Street Promenade's focus Is CocoWalk's strength is its cinema and Beach Walk is scheduled to open soon; and cinemas;retail is secondary; on restaurants and cinemas;active restaurants,together with adjacent specialty no cinema;focus will be on restaurants employment base and hotel/convention bars and night clubs;regional mall retail;very active nightlife. and clubs/bars. activity is important. adjacent. ,ource.Sedway Kobn Mouchly Group. 21-Nov-96 i WTX HUNT WK4 _ 1� I �• i t I j seasonality; • distance from freeways; • current market position of Main Street; and • the intensely competitive market for entertainment/retail and hospitality uses in Orange County. 9 - In summary,SKMG has concluded that the sites have the potential to capture support from a very large market area with unusually strong demographics,based on their unique beach location. DEVELOPMENT POTENTIAL The near-term development focus of the sites should be to expand hospitality facilities related to the beaches, while beginning to create some key elements of entertainment/retail activity strong enough to stand alone as regional destinations in an initial phase. SKMG recommends the three sites be developed in a coordinated program designed to create a unique beach-oriented destination and attract support from a broad regional market. The most feasible near-term products, which are summarized in Exhibit 5, include the following: • A 500-room resort hotel with approximately 60,000 square feet of conference/ meeting space on 12 to 14 acres at the southern end of District 9, as proposed by the Mayer Corporation on the Mayer site.This development is the key initial step to creating an image for the location. Development of the hotel, which will run counter to current trends in the Orange County hotel markets,will immediately position the beach area as a resort destination. • A 200-unit timeshare on 4 to 7 acres at the southern end of District 7 of the Shea Vickers site, adjacent to the Hilton. Of the available hospitality products, time- share developed and managed by a strong branded entity is the most feasible in the current financing market. • An initial entertainment/retail development with 30,000 to 45,000 square feet on 2 to 3 acres at the northern end of the District 7 portion of the Shea Vickers property, based on two to three branded theme restaurants. The issues of parking and critical mass will need to be addressed as developers phase the buildout of these uses. • Up to 100 units of timeshare on Blocks 104 and 105, developed in conjunction with supporting street-level retail and service uses. This will support the Main Street area. A HUNTINGTON BEACH SITES 19 NOVEMBER 1996 FF EXHIBIT 5 SUMMARY OF NEAR TERM DEVELOPMENT POTENTIAL MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Property Approximate Potential Approximate . and Use Site Size Uses Space Mayer Property (1) Resort Hotel 12 - 14 acres 500 room resort hotel 400,000 -450,000 SF 60,000 SF conference space Structured parking Small increment of retail/ service space High Density Residential 10 acres 125 DU minimum 150,000 - 175,000 SF Shea Vickers Property (1) Theme Restaurant 2 - 3 acres 2 -3 theme restaurants 25,000 - 30,000 SF and Entertainment Venues 1 -2 entertainment venues 8,000 - 15,000 SF Surface parking; convert to structured in later phases Timeshare 4 - 7 acres 200 unit timeshare resort 175,000 -220,000 SF Structured parking High Density Residential 10 acres 125 DU minimum 150,000 - 175,000 SF Pier Plaza Area Timeshare 2.25 acres 100 unit timeshare 85,000 - 120,000 SF Structured parking Theme Restaurant 1 acre Duke's Surf City Restaurant 18,000 SF Surface parking Totals Commercial Space 15 - 18 acres 450,000 - 500,000 SF Timeshare 6.25 - 9.25 acres 300 DU 260,000 - 340,000 SF Residential Units 20 acres 250 DU minimum 300,000 - 350,000 SF Grand Total of Sites 41 - 47 acres 1,000,000 - 1,200,000 SF Notes: (1) The developments in this exhibit represent near-term activity only (i.e., within a two year period). Subsequent mid-term and long-term development will build out the sites. Source: Sedway Kotin Mouchly Group. 21-Nov-96 D:1MTX HNT3 WK4 n r1 • Duke's in the Pier Plaza area, which will support both the three sites and the Main Street area. There are five key factors that will affect the near-term success of entertainment/retail development on the three sites: • Most importantly, the development of the 500-room resort hotel and conference/ meeting facilities proposed on the Mayer property, which will create an image for the beach area and will mitigate the seasonality of the current beach-related day trip activity. • The creation of an initial increment of 300 timeshare units on the Shea Vickers property, and Blocks 104 and 105, to provide act;vity in the Main Street area. • The creation of a core of three to four strong, stand-alone branded restaurants (including Duke's) as a regional destination, to create a clear entertainment focus for the beach area. • The expansion or repositioning of the existing multiplex cinema, or the creation of a live ent�_ ainment; 2nue as an anchor on Pacific Coast Highway near Main Street. • The identification of interim and long-term parking resources. Thematic Orientation The entertainment/retail development will need a distinctive theme to create excitement and a regional identity separate from the current reputation of the beach area. Many of the interviewees suggested variations on the "Surf City" theme, focusing on the beaches, and active sports, with a strong family orientation. ilf47rchandising A':.: The merchandising mix SKMG recommends for the near-term development of the beach sites is based principally on hospitality, with destination restaurants. These elements can stand alone and attract regional support. SKMG does not recommend the development of a substantial increment of specialty retail on the beach sites in the near term, both because of competition with the existing retailers on Main Street and the need to first establish an identity for the beach sites as a high-quality resort and entertainment destination before extending activity into retailing. c.•,;�c�cssFc�;E�sruo�n:.��Fm HL'\i" :..TO\BEACH SITES 21 NOVEMBER 1996 ASSUMPTIONS AND GENERAL LIMITING CONDITIONS Sedway Kotin Mouchly Group (SKMG) has made extensive efforts to confirm the accuracy and timeliness of the information contained in this study. Such information was compiled from a variety of sources,including interviews with government officials, review of City and County documents,and other third parties deemed to be reliable. Although SKMG believes all information in this study is correct, it does not warrant the accuracy of such information and assumes no responsibility for inaccuracies in the information by third parties. We have no responsibility to update this report for events and circumstances occurring after the date of this report. Further, no guarantee is made as to the possible effect on development of present or future federal, state or local legislation, including any regarding environmental or ecological matters. The accompanying projections and analyses are based on estimates and assumptions developed in connection with the study. In turn, these assumptions, and their relation to the projections,were developed using currently available economic data and other relevant information. It is the nature of forecasting, however, that some assumptions may not materialize, and unanticipated events and circumstances may occur. Therefore, actual results achieved during the projection period will likely vary from the projections, and some of the variations may be material to the conclusions of the analysis. Contractual obligations do not include access to or ownership transfer of any electronic data processing files, programs or models completed directly for or as by-products of this research effort, unless explicitly so agreed as part of the contract. This report may not be used for any purpose other than that for which it is prepared. Neither all nor any part of the contents of this study shall be disseminated to the public through publication advertising media, public relations, news media, sales media, or any other public means of communication without prior written consent and approval of Sedway Kotin Mouchly Group. HUNTINGTON BEACH SITES 22 NOVEMBER 1996 t SEDWAY KOTIN MOUCHLY GROUP Re61 Estate and Urban Economics a - rj- 5 MARKET OVERVIEW OF THREE BEACH SITES IN HUNTINGTON BEACH Prepared for: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Prepared by: SEDWAY KOTIN MOUCHLY GROUP Date of Report: NOVEMBER 21,1996 San Francisco Three Embarcadero Center,Suite 1150 Tel 415 1,81-8900 Los Angeles San Francisco,California 94111 Fax 41:;781-8118 SEDWAY KOTIN MOUCHLY GROUP Real Estate and Urban Economic., November 21, 1996 Mr. David C. Biggs Director of Economic Development City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Re: Market Overview of Three Beach Sites Dear David: Sedway Kotin Mouchly Group (SKMG) is pleased to submit this report entitled "Market Overview of Three Beach Sites in Huntington Beach." The report includes a review of the three sites to identify the key factors that will affect their development, a detailed survey of existing and near term competitive developments in Orange County,a definition of the competitive position of the three sites,and a definition of the most feasible near term development for the three sites. We were particularly pleased to be able to meet with the Mayer Corporation and Shea Vickers Development to review our analysis and their development proposals in some detail. In sum, SKMG projects that the sites have considerable market support, and will be successful in the near term in the highly competitive Orange County markets for the initial elements of entertainment/retail space, resort hotel,timeshare,and high density residential. It has been a pleasure working with you on this assignment. Please do not hesitate to contact us if you have any questions or comments about this report. Sincerely, LyZSedway, CRE 1� ael Conlon,CRE Principal incipal NP:SK/nam Enclosure San Francisco 1 hree Embarcadero Center,Suite 1150 Tel 41;781-8900 Los Angeles San Francisco,California 94111 Fay-il;781-811S 1 TABLE OF CONTENTS Executive Summary Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Overview of Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 RobertL. Mayer Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Shea Vickers Development LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 PierPlaza Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Description of Uses Analyzed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Entertainment/Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Hospitality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Competitive Position of Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Sources of Market Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Competitive Developments in Market Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Comparison With Other Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Summary of Competitive Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Development Potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Thematic Orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Merchandising Mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ASSUMPTIONS AND GENERAL LIMITING CONDITIONS . . . . . . . . . . . . . . . . . . . . 22 LIST OF EXHIBITS Exhibit1: Map of Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Exhibit 2: Summary of Uses Currently Permitted on Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Exhibit 3: Survey of Competitive Orange County Developments . . . . . . . . . . . . . . . . . . . 16 Exhibit 4: Survey of Selected Comparable Developments . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Exhibit 5: Summary of Near Term Development Potential . . . . . . . . . . . . . . . . . . . . . . . . . 20 EXECUTIVE SUMMARY Sedway Kotin Mouchly Group (SKMG) was retained by the Redevelopment Agency of the City of Huntington Beach (the Agency) in August 1996 to prepare a focused market over- view that examines the near-term potential for regionally oriented commercial uses on three beach sites: (1) the balance of the Robert L. Mayer Corporation property, (2) the Shea Vickers Development LLC property, and (3) the Pier Plaza Area. The purpose of the market overview is to identify the conditions under which large-scale, regionally oriented commercial development (including hotel,resort, conference, retail, and entertainment uses) on the three sites could attract the market support needed to make the beach area in Huntington Beach a regional destination. SKMG analyzed an array of uses within two broad categories: (1) entertainment/retail uses, and (2) hospitality uses. Hence, the market overview focuses on creating places for people to shop,eat,and be entertained; and places for them to stay near the beach while they take advantage of these regional amenities. Competitive Position of Sites Entertainment/Retail. Most of the market support for the entertainment/retail uses on the sites will come from the area within a 10-mile radius of the sites. To assess the strength of demand,SKMG prepared a detailed demographic profile of the market area population and employment base.The profile shows a very large,affluent,well-educated market area with considerable discretionary income in relation to the scale of the uses that could be proposed on the sites. The incomes available in the market area will provide a very strong level of support for any amount of entertainment/retail space that could reasonably be proposed on the site. SKMG concluded that entertainment/retail development has adequate market support to be successful on the beach sites, and will compete effectively as an entertainment/retail location, even in the current crowded environment in Orange County. Hospitality. Huntington Beach's hospitality industry is well positioned to compete with other locations in the county,based on the unique amenity of its beaches and the strength of its 11,000,000 visitors who come to the beaches and the summer beach events. The current limited hotel and meeting/conference capacity in Huntington Beach restricts the city's ability to compete with other county locations for larger regional and national business groups for trade shows and conferences. When the capacity is expanded, resort facilities and timeshare units on the beach sites will compete effectively with established hotels and meeting facilities in Long Beach, Anaheim, and San Diego for a portion of the smaller groups and national business visitors coming to Southern California. Development Potential The near-term development focus of the sites should be to expand hospitality facilities related to the beaches, while beginning to create some key elements of entertainment/retail activity strong enough to stand alone as regional destinations in an initial phase. SKMG recommends the three sites be developed in a coordinated program designed to create a unique beach-oriented destination and attract support from a broad regional market. The most feasible near-term products include the following: • A 500-room resort hotel with approximately 60,000 square feet of conference/ meeting space on 12 to 14 acres at the southern end of the Mayer property, as proposed by the Mayer Corporation on the Mayer site. This development is the key initial step to creating an image for the location. • A 200-unit timeshare on 4 to 7 acres at the southern end of the Shea Vickers site, adjacent to the Hilton. Of the available hospitality products, timeshare developed and managed by a strong branded entity is the most feasible in the current financing market. • An initial entertainment/retail development with 30,000 to 45,000 square feet on 2 to 3 acres at the northern end of the Shea Vickers property, based on two to three branded theme restaurants. • Up to 100 units of timeshare on Blocks 104 and 105, developed in conjunction with supporting street-level retail and service uses. This will support the Main Street area. • Duke's in the Pier Plaza area, which will support both the three sites arid the Main Street area. INTRODUCTION Sedway Kotin Mouchly Group (SKMG) was retained by the Redevelopment Agency of the City of Huntington Beach (the Agency) in August 1996 to prepare a focused market over- view that examines the near-term potential for regionally oriented commercial uses on three beach sites: • the balance of the Robert L.Mayer Corporation property, where there is a proposal for additional hotel rooms with conference/meeting space,and residential development; • the Shea Vickers Development LLC property, where the new owners are currently developing plans for a mix of commercial and residential development; and • the Pier Plaza Area, where the planned restaurant and public beachfront uses could support the Mayer property, the Shea Vickers property, and the downtown. The purpose of the market overview is to identify the conditions under which large-scale, regionally oriented commercial development (including hotel,resort, conference,retail,and entertainment uses) on the three sites could attract the market support needed to make the beach area in Huntington Beach a regional destination. During the assignment, SKMG completed the following tasks: • Reviewed the three sites to identify the key physical,legal,and regulatory factors that will affect their development potential.These included their sizes and configurations, permitted uses,other regulatory controls,access and traffic issues, other infrastructure issues,relations to adjacent uses, and relevant ownership issues. • Conducted a series of interviews with community leaders, business and property owners, representatives of local business and professional organizations, and City/ Agency staff,as well as a focused review of numerous documents, to frame the major land use options for the sites and provide background for the overview. • Defined the regionally oriented uses to be assessed in the market overview. Based on recent and current proposals for the sites and the results of SKMG's initial interviews and document review, these were focused on entertainment/retail (specialty retail, restaurants, cinema, music clubs and similar activities), and hospitality (hotel, resort hotel, small-scale hotel/bed and breakfast, timeshare, hotel-related conference and meeting facilities). • Surveyed the existing and near-term planned destinations in the central Orange County market area that will be most directly competitive with the uses assessed on the sites. SKMG initially reviewed approximately ten regional destinations in central Orange County, and prepared focused assessments of three that will be among the most directly competitive. HUNTINGTON BEACH SITES 1 NOVEMBER 1996 • Surveyed four additional successful regional commercial destinations — two In Southern California and two in Florida — that can serve as models for elements of Huntington Beach's market position, and assessed the successes and shortfalls they have experienced. • Defined the competitive position of the three beach sites in the central Orange County market based on the strength of their demographics, supporting business activity, their supporting retail and entertainment space, supporting hospitality facilities, and relative ease of access. • Defined the most feasible near-term development potential for the three sites, taken as a coordinated resource. This concise report presents a summary of the principal findings and conclusions of the market overview in five sections. Following this introduction, the second section of the report contains a brief overview of the sites to identify the key physical, legal, and regulatory factors that will affect their development potential. The third section defines the uses assessed by SKMG and describes the potential for elements for the sites' development, based on examples of successful entertainment/retail developments and related hospitality facilities from around the country.The fourth section surveys three of the most competitive develop- ments in the central Orange County market area,reviews four other comparable develop- ments to assess the successes and shortfalls they have experienced, and delineates the competitive position of the sites. The fifth section defines the most feasible near-term development potential for the three sites. OVERVIEW OF SITES The balance of the Robert L. Mayer Corporation property, the Shea Vickers property; and the Pier Plaza area together contain approximately 77 acres of key beach. locations, and represent an irreplaceable resource for Huntington Beach. For reference, Exhibit 1 on the following page shows the sites. Exhibit 1 outlines the districts defined in the Downtown Specific Plan that regulate the permitted uses, parcel sizes, densities,building heights, site coverages, setbacks, and open space requirements. This overview refers to the Districts to calculate permitted uses and densities, and to structure the definitions of development potential by subareas. Together,current land use regulations will permit the development of up to approximately 3.7 million square feet of commercial space and approximately 1,355 residential units on the sites.While these maximum densities are unlikely to be attained, the sites have the potential to be developed at a scale that would transform the beach area. The uses and densities permitted in the Downtown Specific Plan are summarized in Exhibit 2. HUNTINGTON BEACH SITES 2 NOVEMBER 1996 • • I � 4NfL� • I BI OAAiil6 �INNllAa III !44ggUp ' IIIA _ Io411 INIAIINI a m =IBM 1112 I ��Ail NAIi N119 WIt11Rl1 A@@9 N@INtlgA N9kgo MINIM Oyu RUN Id44__ NN414i1M aaiai4s I ,AW Bull-- AN4��N4 NA41�A11 comm ire ANi44N1 Npom 4111N®!1 WIlNaN4 Nll4ilml filial linimm a�99a#4 • ,4A 9 Na1 AlNialal E a aN44i®la 9RIIa41A sm IAA aNA46@a minima4AiRl4A W44�a a iNl a4laii�a 411144Im NAREAA 111111NB1 poQ • r igA aBAW@a IaIIIINaC pll19lob W - ■ • (I ia4 fl�ll�4 goal an444_N_4 aAN411_n uaaaaaa 91�a194a f4N8a1N IaA9RW N41111114 aapNlI�I a� as as aaaa4A4 I1aA1 eta 9�la1� ;I Nab ammo R NlIm4Na �1a419S a 111n11 PR flu A9a@ Na641� NC79NgN �Blai NINMIN NNl illy Nang IINNAN @�a a�l�a RIIaaBli4 41I} IBaBBBa 9BHI4aB46� bp8��.� 'a 111111111 11@IIAI@ BRA•Ra@a6AN Ia11BB0 1911NIA46611 �cras�� g�®� ;�jlatJ��j& 11 INIa Ili:iil CIIIINI IIBINIBN 19I9Rug I off oil N4114B I +' j�A �IIIUjIfN BaAAlllt4 BIIIIAN4B CBa41® AB4BA41 aBa'7 �Q�`\``\\\e� :®9 aa �4 ABBBI4B aoanaA4 a4BBIIW IIIBilal 4Ao \O\ �f?A a1BBi�A CIIIIIB� IIIBANaI S91l4BN 6iSNN® � � � \\`\\• �`� �IIN B71iiINB1 4HIIaEi I1A4 A O`\\ �°� � `�UH4 CAA4181 �AfAAi � \\\ �+� �e aluAnll� a4Au1aN a��el s1►e4a�4 aa�mlB •r \\o`` � '`�• CNBBBR BBBBIBRI 191BNBA b�96BA I41BAH1 �� '� \\\\0��.�@� �� `Z • gEiB� 4BB�INB Ba9NRN1A A®4AA1 ABIBa1N IINIai11i � � Q\`/ i��► �� 1:=ai+INa4481 B4NBIIB 18F11BIa! IBNtl1�a IINIINA4 � � 0\ � � @@ ♦ � 'di �\\ .. �W Dili C[i4161a_ ®I 41Ri1B41 N➢ME1B� WfllBlal 11111H68 is\�e@\�♦® ,�\�e, y�' ��'�� @e@ �� I 'BIB. �i16>IHW41`•:`�,., �@��@ VA � .�@ 0.,�@ @'� @ � . � a�'tt mwana uauA��•� • ``e� @@e@� � �@@ e�,@�+�@@�wv`e v��®�' wvA�`�e ��i F.:RIRIIG�malWNp BIIIBRa38 �►�`\ e'�� ''�i ��`@ S \@�@ @@�� @``��o@ \@%\\@@o o� �```e�`•```�� flip m1.111 —� .�I�1!n1AIIiNIBN — �®@ �` � @\ ee @� @@♦�i � � o�� Ir • r • �I EXHIBIT 2 USES CURRENTLY PERMITTED ON SITES MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Site Uses Maximum Maximum Property Size Permitted FAR/Density Development Mayer Property District 9 18.01 acres Commercial Recreation 3.0 FAR 2.3 million SF District 8 24.70 acres High Density Residential 30 DU/acre 740 DU (50 foot height) Shea Vickers Property District 7 10.50 acres Visitor Serving Commercial 3.0 FAR 1.4 million SF (8 stories height) District 8 20.50 acres High Density Residential 30 DU/acre 615 DU (50 foot height) Pier Plaza Area District 3 2.25 acres Visitor Serving Commecial 2.0-3.0 FAR 250,000 SF (Blocks 104, 105) (3-4 story 35-40 foot height) District 10 +/- 1.00 acre Pier-Related Commercial None None (2 story or 25 foot height) Totals Commercial Space 30.76 acres Commercial 3.0 FAR 3.95 million SF Residential Units 45.20 acres Residential 30 DU/acre 1,355 DU Pier-Related 1.00 acre Commercial None None Total of Sites 76.96 acres Source: Sedway Kotin Mouchly Group. 21-Nov-96 D:\MTX HNT2.WK4 Robert L. Mayer Property This property contains two very distinct areas, District 9 and the portion of District 8 that extends roughly from Huntington Avenue to Beach Boulevard. District 9, which includes the 290-room Waterfront Hilton parcel and an additional approximately 18 undeveloped or underutilized acres, is a strip of land with about 2,000 feet of frontage on Pacific Coast Highway (PCH), averaging about 350 feet in depth until it broadens substantially at Beach Boulevard. The portion of District 8 on the property contains some 24.7 acres in a roughly triangular form, and includes the Driftwood Mobilehome Park. The City of Huntington Beach owns the property, and the Robert L. Mayer Corporation has a ground lease that extends to 2010. SKMG has not reviewed the terms of the lease for this assignment. The Downtown Specific Plan (and related coastal and other regulations) currently permits commercial recreation uses on the District 9 portion of the property, with a maximum 3.0 floor area ratio (FAR), and no height limit. This FAR would permit just over 2.3 million square feet of additional space on the 18.01 undeveloped acres. The District 8 portion of the property permits high-density residential uses to a maximum of 30 units per acre and a maximum building height of 50 feet. These development regula- tions translate to a maximum of 740 units developed on the 24.7 acres. Several infrastructure issues related to the property will affect its near-term development potential.These include the extension of Walnut Avenue (Pacific View Drive), the environ- mental remediation of wetlands on portions of the property, reabandonment of oil wells, the acquisition and relocation of the remaining mobile homes,and the demolition of several improvements on the property.The costs for these activities,which are currently the subject of negotiations between the City of Huntington Beach and the lessee,were estimated to be approximately$11.3 million in early 1996. Shea Vickers Development LLC This 31-acre property is essentially undeveloped except for a motel and restaurant. Similar to the Mayer property,it contains two distinct subareas,District 7 and the portion of District 8 that extends roughly from First Street to Huntington Avenue. District 7, which includes approximately 10.5 undeveloped or underutilized acres, is a strip of land with about 1,000 feet of frontage on PCH,averaging about 350 feet in depth. The portion of District 8 contains approximately 20.5 acres from First Street to Atlanta Avenue to Huntington Avenue m a roughly rectangular form. Shea Vickers Development LLC,a joint venture between Morgan Stanley and Shea Business Properties, owns the property and is planning for its near-term development. HUNTINGTON BEACH SITES 5 NOVEMBER 1996 The Downtown Specific Plan (and related coastal and other regulations) permit visitor- serving commercial uses on the District 7 portion of the property, with a maximum 3.0 FAR and a maximum building height of eight stories. This would permit almost 1.4 million square feet of additional commercial space on the 10.5 undeveloped acres. The District 8 portion of the property permits high-density residential uses to a maximum of 30 units per acre and a maximum building height of 50 feet. These development regulations translate to a maximum of 615 units developed on the 20.5 acres. Two significant infrastructure requirements are related to the property's near-term develop- ment potential: the extension of Walnut Avenue (Pacific View Drive), and the remediation of oil production on portions of the property.There are no estimates for these costs. Pier Plaza Area The Pier Plaza Area,as shown on Exhibit 1,is defined in this overview as approximately 3.25 acres in the vicinity of the pier. The area includes three sites: the approximately one-acre restaurant pad just south of the pier to the west of Pacific Coast Highway; 1.6 acres of Block 104; and 0.65 acres of Block 105. The restaurant pad is developed with a now vacant restaurant, which is proposed to be replaced by Duke's Surf City. It surrounds the pier and has over 1,000 feet of frontage on Pacific Coast Highway in the heart of the beach area. The uses currently permitted on this property by the Downtown Specific Plan(and related coastal and other regulations) include pier-related commercial,with no maximum FAR, and a maximum building height of 25 feet or two stories. The public improvements to the Pier Plaza Area, which are out to bid, are projected to be approximately$5 million; the private investment in Duke's is projected to be an additional$5 million. Block 104 and Block 105 contain approximately 2.25 acres in District 3 of the Downtown Specific Plan,designated for a wide range of visitor-serving commercial uses. The maximum density ranges from 2.0 to 3.0 FAR, depending on lot size,with height limits of 3 to 4 stories (35 to 45 feet) based on lot size. Both blocks have existing development;new development must blend with existing structures. Block 104 is bordered by Pacific Coast Highway and Walnut Avenue, from Main Street to 5th Street. Block 105 is bordered by Pacific Coast Highway and Walnut Avenue, from 5th Street to 6th Street. DESCRIPTION OF USES ANALYZED The purpose of this market overview is to identify the conditions under which large-scale, regionally oriented commercial development on the three sites could attract the market HWNMNGTON BEACH SITES 6 NOVEMBER 1996 support needed to make the beach area in Huntington Beach an exciting regional destination. During SKMG's interviews with community leaders and City/Agency staff, all the interviewees stressed the importance of creating high-impact, regionally oriented retail and visitor-serving uses on the three beach sites. SKMG's summary of the interviews revealed that the community leaders and City/Agency staff sought to creatively explore a wide range of uses and activities for the beach area. In response, SKMG analyzed an array of uses within two broad categories: (1) entertainment/retail uses, and (2) hospitality uses. Hence, the market overview focuses on creating places for people to shop, eat, and be entertained; and places for them to stay near the beach while they take advantage of these regional amenities. In addition to the two principal uses assessed, there are other supporting uses also addressed, including office space targeted to the services sector and residential units planned for development on the sites. SKMG anticipates that there will be a nominal increment of service office developed; but office is not likely to be a focus of the program. Orange County has a total office space inventory of approximately 64 million square feet,with the largest single focus being the 25- million-square-foot regional cluster in the Airport area. The office markets in central and west Orange County have experienced lease rates well below replacement cost, low occupancy rates,and high tenant turnover until recent months. Although overall conditions are improving, the office markets in the county will not support significant new development in the near term, except for build-to-suits. Huntington Beach represents an insignificant share of the existing office space inventory in Orange County. Currently,there is an inventory of approximately two million square feet of non-owner occupied office space in Huntington Beach,most of it clustered on the major arterials near the I-405 freeway. With a few notable exceptions, the users are local-serving firms and back-office locations. These users are cost-sensitive and will not support the development of new office space. As a result, SKMG does not expect a substantial change in the office markets in the Huntington Beach area in the near term, and does not anticipate development of significant office space on the three sites. Residential development will be feasible where permitted on the sites, given the proven strong demand for a wide range of medium and higher density residential products in the areas near the beach.SKMG anticipates that the principal issues related to the development of residential uses on the sites will not be market issues but policy issues regarding ownership, density, amenities, and pricing. HUNTINGTON BEACH SITES 7 NOVEMBER 1996 Entertainment/Retail Entertainment/retail development represents a very dynamic blend of new entertainment technology and new retail technology designed to create exciting and constantly changing environments for shopping,eating,and recreation. Entertainment/retail has evolved during the past several years, as the distribution systems for retail merchandise and entertainment products have been converging rapidly, producing creative new alliances between retailers and entertainment companies. On the retail side,the recent evolution of retail technologies (including the sudden and very successful development of category killers, power centers,big boxes, and outlet malls) has dramatically altered the retail landscape, increasing competition and forcing managers of many types of retail facilities such as regional malls to look for new ways to continually energize retail environments and attract shoppers looking for new experiences. In the entertainment industry, changing technologies and access to much larger amounts of capital have opened possibilities for retail distribution of products beyond the traditional theme parks, cinemas, and video cassettes. These new retail distribution channels include improved licensing methods,direct selling of branded merchandise, smaller scale rides, and games based on new computer technology. Components of Entertainment/Retail. As entertainment technologies have swept into retail- ing, several new types of retail space have begun to appear in major urban markets, sometimes as new tenants in regional malls and, increasingly, as new types of anchors in new centers driven by entertainment. Because these new technologies are not yet assimi- lated into retailing patterns, they are still called "entertainment/retail."The entertainment/ retail components that have had the most impact on retail activity to date include the following: • Cinema megaplexes with 12 to 24 screens of up to 100,000 square feet and 6,000 seats; some include large-screen,high-definition film formats such as IMAX, Cinetropolis by IWERKS,the Sony Theatres at Lincoln Square in New York,and Cinemania Showscan at CityWalk in Universal City. The megaplexes draw substantial traffic from regional markets, and have become the hottest new anchors for many malls. • Heavily themed, large, high-volume restaurants with brand name appeal that can draw from wide regional trade areas; they include Hard Rock Cafe, Planet Hollywood, Dive!, Rain Forest Cafe, B. B. King's Blues Club,Jekyll &Hyde, Wizardz Magic Club and Dinner Theatre, Front Row Sports Bar, All-Star Cafe, Country Star American Music Grill, Harley Davidson Cafe, Motown Cafe, and Marvel Mania. The heavily themed restaurants are designed to entertain their customers, and often focus more on selling entertainment and branded merchandise than food. HUNTINGTON BEACH SITES 8 NOVEMBER 1996 • Large new entertainment-oriented retailers selling very powerful brand name merchandise directly; these include Sony, Nike Town, Coca-Cola, Disney Stores, Warner Bros. Studio Stores, as well as several large music and book stores such as Virgin Records megastores, HMV, Barnes &Noble, and Borders. These new retailers create exciting environments, based on entertainment, to attract shoppers from regional markets. • Large-scale live entertainment venues with several nightclubs and other music-based activities; they include House of Blues, Wild Horse Saloon, Dave & Busters, cafe@play,Billboard Live. Most of these,like the themed restaurants, have developed national merchandising plans based on the creation of a themed, often interactive, environment. • Computer-based video entertainment facilities; these include Sony Wonder in New York,Virtual World,Magic Edge,Fightertown, and several new concepts that will be rolled out during the next few months. These facilities have not yet been generally successful to the same degree that the megaplexes, theme restaurants, branded retailers, and live entertainment venues have been. Types of Entertainment/Retail Developments. SKMG researched entertainment/retail development nationally to find elements of a thematic orientation and merchandising mix that would be appropriate for the location of the beach sites. To provide a structured perspective on the wide range of existing entertainment/retail developments, SKMG arrayed the existing developments into four broad categories: (1) urban mixed-use areas that have come to focus increasingly on multiplex cinemas, other entertainment venues, and restaurants rather than specialty retail as their principal means of attracting activity; (2) major national tourist destinations and vacation locations that are using large-scale enter- tainment venues(both live and electronic)and branded restaurants to create excitement and provide new inducements for repeat visits; (3) cinema-based developments and other related entertainment venues where the anchor is the entertainment; and (4) recent suburban adaptations of entertainment retail in the form of regionally oriented entertain- ment/retail developments which are generally focused on multiplex cinemas and branded restaurants. Because the trend is so recent, new entertainment/retail developments include a broad range of projects, some familiar and others very experimental. Urban mixed-use developments have increasingly come to focus on entertainment activities such as multiplex cinemas, nightclubs, live entertainment venues, and branded restaurants to attract market support. As shopping has become a more routinized activity, with many urban retail centers nationally having essentially the same merchandising mix and often the same tenants, shoppers have tended to look to entertainment activities for excitement. HUNTINGTON BEACH SITES 9 NOVEMBER 1996 Examples of urban mixed-use centers that have focused on entertainment activities include the following: • The Inner Harbor in Baltimore: more than 20 attractions built around Harborplace, including a children's museum, an entertainment center in the Power Plant, and the Disney Imageering marine biology exposition. • Third Street Promenade in Santa Monica: a marketplace with 120 total tenants, 50 restaurants, an adjacent regional mall, and three cinema complexes with 17 screens and 5,000 seats. • The huge Chelsea Piers family sports/entertainment complex: on four piers in New York, where there is a wide choice of activities involving sports and entertainment. • Old Town Pasadena: based on restaurants, specialty retail, and then movie theaters; this area has been in process of revitalization for several years. • Power & Light District in Kansas City, Missouri: a proposed 600,000-square-foot entertainment center located next to the major hotels,live theater district,and conven- tion center; will include a 30-screen AMC multiplex, several restaurants and live entertainment venues. Many of the best-known entertainment/retail developments completed to date are really very large-scale, tourist-oriented attractions in major cities and national vacation locations such as New York,Los Angeles, Orlando, and Las Vegas. Many of these venues depend on visitation by millions of vacationers looking for unique experiences. Examples include the following: • E Walk on 42nd street in New York: planned opening in 1998 for approximately 200,000 square feet of entertainment/retail space, with a 13-screen 90,000-square-foot Sony complex and Vegas! as anchors, and interest from many key tenants,in addition to a large hotel and possibly a smaller timeshare for subsequent phases. • Yerba Buena Gardens in San Francisco: planned opening in late 1997 of the Sony Retail Entertainment Center, a 15-screen multiplex with an Rv AX theatre as the anchor; retail space based on unique San Francisco-themed shops; several highly themed restaurants, and clubs with live music; the central concourse to be called the Gateway,with large projection screens to display live events or create shows; to open in late 1997. • Several developments in Orlando, based almost exclusively on national tourism related to the theme parks and other large-scale destinations (Disney World, Church Street Station, Pleasure Island). Proposed is Pointe Orlando, a 450,000-square-foot HUNTINGTON BEACH SITES 10 NOVEMBER 1996 entertainment/retail center with a 23,000-square-foot FAO Schwartz and a 23-screen multiplex with an IMAX. • Several developments in Las Vegas, based on casinos and very large hotels, which need to create continually changing attractions for vacationers (Treasure Island, Circus Circus,Luxor,MGM Grand,the Forum Shops, the proposed Star Trek, the Experience at the Hilton). • CityWalk in Universal City: a 220,000-square-foot entertainment/retail center on 6.25 acres next to Universal Studios theme park containing approximately 40 retail shops, restaurants,and entertainment venues; opened in 1993; 1,500-foot-long street with 21 vintage neon signs and a stadium-sized Astrovision video screen,previously existing 18-screen 6,000-seat Universal City Cinemas (opened in 1987); several large local brand name restaurants; regular planned events; 10,000 people working on site; develop- ment and management by MCA. A third type of entertainment/retail is cinema-based developments that market a major multiplex (12 to 30 screens) with a large format venue (such as an IMAX), theater-based entertainment venues that are updated with technology to provide flexibility for several types of events. These projects, which are attracting increased interest, are designed for large regional markets. Examples include the following: • Lincoln Square in New York:Sony Theatres 12-screen multiplex with an IMAX theatre in an area of restaurants and other theatres. • Foxwoods Casino in Connecticut:the location of the prototype Cinetropolis facility by IWERKS. • Sundance Square, Fort Worth: an 11-screen AMC multiplex opened in 1993; several major national retailers and restaurants opened following the cinema; in May 1996 a second 12-screen AMC theater opened. • The $38 million Sony-Blockbuster Amphitheatre on the waterfront in Camden, New Jersey: an amphitheatre seating between 1,600 and 25,000 people designed for smaller concerts,ballet, opera, and big name entertainers. The emerging trend in more suburban locations is a loose entertainment/retail standard similar to CocoWalk, which includes approximately 100,000 to 200,000 square feet of total space,with about two-thirds containing entertainment and heavily themed restaurants, and the balance specialty retail.The retail uses are expected to generate the majority of the sales; as a result, the retailers must contain a high percentage of strong,highly productive credit tenants. HUNTINGTON BEACH SITES 11 NOVEMBER 1996 Suburban entertainment/retail developments are still difficult to structure and to finance, and tend to be very management-intensive due to the need to be continually kept current. Because these developments are still unproven as longer term investments, the current lending criteria for entertainment/retail projects emphasize strong balance sheets, high levels of equity, substantial preleasing to credit tenants, and experienced, innovative management. Examples include the following: • Entertainment Center at Irvine Spectrum: a 271,000-square-foot entertainment/retail center on 35 acres; themed as a Moroccan village,with a 21-screen, 6,400-seat Edwards Cinema and an IMAX theatre; 50,000 square feet of restaurants with 1,700 seats. • CocoWalk in Coconut Grove,Florida: a 120,000-square-foot entertainment/retail center in the heart of the traditional bohemian area, with speciality shops, restaurants, and live entertainment venues; opened in 1993; 10-screen multiplex cinema is the major anchor; several large local and national brand name restaurants; regular planned events. • Beach Walk in Fort Lauderdale: a 150,000-square-foot center based primarily on restaurants and live entertainment venues, designed for beach visitors; there is no cinema; scheduled to open within the next two months. This overview will define the conditions under which elements of a suburban entertain- ment/retail concept can be developed successfully on the three sites and be used as an approach to attract regional market support for restaurants, clubs, shops, and related uses at a scale appropriate for the beach area of Huntington Beach. Hospitality The hospitality industry has been through a period of significant consolidation and change during the past few years, and is just now recovering from the recession of the late 1980s and early 1990s.To respond to several years of decreased occupancy and room rates, many hotel management companies have deferred capital investments, reorganized to create operational efficiencies,and reflagged properties. There has been very little development of traditional full-service hotels during the period. In fact, room rates do not yet generally support new full-service construction in most markets. However, the development of a few new hospitality products (including limited service hotels, extended stay facilities, and timeshare projects) has enabled some.hotel management companies to gain market share in spite of increased competition. Three types of new hospitality products have had the most success: • Limited-service hotels (sometimes distinguished from no-service hotels,where there is no restaurant in the facility) provide basic accommodations at very competitive HUNTINGTON BEACH SITES 12 NOVEMBER 1996 rates. Examples include Marriott Courtyard, Fairfield Inn by Marriott, Holiday Inn Express, Days Inn,Travelodge. • Extended stay facilities, often defined as providing for stays of a week minimum (but sometimes defined to include suites hotels where many of the guests are on extended stays). Examples include Homestay, Homestead Inn, Summerfield Suites, Residence Inn. • Timeshare (now often referred to as interval ownership) facilities provide limited time periods of occupancy in resorts. Examples include a number of independent develop- ment and management organizations. Although Marriott is the largest by a wide margin,several other major hotel management companies are rapidly increasing their inventories. COMPETITIVE POSITION OF SITES This overview assesses the competitive position of the three sites by evaluating the portion of the market area's unmet demand that they must capture to be successful. SKMG concludes that the sites should be developed as a coordinated program that can be used to create a destination and attract support from a broad regional market. Sources of Market Support Entertainment/Retail. Most of the market support for the entertainment/retail uses on the sites will come from the area within a 10-mile radius of the sites. To assess the strength of demand,SKMG prepared a detailed demographic profile of the market area population and employment base.The profile shows a very large,affluent,well-educated market area with considerable discretionary income in relation to the scale of the uses that could be proposed on the sites. The total 1996 market area population is approximately 944,838 residents and approximately 316,300 households,based on projections from the 1990 U.S. Census. Since the market area is essentially developed, the population is expected to increase very slowly. The 1996 average age is 34.3 years,with a relatively large portion of families with children by regional and national norms. The 1996 market area per capita,average household, and median household incomes were quite high, at $21,533, $63,825, and $53,733, respectively, with relatively large numbers of households/families in the higher income brackets. This is well above national and even regional norms, and indicates a very affluent market base. HUNTINGTON BEACH SITES 13 NOVEMBER 1996 The incomes available in the market area will provide a very strong level of support for any amount of entertainment/retail space that could reasonably be proposed on the sites. SKMG estimates that there will be approximately$1.1 billion expended by residents of the market area for eating and drinking places, and some$1.1 billion expended in department, apparel, and shoe stores. As an illustrative example,200,000 square feet of restaurants and specialty retail space on the site, needing to generate $350 per square foot to be successful, would need to capture approximately$70,000,000 in sales, or some one quarter of 1 percent of the total $2.8 billion in expenditure potential available in these merchandise categories in the market area.Based on this very low capture rate, SKMG has concluded that entertainment/ retail development has adequate market support to be successful on the beach sites. Hospitality. The hospitality industry in Orange County is now improving rapidly after the several years of low room rates and occupancy rates, and little or no construction (except for budget and extended products) since 1989. However, most hotel development plans remain on hold or have been abandoned, and the products that continue to perform well in the county are the midprice and all-suite segments. The improving national and regional economies have mitigated the principal factors that most affected the hotel markets in Orange County—the recession, a decrease in Disneyland- related hotel bookings, a decline in corporate travel, the cutbacks in aerospace/defense activity. As the Disneyland expansion proceeds and the Anaheim Convention Center is expanded and renovated, Orange County will be better positioned to compete with the expanded and renovated convention facilities in Long Beach,Los Angeles, and San Diego. However, Huntington Beach's hospitality industry is not yet designed to serve large numbers of visitors, particularly in larger business groups, meetings, and conferences. In 1995,Huntington Beach had a total inventory of approximately 1,200 hotel rooms. Approxi- mately 40 percent of this total were in the two major hotels in the city, both of which are equipped to host smaller meetings and conferences. The ballroom,banquet facilities, and meeting rooms in the Waterfront Hilton,with approximately 21,000 total square'feet of ball- room and meeting space, provide the largest conference and meeting facilities in Huntington Beach. An estimated 11,000,000 visitors came to Huntington Beach in 1995. Of this total, approximately 70 percent came from within 90 miles. Essentially all of the visitation is day trips to the beaches, with most of the activity during the weekends in the peak summer months. Two factors currently limit Huntington Beach's hospitality industry: • First is the limited hotel and meeting/conference capacity, which restricts the city's ability to attract larger regional and national business groups for trade shows and conferences. HUNTINGTON BEACH SITES 14 NOVEMBER 1996 • Second is the competition from established hotels and meeting facilities in Long Beach, Anaheim, and San Diego, which are the focal points for larger groups and national business visitors coming to Southern California. Expansion of regional and national hospitality activity in Huntington Beach through a program focused on group business travel and meetings is a major area of opportunity,in spite of the intense competition from established facilities in Long Beach,Anaheim, and San Diego. Competitive Developments in Market Area Entertainment/Retail. SKMG reviewed approximately 15 developments in the central Orange County area that could be competitive with elements of entertainment/retail activities on the sites. These include Huntington Center (assuming its repositioning with a multiplex cinema), Westminster Mall, Mainplace in Santa Ana, South Coast Plaza, South Coast Town Center, Metro Pointe, the Entertainment Center at the Spectrum, Park Place, Fashion Island, plans for resort development on the Newport Coast, Laguna Beach, the Tustin Marketplace, Belmont Shore in Long Beach, Downtown Long Beach, Disneyland, and Knotts Berry Farm. Overall, SKMG has concluded that the beach sites will compete effectively as an entertain- ment/retail location, even in the current crowded environment in Orange County. Exhibit 3 summarizes the sites' market relationships to three of the mostly directly competitive developments that SKMG selected to illustrate the current retail market in Orange County. Hospitality. There are approximately 46,000 hotel rooms in Orange County, with the greatest single concentration in the vicinity of Disneyland and a second large cluster in the Airport area. Huntington Beach's hospitality industry is well positioned to compete with other locations in the county,based on the unique amenity of its beaches and the strength of its 11,000,000 visitors who come to the beaches and the summer beach events. The current limited hotel and meeting/conference capacity in Huntington Beach restricts the city's ability to compete with other county locations for larger regional and national business groups for trade shows and conferences. When the capacity is expanded, resort facilities and timeshare units on the beach sites will compete effectively with established hotels and meeting facilities in Long Beach, Anaheim, and San Diego for a portion of the smaller groups and national business visitors coming to Southern California. HUNTINGTON BEACH SITES 15 NOVEMBER 1996 EXHIBIT 3 SURVEY OF COMPETITIVE ORANGE COUNTY DEVELOPMENTS MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Beach Area Entertalnment Center Newport Harbor Beachfront Huntington Beach Irvine Spectrum Newport Beach Laguna Beach Basic Facts Beach serving and community serving retail, - New entertainment/retail center. Major regional office center,regional mall, Small scale beach resort with specialty restaurant,and entertainment uses; 271.000 SF total;21 screen cinema; museums,conference facilities; retail,small scale hotels,and a wide 6 Alex cinema: Moroccan architectural motif;in major resort and boating center variety of destination restaurants. 500 hotel rooms office center Demographics(10 mile radius) Total 1996 Population 944.838 819.228 848.217 478.732 1996 Per Capita Income $21.533 $26.447 $22,361 $32,727 Total 1996 Income $20.35 billion $21.67 billion $18.97 billion $15.67 billion Business Activity Small office inventory 10 MSF office space and R&D 4 MSF office space No significant office space Local serving office space Regional and national headquarter Regional,national headquarters 35.000 employees on site Airport office area(25 million SF)4 miles away Retail Activity Retail both local serving and beach-oriented 271.000 SF total Major regional mall Small scale specialty retail. Focus on food and sports apparel 50,000 SF restaurants with 1,700 seals Wide variety of specialty retail with focus on arts Entertainment Cinemas Edwards 6 plex 21 screen Edwards multiplex 6 piex cinema No major cinema BarwNight Clubs Several night dubs,bars 50,000 SF of restaurants(1,700 seats) - 350 restaurants citywide Very active night life Arena/Sports Team TraffdAccess Access from Route 1 PCH - Access from 1405,1-5,Rte 133 Access from Rte.73.Rte.55,Rte.1 Access from Rle.133,Rte.1 5 miles from 1405 500,000 ADT 3 miles from Rte.73 8 miles from 1-405 60,000 ADT on PCH and Beach 100.000 ADT on PCH and Jamboree 30.000 ADT on PCH,Laguna Canyon Hospitality Facilities Hotel Rooms 1.200 rooms citywide Several large first class hotels in nearby 2,600 hotel rooms dtywide Several small hotels along PCH Meeting/Conference Facilities Hotel meeting facilities airport area Hotel meeting facilities Convention Centers Hotel meeting facilities Huntington Center(5 miles) Competition Westminster Center(6 miles) South Coast Plaza(9 miles) South Coast Plaza(5 miles) Irvine Spectrum(8 miles) South Coast Plaza(7 miles) Newport Harbor(9 miles) Irvine Spectrum(8 miles) Newport Harbor(9 miles) Newport Harbor(7 miles) Laguna Beach(8 miles) Laguna Beach(9 mlles) South Coast Plaza(13 miles) Irvine Spectrum(17 miles) Disneyland(16 miles) Disneyland(18 miles) Disneyland(24 miles) Disneyland 17 miles Conclusions Beach Area's strengths are its location Entertainment center now draws from Newport Harbor is a major regional Laguna Beach's focus is its charm,artist on the beach,recreation facilities, nearby employment center and business center,resort and colony history,and small scale pedestrian and events. -wide regional market,due to uniqueness entertainment destination. areas;wide regional draw as weekend of concept., and summer destination. Source:Sedway Kotln Mouchty Group. 21-Nov-96 D:WTX HUNT.WK4 Comparison With Other Developments For comparison to the beach sites, SKMG surveyed four additional successful regional commercial destinations—two in Southern California and two in Florida—that can serve as models for elements of Huntington Beach's market position; in addition, SKMG assessed the successes and shortfalls these successful regional destinations have experienced. The developments are the Pine Avenue area in downtown Long Beach (which is competitive to a degree with the beach area in Huntington Beach), the Third Street Promenade in Santa Monica, CocoWalk in Coconut Grove (a nationally recognized model for entertainment/ retail development), and Beach Walk in Fort Lauderdale (patterned to some degree after CocoWalk,but with no cinema, it is due to open within the next month). SKMG structured the comparison in the same format as the survey of competitive Orange County developments, and examined the market position of the four developments based on the strength of their demographics,supporting business activity, their supporting retail and entertainment space,supporting hospitality facilities,and relative ease of access. Exhibit 4 summarizes the comparison. The comparison shows that the four developments have found somewhat different ways to become successful,based on their own particular strengths. However,a few key patterns emerge from the comparison (these patterns are essentially the same as those from Exhibit 3, which reviews the Orange County developments). Among them are (1) the importance of multiplex cinemas as entertainment anchors; (2) the key role of large,branded destination restaurants to attract regional market support; (3) the critical support brought by lunchtime restaurant demand from adjacent employment centers; (4) the importance of a thematic orientation to give a clear identity to the development; and (5) the need to attract large destination retailers as retail anchors. Summary of Competitive Position Strengths.The beach sites have several key market strengths,based on their location and the size and characteristics of the market area: • very strong demographics; • annually, 11,000,000 visitors,based on City data; • unique location on the beaches; • two large sites under single well capitalized, experienced ownerships; and • renovation of the pier and the adjacent area. Weaknesses.The principal weaknesses of the location include the following: • lack of an employment base to support lunchtime 'restaurant and daytime retail activity; HUNTINGTON BEACH SITES 17 NOVEMBER 1996 EXHIBIT 4 SURVEY OF SELECTED COMPARABLE DEVELOPMENTS MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Pine Avenue The Third Street Promenade CccoWalk Beach Walk Long Beach Santa Monica Coconut Grove Fla. Fort Lauderdale Basic Facts Revitalized downtown with regional - Festival marketplace with 120 tenants and Traditional bohemian area with smaller Main beachfront with large hotel mall,restaurant/entertainment uses, 7.000 parking spaces,50 restaurants, scale specialty retail,entertainment, inventory; large hotel inventory,and convention regional mall,regional office center, very active nightlife Major tourist destination; center. ocean front location Very active entertainment and restaurant Demographics(10 mile radius) Total 1996 Population 1,359,352 975.173 1.075,602 719.736 1996 Per Capita Income $18.333 $33,613 $15.706 $19.302 Total 1996 Income $24.92 billion $32.173 billion $16.893 billion $13.892 billion Business Activity Three million square feet of office space 2 million square feet of office space No major employment centers Not a major employment center Major port Brickell Avenue 10 minutes away Business center 3 miles away Retail Activity Some specialty retail Full range of specialty retail Major regional specialty retail location Major regional specialty area nearby Regional mall Regional mall adjacent Entertainment Cinemas AMC 16 screens 3 large cinema complexes(6,000 seats) 10 screen cinema at Cocowalk No cinema in Beach Walk Bars/Night Clubs Active bar/night dub area Active night dubs,bars Very active nightlife Very active nightlife Arena/Sports Team Hockey team,Queen Mary,aquarium Traffic/Access Access from 1-710 Access from l-10 Access from Coast Highway Access from Coast Highway 160,000 ADT on 1-710 160,00 ADT on I-10 75,000 ADT on arterials,coast highway 100.000 ADT on arterials,coast highway Hospitality Facilities Hotel Rooms 5,000 rooms citywide,2,000 in downtown 3.000 rooms citywide 500 rooms citywide 5,000 rooms citywide Meeting/Conference Facilities Hotel meeting facilites Hotel meeting facilities Hotel meeting facilifies Convention Centers Major regional convention center Regional convention center Competition Belmont Shore/PCH(3 miles) South Main(1 mile) Bayside,Miami(10 miles) Galleria Mail(1 mile) Lakeview Mall(6 miles) Montana Avenue(1 mile) Cerritos Mall(8 miles) Westwood(5 miles) South Coast Plaza(22 miles) Century City(6 miles) Disneyland 22 miles Beverly Hills 7 miles Conclusions Pine Avenue's strength is its restaurants The Third Street Promenade's focus is CocoWalk's strength is its cinema and Beach Walk is scheduled to open soon; and cinemas;retail is secondary; on restaurants and cinemas;active restaurants,together with adjacent specialty no cinema;focus will be on restaurants employment base and hotellconvention bars and night dubs;regional mall retail;very active nightlife. and dubs/bars. activity is important. adjacent. Source:Sedway Kotin Mouchy Group. 21-Nov-96 D*.WTX HUNT.WK4 • seasonality; • distance from freeways; • current market position of Main Street; and • the intensely competitive market for entertainment/retail and hospitality uses in Orange County. In summary,SKMG has concluded that the sites have the potential to capture support from a very large market area with unusually strong demographics,based on their unique beach location. DEVELOPMENT POTENTIAL The near-term development focus of the sites should be to expand hospitality facilities related to the beaches,while beginning to create some key elements of entertainment/retail activity strong enough to stand alone as regional destinations in an initial phase. SKMG recommends the three sites be developed in a coordinated program designed to create a unique beach-oriented destination and attract support from a broad regional market. The most feasible near-term products, which are summarized in Exhibit 5, include the following: • A 500-room resort hotel with approximately 60,000 square feet of conference/ meeting space on 12 to 14 acres at the southern end of District 9,as proposed by the Mayer Corporation on the Mayer site.This development is the key initial step to creating an image for the location. Development of the hotel,which will run counter to current trends in the Orange County hotel markets,will immediately position the beach area as a resort destination. • A 200-unit timeshare on 4 to 7 acres at the southern end of District 7 of the Shea Vickers site, adjacent to the Hilton. Of the available hospitality products, time- share developed and managed by a strong branded entity is the most feasible in the current financing market. • An initial entertainment/retail development with 30,000 to 45,000 square feet on 2 to 3 acres at the northern end of the District 7 portion of the Shea Vickers property, based on two to three branded theme restaurants. The issues of parking and critical mass will need to be addressed as developers phase the buildout of these uses. • Up to 100 units of timeshare on Blocks 104 and 105, developed in conjunction with supporting street-level retail and service uses. This will support the Main Street area. HUNTINGTON BEACH SITES 19 NOVEMBER 1996 EXHIBIT 5 SUMMARi .JF NEAR TERM DEVELOPMENT POTEN.sAL MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Property Approximate Potential Approximate and Use Site Size Uses Space Mayer Property (1) Resort Hotel 12 - 14 acres 500 room resort hotel 400,000-450,000 SF 60,000 SF conference space Structured parking Small increment of retail/ service space High Density Residential 10 acres 125 DU minimum 150,000 - 175,000 SF Shea Vickers Property (1) Theme Restaurant 2 -3 acres 2 -3 theme restaurants 25,000 - 30,000 SF and Entertainment Venues 1 -2 entertainment venues 8,000 - 15,000 SF Surface parking; convert to structured in later phases Timeshare 4-7 acres 200 unit timeshare resort 175,000 -220,000 SF Structured parking High Density Residential 10 acres 125 DU minimum 150,000 - 175,000 SF Pier Plaza Area Timeshare 2.25 acres 100 unit timeshare 85,000 - 120,000 SF Structured parking Theme Restaurant 1 acre Duke's Surf City Restaurant 18,000 SF Surface parking Totals Commercial Space 15- 18 acres 450,000 - 500,000 SF Timeshare 6.25-9.25 acres 300 DU 260,000- 340,000 SF Residential Units 20 acres 250 DU minimum 300,000-350,000 SF Grand Total of Sites 41 -47 acres 1,000,000- 1,200,000 SF Notes: (1)The developments in this exhibit represent near-term activity only (i.e., within a two year period). Subsequent mid-term and long-term development will build out the sites. Source: Sedway Kotin Mouchly Group. 21-Nov-96 D:1MTX HNT3.WK4 • Duke's in the Pier Plaza area, which will support both the three sites and the Main Street area. There are five key factors that will affect the near-term success of entertainment/retail development on the three sites: • Most importantly,the development of the 500-room resort hotel and conference/ meeting facilities proposed on the Mayer property, which will create an image for the beach area and will mitigate the seasonality of the current beach-related day trip activity. • The creation of an initial increment of 300 timeshare units on the Shea Vickers property,and Blocks 104 and 105, to provide activity in the Main Street area. • The creation of a core of three to four strong, stand-alone branded restaurants (including Duke's)as a regional destination, to create a clear entertainment focus for the beach area. • The expansion or repositioning of the existing multiplex cinema, or the creation of a live entertainment venue as an anchor on Pacific Coast Highway near Main Street. • The identification of interim and long-term parking resources. Thematic Orientation The entertainment/retail development will need a distinctive theme to create excitement and a regional identity separate from the current reputation of the beach area. Many of the interviewees suggested variations on the "Surf City" theme, focusing on the beaches, and active sports, with a strong family orientation. Merchandising Mix The merchandising mix SKMG recommends for the near-term development of the beach sites is based principally on hospitality, with destination restaurants. These elements can stand alone and attract regional support. SKMG does not recommend the development of a substantial increment of specialty retail on the beach sites in the near term,both because of competition with the existing retailers on Main Street and the need to first establish an identity for the beach sites as a high-quality resort and entertainment destination before extending activity into retailing. C:\WPDOCS\PROj ECfSA36%'036%.ROl HUNTINGTON BEACH SITES 21 NOVEMBER 1996 ASSUMPTIONS AND GENERAL LIMITING CONDITIONS Sedway Kotin Mouchly Group (SKMG) has made extensive efforts to confirm the accuracy and timeliness of the information contained in this study. Such information was compiled from a variety of sources,including interviews with government officials, review of City and County documents,and other third parties deemed to be reliable. Although SKMG believes all information in this study is correct, it does not warrant the accuracy of such information and assumes no responsibility for inaccuracies in the information by third parties. We have no responsibility to update this report for events and circumstances occurring after the date of this report. Further, no guarantee is made as to the possible effect on development of present or future federal, state or local legislation, including any regarding environmental or ecological matters. The accompanying projections and analyses are based on estimates and assumptions developed in connection with the study. In turn, these assumptions, and their relation to the projections,were developed using currently available economic data and other relevant information. It is the nature of forecasting, however, that some assumptions may not materialize, and unanticipated events and circumstances may occur. Therefore, actual results achieved during the projection period will likely vary from the projections, and some of the variations may be material to the conclusions of the analysis. Contractual obligations do not include access to or ownership transfer of any electronic data processing files, programs or models completed directly for or as by-products of this research effort, unless explicitly so agreed as part of the contract. This report may not be used for any purpose other than that for which it is prepared. Neither all nor any part of the contents of this study shall be disseminated to the public through publication advertising media, public relations, news media, sales media, or any other public means of communication without prior written consent and approval of Sedway Kotin Mouchly Group. HUNTINGTON BEACH SITES 22 NOVEMBER 1996 ;f ACTION AGENDA CITY COUNCIUREDEVELOPMENT AGENCY CITY OF HUNTINGTON BEACH ADJOURNED REGULAR MEETING MONDAY, DECEMBER 9, 1996 5:00 P.M. -Council Chamber Civic Center, 2000 Main Street Huntington Beach, California 92648 5so 5"20 P.M. - Council Chamber Call City Council/Redevelopment Agency Meeting To Order Roll Call: Harman, Julien, Dettloff, Bauer, Sullivan, Green, Garofalo [Present] (City Council/Redevelopment Agency) Study Session - Presentation By Sedway Kotin Mouchly Group - Market Overview Of Three Beach Sites In Huntington Beach - Robert L. It ayer Property -Shea Vickers Property - Pier Plaza Area (240.40) Transmittal from the Economic Development Department of a report dated November 21, 1996, titled Market Overview of Three Beach Sites prepared by Sedway Kotin Mouchly Group which includes a review of the three sites to identify the key factors that will affect their development, a detailed survey of existing and near term competitive developments in Orange County, a definition of the competitive position of the three sites, and a definition of the most feasible near term development for the three sites. Sedway Kotin Mouchly Group projects that the sites have considerable market support, and will be successful in the near term in the highly competitive Orange County markets for the initial elements of entertainment/retail space, resort hotel, timeshare, and high density residential. Robert L. Mayer City Leased Property Two distinct areas, District 9 and the portion of District that extends roughly from Huntington Ave. to Beach Blvd. District 9 includes the Waterfront Hilton parcel and an additional approximately 18 undeveloped or underutilized acres. It is a strip of land with about 2,000 ft. of PCH frontage averaging about 350 ft. in depth until it broadens substantially at Beach Blvd. The portion of District 8 on the property contains some 24.7 acres and includes Driftwood Mobilehome Park. rt t; Page 2 - Council/Agency Agenda - 12/09/96 Shea Vickers Morgan Stanley Development LLC This 31 acre essentially undeveloped property except for a motel and restaurant. Two distinct subareas, District 7 and the portion of District 8 that extends roughly from First St. to Huntington Ave: District 7 includes approximately 10.5 undeveloped or underutilized acres. It is a strip of land with about 1,000 ft. of PCH frontage averaging about 350 ft. in depth. The portion of District 8 contains approximately 20.5 acres from First St. to Atlanta Ave. to Huntington Ave. Pier Plaza Area Approximately 3.25 acres in the vicinity of the pier. Includes three sites: the approximately one-acre restaurant pad south of the pier to the west of PCH, 1.6 acres of Block 104, and 0.65 acres of Block 105. [Report on above subjects presented] Presentations By City/Agency Staff& Respective Consultants 1. Presentation by Shea Business Properties Shea will present its plans for the 31 acres located between PCH and Atlanta Ave. and 1st and Huntington Streets. Possible uses suggested by the SKMG study include time share units and "branded" restaurants. [Report presented by Shea Business Properties Representative] 2. Presentation by The Waterfront The Waterfront will present its plans regarding the development of the remainder of the 45 acre site leased by the Redevelopment Agency to the Robert Mayer Trust. Proposed uses may include an additional hotel tower, a conference center, a low- rise hotel and residential. [Report Deferred] Call Closed Session Of City Council/Redevelopment Agencyat 7:30 p.m.] Closed Session - City Council pursuant to Government Code Section 54957.6 to meet with its designated representatives William Osness, Personnel Director, and Daniel Cassidy, Esquire, Liebert, Cassidy and Frierson, regarding labor relations matters - meet and confer with the following employee organizations: MSOA, POA, PMA, MEA, MEO, HBFA, and SCLEA. (120.80) Closed Session - City Council pursuant to Government Code Section 54956.8 to give instructions to the city's negotiator, Michael Uberuaga, regarding negotiations with R.L.M. concerning the property located between Beach and Huntington and Pacific Coast Highway. Instruction will concern price and terms of payment. Subject: Waterfront; Developer's New Proposal. (120.80) (2) 12/09/96 - Council Agency Agenda - Page 3 Closed Session - City Council pursuant to Government Code Section 54956.9(a) to confer with its attorney regarding pending litigation which has been initiated formally and to which the city is a party.'The title of the litigation is Reith Schoap v. City of Huntington Beach - Orange County Superior Court Case No. 722009. Subject: Reith Schoap v. City of Huntington Beach. (120.80) Closed Session - City Council pursuant to Government Code Section 54956.9(a) to confer with its attorney regarding pending litigation which has been initiated formally and to which the city is a party. The title of the litigation is City of Huntington Beach v. Donald W. Tosh, et al. - Orange County Municipal Court Case No. 22 74 20 Donald W. Tosh, et al., v. City of Huntington Beach - Orange County Superior Court Case No. 76 96 00. Subject: City v. TLC - Tosh v. City. (120.80) Closed Session - City Council pursuant to Government Code Section 54956.9(a) to confer with its attorney regarding pending litigation which has been initiated formally and to which the city is a party. The title of the litigation is City v. McDonnell Douglas Corporation - U.S. District Court Case No. SACV 94 29 LHM (RWRx). Subject: City v. McDonnell Douglas Corporation (120.80) COUNCIL/AGENCY ADJOURNMENT: [at 7:30 P.M.]To Monday, December 16, 1996, at 5:00 p.m. in Room B-8, Civic Center, 2000 Main Street, Huntington Beach, California. CONNIE BROCKWAY,CITY CLERK City of Huntington Beach 2000 Main Street- Second Floor Huntington Beach, California 92648 536-5227 (3) SEDWAY KOTIN MOUCHLY GROUP Real Estate and Urban Economics l a - /- `2 ✓ '.-�'�l Nay MARKET OVERVIEW OF THREE BEACH SITES IN HUNTINGTON BEACH Prepared for: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Prepared by: SEDWAY KOTIN MOUCHLY GROUP Date of Report: NOVEMBER 21,1996 San Francisco Three Embarcadero Center,Suite 1150 Tel 415 781-8900 Los Angeles San Francisco,California 94111 Fax 415 781-8118 1 1 SiEDWAY KOTIN MOUCHLY GROUP Real Estate and Urban Economics November 21, 1996 Mr. David C.Biggs Director of Economic Development City of Huntington Beach 2000 Main Street Huntington Beach,CA 92648 Re: Market Overview of Three Beach Sites Dear David: Sedway Kotin Mouchly Group (SKMG) is pleased to submit this report entitled "Market Overview of Three Beach Sites in Huntington Beach." The report includes a review of the three sites to identify the key factors that will affect their development, a detailed survey of existing and near term competitive developments in Orange County,a definition of the competitive position of the three sites,and a definition of the most feasible near term development for the three sites. We were particularly pleased to be able to meet with the Mayer Corporation and Shea Vickers Development to review our analysis and their development proposals in some detail. In sum, SKMG projects that the sites have considerable market support, and will be successful in the near term in the highly competitive Orange County markets for the initial elements of entertainment/retail space, resort hotel,timeshare,and high density residential. It has been a pleasure working with you on this assignment. Please do not hesitate to contact us if you have any questions or comments about this report. Sincerely, L Sedway, CRE 4111- ael Conlon,CRE Principal cipal NP:SK/nam Enclosure San Francisco Three Embarcadero Center,Suite 1150 Tel 415 781-8900 Los Angeles San Francisco,California 94111 Fax 415 781-8118 TABLE OF CONTENTS Executive Summary Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Overview of Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 RobertL. Mayer Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Shea Vickers Development LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Pier Plaza Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Description of Uses Analyzed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Entertainment/Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Hospitality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Competitive Position of Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Sources of Market Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Competitive Developments in Market Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Comparison With Other Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Summary of Competitive Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Development Potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Thematic Orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Merchandising Mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ASSUMPTIONS AND GENERAL LIMITING CONDITIONS . . . . . . . . . . . . . . . . . . . . 22 LIST OF EXHIBITS Exhibit1: Map of Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Exhibit 2: Summary of Uses Currently Permitted on Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Exhibit 3: Survey of Competitive Orange County Developments . . . . . . . . . . . . . . . . . . . 16 Exhibit 4: Survey of Selected Comparable Developments . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Exhibit 5: Summary of Near Term Development Potential . . . . . . . . . . . . . . . . . . . . . . . . . 20 EXECUTIVE SUMMARY Sedway Kotin Mouchly Group (SKMG) was retained by the Redevelopment Agency of the City of Huntington Beach (the Agency) in August 1996 to prepare a focused market over- view that examines the near-term potential for regionally oriented commercial uses on three beach sites: (1) the balance of the Robert L. Mayer Corporation property, (2) the Shea Vickers Development LLC property, and (3) the Pier Plaza Area. The purpose of the market overview is to identify the conditions under which large-scale, regionally oriented commercial development(including hotel,resort,conference,retail,and entertainment uses) on the three sites could attract the market support needed to make the beach area in Huntington Beach a regional destination. SKMG analyzed an array of uses within two broad categories: (1)entertainment/retail uses, and (2) hospitality uses. Hence, the market overview focuses on creating places for people to shop,eat,and be entertained; and places for them to stay near the beach while they take advantage of these regional amenities. Competitive Position of Sites Entertainment/Retail. Most of the market support for the entertainment/retail uses on the sites will come from the area within a 10-mile radius of the sites. To assess the strength of demand,SKMG prepared a detailed demographic profile of the market area population and employment base. The profile shows a very large,affluent,well-educated market area with considerable discretionary income in relation to the scale of the uses that could be proposed on the sites. The incomes available in the market area will provide a very strong level of support for any amount of entertainment/retail space that could reasonably be proposed on the site. SKMG concluded that entertainment/retail development has adequate market support to be successful on the beach sites, and will compete effectively as an entertainment/retail location, even in the current crowded environment in Orange County. Hospitality. Huntington Beach's hospitality industry is well positioned to compete with other locations in the county,based on the unique amenity of its beaches and the strength of its 11,000,000 visitors who come to the beaches and the summer beach events. The current limited hotel and meeting/conference capacity in Huntington Beach restricts the city's ability to compete with other county locations for larger regional and national business groups for trade shows and conferences. When the capacity is expanded, resort facilities and timeshare units on the beach sites will compete effectively with established hotels and meeting facilities in Long Beach,Anaheim, and San Diego for a portion of the smaller groups and national business visitors coming to Southern California. Development Potential The near-term development focus of the sites should be to expand hospitality facilities related to the beaches,while beginning to create some key elements of entertainment/retail activity strong enough to stand alone as regional destinations in an initial phase. SKMG recommends the three sites be developed in a coordinated program designed to create a unique beach-oriented destination and attract support from a broad regional market.The most feasible near-term products include the following: • A 500-room resort hotel with approximately 60,000 square feet of conference/ meeting space on 12 to 14 acres at the southern end of the Mayer property, as proposed by the Mayer Corporation on the Mayer site. This development is the key initial step to creating an image for the location. • A 200-unit timeshare on 4 to 7 acres at the southern end of the Shea Vickers site, adjacent to the Hilton. Of the available hospitality products, timeshare developed and managed by a strong branded entity is the most feasible in the current financing market. • An initial entertainment/retail development with 30,000 to 45,000 square feet on 2 to 3 acres at the northern end of the Shea Vickers property,based on two to three branded theme restaurants. • Up to 100 units of timeshare on Blocks 104 and 105, developed in conjunction with supporting street-level retail and service uses. This will support the Main Street area. • Duke's in the Pier Plaza area, which will support both the three sites and the Main Street area. INTRODUCTION Sedway Kotin Mouchly Group (SKMG)was retained by the Redevelopment Agency of the City of Huntington Beach (the Agency) in August 1996 to prepare a focused market over- view that examines the near-term potential for regionally oriented commercial uses on three beach sites: • the balance of the Robert L. Mayer Corporation property,where there is a proposal for additional hotel rooms with conference/meeting space,and residential development; • the Shea Vickers Development LLC property, where the new owners are currently developing plans for a mix of commercial and residential development; and • the Pier Plaza Area, where the planned restaurant and public beachfront uses could support the Mayer property,the Shea Vickers property,and the downtown. The purpose of the market overview is to identify the conditions under which large-scale, regionally oriented commercial development(including hotel,resort, conference,retail,and entertainment uses) on the three sites could attract the market support needed to make the beach area in Huntington Beach a regional destination. During the assignment, SKMG completed the following tasks: • Reviewed the three sites to identify the key physical,legal,and regulatory factors that will affect their development potential.These included their sizes and configurations, permitted uses,other regulatory controls,access and traffic issues,other infrastructure issues,relations to adjacent uses,and relevant ownership issues. • Conducted a series of interviews with community leaders, business and property owners, representatives of local business and professional organizations, and City/ Agency staff,as well as a focused review of numerous documents,to frame the major land use options for the sites and provide background for the overview. • Defined the regionally oriented uses to be assessed in the market overview. Based on recent and current proposals for the sites and the results of SKMG's initial interviews and document review, these were focused on entertainment/retail (specialty retail, restaurants, cinema, music clubs and similar activities),and hospitality (hotel, resort hotel, small-scale hoteVbed and breakfast, timeshare, hotel-related conference and meeting facilities). • Surveyed the existing and near-term planned destinations in the central Orange County market area that will be most directly competitive with the uses assessed on the sites. SKMG initially reviewed approximately ten regional destinations in central Orange County, and prepared focused assessments of three that will be among the most directly competitive. HUNTINGTON BEACH SITES 1 NOVEMBER 1996 • Surveyed four additional successful regional commercial destinations — two in Southern California and two in Florida — that can serve as models for elements of Huntington Beach's market position, and assessed the successes and shortfalls they have experienced. • Defined the competitive position of the three beach sites in the central Orange County market based on the strength of their demographics, supporting business activity, their supporting retail and entertainment space,supporting hospitality facilities,and relative ease of access. • Defined the most feasible near-term development potential for the three sites, taken as a coordinated resource. This concise report presents a summary of the principal findings and conclusions of the market overview in five sections. Following this introduction, the second section of the report contains a brief overview of the sites to identify the key physical, legal, and regulatory factors that will affect their development potential. The third section defines the uses assessed by SKMG and describes the potential for elements for the sites' development, based on examples of successful entertainment/retail developments and related hospitality facilities from around the country. The fourth section surveys three of the most competitive develop- ments in the central Orange County market area,reviews four other comparable develop- ments to assess the successes and shortfalls they have experienced, and delineates the competitive position of the sites. The fifth section defines the most feasible near-term development potential for the three sites. OVERVIEW OF SITES The balance of the Robert L. Mayer Corporation property, the Shea Vickers property, and the Pier Plaza area together contain approximately 77 acres of key beach locations, and represent an irreplaceable resource for Huntington Beach. For reference, Exhibit 1 on the following page shows the sites. Exhibit 1 outlines the districts defined in the Downtown Specific Plan that regulate the permitted uses,parcel sizes, densities,building heights, site coverages, setbacks,and open space requirements. This overview refers to the Districts to calculate permitted uses and densities, and to structure the definitions of development potential by subareas. Together,current land use regulations will permit the development of up to approximately 3.7 million square feet of commercial space and approximately 1,355 residential units on the sites.While these maximum densities are unlikely to be attained,the sites have the potential to be developed at a scale that would transform the beach area. The uses and densities permitted in the Downtown Specific Plan are summarized in Exhibit 2. HUNTINGTON BEACH SITES 2 NOVEMBER 1996 • Nd1U (dN U `nAll IEREN NBd@NUN dAlltglNN ounlin wUUUd I 811d � IANoil I IINU OMM nun k41UNllm ®N IUdll Ui �INI11-- NNUna Nnuunil U&Ua'9I N full N IRUU NNdI ~dfl9 f1 ss BdIIIM Hip NI NNN mumm noun A C� B IINNNN Nlloom NIANNNn NNNUNAA BUUAUAN • I 11 HBO H EHMO N ANIAAAIN ,INi8 Omni Ae gpUNA&A UUUlmi NUAIIdNd angltriA !NA oil HURD 11111110 110 ■ 000 !dA �U�IdU NNIIiI� E&N A811 A dAAIIA dUNAUNA imumi l i fill I UPONUUN �Iflii U&IINIIIIU � d dNAUIINI immup N NNUIdAU Ildl i� A&U UNNIN� NA�N— tNone lily@Nt �1NNANd in IIINnIN "ENNUIIN mdAAl NOUN dddAUlld ? �Nim NI9 INU NUIE I-_ Ron NI N [lung-up H UUUd I HMO N Oil] U AIIUUgiIN IIII NdNdtAd Nd1IINIIdtd'" NN '1 AAUNAI� IIE-UUIN UU•UNN"AtG NNNNNUN Nd11NtAAN811 tlp_gg�� N Ui IIU 111:Ni1' :111111 NBNIINNN ddNdNtt8ldU pnaayy�� @�� N ERROR III NI IIIUUd 6t 1111 1111111 NUUAtNd NNNggt. ��®��=r@UI Ngpld AIIHINlU 1111111 l HillAlk III'i MdmullU A �IIIU1(U NgNNllli NIIIINNNd 1 UUNNIgIN NttNINN�U U��N dNdNtNN NNNIiNdI NNdtiNNl NNIt11Al IAOp' \ UE�9 tIt111NN wNNIIIgdI NIIdNNNt SGI1181t �NIiNHI �/( \\\\\O\\� �� kN11 NillElliNl fa4lNllli NlNllldlN dNNAINN �ANNtl �� •� � VAAA �y�p fall NIIINIiI NdNlllllN NIEIININ dllmpul loom VAAAAAA�� , • ■ Gilt �IUNddd INNNINIiI dNNN1 6NNNNBd N18NIN1 \\ \� Q► 1l�.4 NNNNIIU? 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VAAAAQAA��,\+��' �, �� IddINtA dtNdN1AEilNllN INUIN NIIE�HIN ®A`A �� •�� V`A� NN�1 tNgNEii toitkiNN oil long Ilill �Id1111 NNNiiU t fUali �'i f 911111u iU 111 li`N aNl�r I-1� Lgl NNIIIUIgq NO WNIE��R�� YNlNlidlN NN11IfA oil- IIIIIIIIIIIIII _ dlNll I � t � ' I • n • I it • F EXHIBIT 2 USES CURRENTLY PERMITTED ON SITES MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Site Uses Maximum Maximum Pro a Size Permitted FAR/Density Development Mayer Property District 9 18.01 acres Commercial Recreation 3.0 FAR 2.3 million SF District 8 24.70 acres High Density Residential 30 DU/acre 740 DU (50 foot height) Shea Vickers Property District 7 10.50 acres Visitor Serving Commercial 3.0 FAR 1.4 million SF (8 stories height) District 8 20.50 acres High Density Residential 30 DU/acre 615 DU (50 foot height) Pier Plaza Area District 3 2.25 acres Visitor Serving Commecial 2.0-3.0 FAR 250,000 SF (Blocks 104, 105) (3-4 story 35-40 foot height) District 10 +/- 1.00 acre Pier-Related Commercial None None (2 story or 25 foot height) Totals Commercial Space 30.76 acres Commercial 3.0 FAR 3.95 million SF Residential Units 45.20 acres Residential 30 DU/acre 1,355 DU Pier-Related 1.00 acre Commercial None None Total of Sites 76.96 acres Source: Sedway Kotin Mouchly Group. 21-Nov-96 D:WITX HNT2.WK4 Robert L. Mayer Property This property contains two very distinct areas, District 9 and the portion of District 8 that extends roughly from Huntington Avenue to Beach Boulevard. District 9, which includes the 290-room Waterfront Hilton parcel and an additional approximately 18 undeveloped or underutilized acres,is a strip of land with about 2,000 feet of frontage on Pacific Coast Highway(PCH),averaging about 350 feet in depth until it broadens substantially at Beach Boulevard. The portion of District 8 on the property contains some 24.7 acres in a roughly triangular form,and includes the Driftwood Mobilehome Park. The City of Huntington Beach owns the property,and the Robert L. Mayer Corporation has a ground lease that extends to 2010. SKMG has not reviewed the terms of the lease for this assignment. The Downtown Specific Plan (and related coastal and other regulations) currently permits commercial recreation uses on the District 9 portion of the property,with a maximum 3.0 floor area ratio (FAR), and no height limit. This FAR would permit just over 2.3 million square feet of additional space on the 18.01 undeveloped acres. The District 8 portion of the property permits high-density residential uses to a maximum of 30 units per acre and a maximum building height of 50 feet.These development regula- tions translate to a maximum of 740 units developed on the 24.7 acres. Several infrastructure issues related to the property will affect its near-term development potential.These include the extension of Walnut Avenue (Pacific View Drive), the environ- mental remediation of wetlands on portions of the property, reabandonment of oil wells, the acquisition and relocation of the remaining mobile homes,and the demolition of several improvements on the property.The costs for these activities,which are currently the subject of negotiations between the City of Huntington Beach and the lessee,were estimated to be approximately$11.3 million in early 1996. Shea Vickers Development LLC This 31-acre property is essentially undeveloped except for a motel and restaurant. Similar to the Mayer property,it contains two distinct subareas,District 7 and the portion of District 8 that extends roughly from First Street to Huntington Avenue. District 7,which includes approximately 10.5 undeveloped or underutilized acres, is a strip of land with about 1,000 feet of frontage on PCH,averaging about 350 feet in depth.The portion of District 8 contains approximately 20.5 acres from First Street to Atlanta Avenue to Huntington Avenue in a roughly rectangular form. Shea Vickers Development LLC,a joint venture between Morgan Stanley and Shea Business Properties,owns the property and is planning for its near-term development. HUNTINGTON BEACH SITES 5 NovEMBER 1996 The Downtown Specific Plan (and related coastal and other regulations) permit visitor- serving commercial uses on the District 7 portion of the property,with a maximum 3.0 FAR and a maximum building height of eight stories. This would permit almost 1.4 million square feet of additional commercial space on the 10.5 undeveloped acres. The District 8 portion of the property permits high-density residential uses to a maximum of 30 units per acre and a maximum building height of 50 feet. These development regulations translate to a maximum of 615 units developed on the 20.5 acres. Two significant infrastructure requirements are related to the property's near-term develop- ment potential: the extension of Walnut Avenue (Pacific View Drive),and the remediation of oil production on portions of the property.There are no estimates for these costs. Pier Plaza Area The Pier Plaza Area,as shown on Exhibit 1,is defined in this overview as approximately 3.25 acres in the vicinity of the pier. The area includes three sites: the approximately one-acre restaurant pad just south of the pier to the west of Pacific Coast Highway; 1.6 acres of Block 104; and 0.65 acres of Block 105. The restaurant pad is developed with a now vacant restaurant, which is proposed to be replaced by Duke's Surf City. It surrounds the pier and has over 1,000 feet of frontage on Pacific Coast Highway in the heart of the beach area.The uses currently permitted on this property by the Downtown Specific Plan(and related coastal and other regulations)include pier-related commercial,with no maximum FAR,and a maximum building height of 25 feet or two stories. The public improvements to the Pier Plaza Area, which are out to bid, are projected to be approximately$5 million; the private investment in Duke's is projected to be an additional$5 million. Block 104 and Block 105 contain approximately 2.25 acres in District 3 of the Downtown Specific Plan,designated for a wide range of visitor-serving commercial uses. The maximum density ranges from 2.0 to 3.0 FAR,depending on lot size,with height limits of 3 to 4 stories (35 to 45 feet)based on lot size. Both blocks have existing development; new development must blend with existing structures. Block 104 is bordered by Pacific Coast Highway and Walnut Avenue, from Main Street to 5th Street. Block 105 is bordered by Pacific Coast Highway and Walnut Avenue,from 5th Street to 6th Street. DESCRIPTION OF USES ANALYZED The purpose of this market overview is to identify the conditions under which large-scale, regionally oriented commercial development on the three sites could attract the market HUNTINGTON BEACH SITES 6 NOVEMBER 1996 f support needed to make the beach area in Huntington Beach an exciting regional destination. During SKMG's interviews with community leaders and City/Agency staff, all the interviewees stressed the importance of creating high-impact,regionally oriented retail and visitor-serving uses on the three beach sites. SKMG's summary of the interviews revealed that the community leaders and City/Agency staff sought to creatively explore a wide range of uses and activities for the beach area. In response, SKMG analyzed an array of uses within two broad categories: (1) entertainment/retail uses,and (2) hospitality uses. Hence, the market overview focuses on creating places for people to shop,eat,and be entertained; and places for them to stay near the beach while they take advantage of these regional amenities. In addition to the two principal uses assessed, there are other supporting uses also addressed, including office space targeted to the services sector and residential units planned for development on the sites. SKMG anticipates that there will be a nominal increment of service office developed; but office is not likely to be a focus of the program. Orange County has a total office space inventory of approximately 64 million square feet,with the largest single focus being the 25- million-square-foot regional cluster in the Airport area. The office markets in central and west Orange County have experienced lease rates well below replacement cost, low occupancy rates,and high tenant turnover until recent months.Although overall conditions are improving, the office markets in the county will not support significant new development in the near term,except for build-to-suits. Huntington Beach represents an insignificant share of the existing office space inventory in Orange County.Currently,there is an inventory of approximately two million square feet of non-owner occupied office space in Huntington Beach,most of it clustered on the major arterials near the I-405 freeway. With a few notable exceptions, the users are local-serving firms and back-office locations. These users are cost-sensitive and will not support the development of new office space. As a result, SKMG does not expect a substantial change in the office markets in the Huntington Beach area in the near term,and does not anticipate development of significant office space on the three sites. Residential development will be feasible where permitted on the sites, given the proven strong demand for a wide range of medium and higher density residential products in the areas near the beach.SKMG anticipates that the principal issues related to the development of residential uses on the sites will not be market issues but policy issues regarding ownership,density,amenities,and pricing. HUNTINGTON BEACH SITES 7 NOvEMBER 1996 Entertainment/Retail Entertainment/retail development represents a very dynamic blend of new entertainment technology and new retail technology designed to create exciting and constantly changing environments for shopping,eating,and recreation. Entertainment/retail has evolved during the past several years,as the distribution systems for retail merchandise and entertainment products have been converging rapidly,producing creative new alliances between retailers and entertainment companies. On the retail side,the recent evolution of retail technologies (including the sudden and very successful development of category killers,power centers,big boxes, and outlet malls)has dramatically altered the retail landscape, increasing competition and forcing managers of many types of retail facilities such as regional malls to look for new ways to continually energize retail environments and attract shoppers looking for new experiences. In the entertainment industry, changing technologies and access to much larger amounts of capital have opened possibilities for retail distribution of products beyond the traditional theme parks, cinemas,and video cassettes. These new retail distribution channels include improved licensing methods,direct selling of branded merchandise, smaller scale rides,and games based on new computer technology. Components of Entertainment/Retail. As entertainment technologies have swept into retail- ing, several new types of retail space have begun to appear in major urban markets, sometimes as new tenants in regional malls and, increasingly, as new types of anchors in new centers driven by entertainment. Because these new technologies are not yet assimi- lated into retailing patterns, they are still called "entertainment/retail." The entertainment/ retail components that have had the most impact on retail activity to date include the following: • Cinema megaplexes with 12 to 24 screens of up to 100,000 square feet and 6,000 seats; some include large-screen,high-definition film formats such as IMAX,Cinetropolis by IWERKS,the Sony Theatres at Lincoln Square in New York,and Cinemania Showscan at CityWalk in Universal City.The megaplexes draw substantial traffic from regional markets,and have become the hottest new anchors for many malls. • Heavily themed, large, high-volume restaurants with brand name appeal that can draw from wide regional trade areas;they include Hard Rock Cafe,Planet Hollywood, Dive!, Rain Forest Cafe,B. B. King's Blues Club,Jekyll&Hyde, Wizardz Magic Club and Dinner Theatre, Front Row Sports Bar, All-Star Cafe, Country Star American Music Grill, Harley Davidson Cafe, Motown Cafe, and Marvel Mania. The heavily themed restaurants are designed to entertain their customers, and often focus more on selling entertainment and branded merchandise than food. HUNTINGTON BEACH SITES 8 NOVEMBER 1996 • Large new entertainment-oriented retailers selling very powerful brand name merchandise directly; these include Sony, Nike Town, Coca-Cola, Disney Stores, Warner Bros. Studio Stores, as well as several large music and book stores such as Virgin Records megastores,HMV,Barnes&Noble,and Borders.These new retailers create exciting environments, based on entertainment, to attract shoppers from regional markets. • Large-scale live entertainment venues with several nightclubs and other music-based activities; they include House of Blues, Wild Horse Saloon, Dave & Busters, cafe@play,Billboard Live.Most of these,like the themed restaurants,have developed national merchandising plans based on the creation of a themed, often interactive, environment. • Computer-based video entertainment facilities; these include Sony Wonder in New York,Virtual World,Magic Edge,Fightertown,and several new concepts that will be rolled out during the next few months. These facilities have not yet been generally successful to the same degree that the megaplexes, theme restaurants, branded retailers,and live entertainment venues have been. Types of Entertainment/Retail Developments. SKMG researched entertainment/retail development nationally to find elements of a thematic orientation and merchandising mix that would be appropriate for the location of the beach sites. To provide a structured perspective on the wide range of existing entertainment/retail developments, SKMG arrayed the existing developments into four broad categories: (1)urban mixed-use areas that have come to focus increasingly on multiplex cinemas, other entertainment venues, and restaurants rather than specialty retail as their principal means of attracting activity; (2) major national tourist destinations and vacation locations that are using large-scale enter- tainment venues(both live and electronic)and branded restaurants to create excitement and provide new inducements for repeat visits; (3) cinema-based developments and other related entertainment venues where the anchor is the entertainment; and (4) recent suburban adaptations of entertainment retail in the form of regionally oriented entertain- ment/retail developments which are generally focused on multiplex cinemas and branded restaurants. Because the trend is so recent, new entertainment/retail developments include a broad range of projects,some familiar and others very experimental. Urban mixed-use developments have increasingly come to focus on entertainment activities such as multiplex cinemas,nightclubs,live entertainment venues, and branded restaurants to attract market support. As shopping has become a more routinized activity,with many urban retail centers nationally having essentially the same merchandising mix and often the same tenants, shoppers have tended to look to entertainment activities for excitement. HUNTINGTON BEACH SITES 9 NOVEMBER 1996 Examples of urban mixed-use centers that have focused on entertainment activities include the following: • The Inner Harbor in Baltimore: more than 20 attractions built around Harborplace, including a children's museum,an entertainment center in the Power Plant,and the Disney Imageering marine biology exposition. • Third Street Promenade in Santa Monica: a marketplace with 120 total tenants, 50 restaurants, an adjacent regional mall, and three cinema complexes with 17 screens and 5,000 seats. • The huge Chelsea Piers family sports/entertainment complex: on four piers in New York,where there is a wide choice of activities involving sports and entertainment. • Old Town Pasadena: based on restaurants, specialty retail, and then movie theaters; this area has been in process of revitalization for several years. • Power & Light District in Kansas City, Missouri: a proposed 600,000-square-foot entertainment center located next to the major hotels,live theater district,and conven- tion center; will include a 30-screen AMC multiplex, several restaurants and live entertainment venues. Many of the best-known entertainment/retail developments completed to date are really very large-scale,tourist-oriented attractions in major cities and national vacation locations such as New York,Los Angeles,Orlando,and Las Vegas. Many of these venues depend on visitation by millions of vacationers looking for unique experiences. Examples include the following: • E Walk on 42nd street in New York: planned opening in 1998 for approximately 200,000 square feet of entertainment/retail space,with a 13-screen 90,000-square-foot Sony complex and Vegas!as anchors,and interest from many key tenants,in addition to a large hotel and possibly a smaller timeshare for subsequent phases. • Yerba Buena Gardens in San Francisco: planned opening in late 1997 of the Sony Retail Entertainment Center, a 15-screen multiplex with an INM theatre as the anchor; retail space based on unique San Francisco-themed shops; several highly themed restaurants,and clubs with live music; the central concourse to be called the Gateway,with large projection screens to display live events or create shows; to open in late 1997. • Several developments in Orlando, based almost exclusively on national tourism related to the theme parks and other large-scale destinations (Disney World,Church Street Station, Pleasure Island). Proposed is Pointe Orlando, a 450,000-square-foot HUNTINGTON BEACH SITES 10 NOVEMBER 1996 entertainment/retail center with a 23,000-square-foot FAO Schwartz and a 23-screen multiplex with an IMAX. • Several developments in Las Vegas, based on casinos and very large hotels, which need to create continually changing attractions for vacationers (Treasure Island,Circus Circus,Luxor,MGM Grand,the Forum Shops,the proposed Star Trek, the Experience at the Hilton). • CityWalk in Universal City: a 220,000-square-foot entertainment/retail center on 6.25 acres next to Universal Studios theme park containing approximately 40 retail shops, restaurants,and entertainment venues; opened in 1993; 1,500-foot-long street with 21 vintage neon signs and a stadium-sized Astrovision video screen,previously existing 18-screen 6,000-seat Universal City Cinemas (opened in 1987); several large local brand name restaurants; regular planned events; 10,000 people working on site; develop- ment and management by MCA. A third type of entertainment/retail is cinema-based developments that market a major multiplex (12 to 30 screens) with a large format venue (such as an IMAX), theater-based entertainment venues that are updated with technology to provide flexibility for several types of events. These projects, which are attracting increased interest, are designed for large regional markets. Examples include the following: • Lincoln Square in New York:Sony Theatres 12-screen multiplex with an IMAX theatre in an area of restaurants and other theatres. • Foxwoods Casino in Connecticut:the location of the prototype Cinetropolis facility by IWERKS. • Sundance Square, Fort Worth: an 11-screen AMC multiplex opened in 1993; several major national retailers and restaurants opened following the cinema; in May 1996 a second 12-screen AMC theater opened. • The $38 million Sony-Blockbuster Amphitheatre on the waterfront in Camden, New Jersey:an amphitheatre seating between 1,600 and 25,000 people designed for smaller concerts,ballet,opera,and big name entertainers. The emerging trend in more suburban locations is a loose entertainment/retail standard similar to CocoWalk, which includes approximately 100,000 to 200,000 square feet of total space,with about two-thirds containing entertainment and heavily themed restaurants,and the balance specialty retail.The retail uses are expected to generate the majority of the sales; as a result, the retailers must contain a high percentage of strong,highly productive credit tenants. HUNnNGTON BEACH SITES 11 NOVEMBER 1996 Suburban entertainment/retail developments are still difficult to structure and to finance, and tend to be very management-intensive due to the need to be continually kept current. Because these developments are still unproven as longer term investments, the current lending criteria for entertainment/retail projects emphasize strong balance sheets, high levels of equity, substantial preleasing to credit tenants, and experienced, innovative management. Examples include the following: • Entertainment Center at Irvine Spectrum: a 271,000-square-foot entertainment/retail center on 35 acres;themed as a Moroccan village,with a 21-screen,6,400-seat Edwards Cinema and an IMAX theatre; 50,000 square feet of restaurants with 1,700 seats. • CocoWalk in Coconut Grove,Florida:a 120,000-square-foot entertainment/retail center in the heart of the traditional bohemian area, with speciality shops,restaurants, and live entertainment venues; opened in 1993; 10-screen multiplex cinema is the major anchor; several large local and national brand name restaurants; regular planned events. • Beach Walk in Fort Lauderdale: a 150,000-square-foot center based primarily on restaurants and live entertainment venues, designed for beach visitors; there is no cinema; scheduled to open within the next two months. This overview will define the conditions under which elements of a suburban entertain- ment/retail concept can be developed successfully on the three sites and be used as an approach to attract regional market support for restaurants, clubs, shops, and related uses at a scale appropriate for the beach area of Huntington Beach. Hospitality The hospitality industry has been through a period of significant consolidation and change during the past few years, and is just now recovering from the recession of the late 1980s and early 1990s.To respond to several years of decreased occupancy and room rates,many hotel management companies have deferred capital investments, reorganized to create operational efficiencies,and reflagged properties. There has been very little development of traditional full-service hotels during the period. In fact, room rates do not yet generally support new full-service construction in most markets. However, the development of a few new hospitality products (including limited service hotels, extended stay facilities, and timeshare projects) has enabled some hotel management companies to gain market share in spite of increased competition. Three types of new hospitality products have had the most success: • Limited-service hotels (sometimes distinguished from no-service hotels,where there is no restaurant in the facility) provide basic accommodations at very competitive HUNTINGTON BEACH SITES 12 NOVEMBER 1996 rates. Examples include Marriott Courtyard, Fairfield Inn by Marriott, Holiday Inn Express,Days Inn,Travelodge. • Extended stay facilities,often defined as providing for stays of a week minimum(but sometimes defined to include suites hotels where many of the guests are on extended stays). Examples include Homestay,Homestead Inn, Summerfield Suites, Residence Inn. • Timeshare(now often referred to as interval ownership) facilities provide limited time periods of occupancy in resorts. Examples include a number of independent develop- ment and management organizations. Although Marriott is the largest by a wide margin,several other major hotel management companies are rapidly increasing their inventories. COMPETITIVE POSITION OF SITES This overview assesses the competitive position of the three sites by evaluating the portion of the market area's unmet demand that they must capture to be successful. SKMG concludes that the sites should be developed as a coordinated program that can be used to create a destination and attract support from a broad regional market. Sources of Market Support Entertainment/Retail Most of the market support for the entertainment/retail uses on the sites will come from the area within a 10-mile radius of the sites. To assess the strength of demand,SKMG prepared a detailed demographic profile of the market area population and employment base.The profile shows a very large,affluent,well-educated market area with considerable discretionary income in relation to the scale of the uses that could be proposed on the sites. The total 1996 market area population is approximately 944,838 residents and approximately 316,300 households,based on projections from the 1990 U.S.Census. Since the market area is essentially developed, the population is expected to increase very slowly. The 1996 average age is 34.3 years,with a relatively large portion of families with children by regional and national norms. The 1996 market area per capita,average household,and median household incomes were quite high, at $21,533, $63,825, and $53,733, respectively, with relatively large numbers of households/families in the higher income brackets. This is well above national and even regional norms,and indicates a very affluent market base. HUNTINGTON BEACH SITES 13 NovEMBER 1996 The incomes available in the market area will provide a very strong level of support for any amount of entertainment/retail space that could reasonably be proposed on the sites. SKMG estimates that there will be approximately$1.1 billion expended by residents of the market area for eating and drinking places,and some$1.1 billion expended in department,apparel, and shoe stores.As an illustrative example,200,000 square feet of restaurants and specialty retail space on the site, needing to generate $350 per square foot to be successful, would need to capture approximately$70,000,000 in sales,or some one quarter of 1 percent of the total$2.8 billion in expenditure potential available in these merchandise categories in the market area.Based on this very low capture rate,SKMG has concluded that entertainment/ retail development has adequate market support to be successful on the beach sites. Hospitality.The hospitality industry in Orange County is now improving rapidly after the several years of low room rates and occupancy rates, and little or no construction (except for budget and extended products) since 1989. However, most hotel development plans remain on hold or have been abandoned, and the products that continue to perform well in the county are the midprice and all-suite segments. The improving national and regional economies have mitigated the principal factors that most affected the hotel markets in Orange County—the recession,a decrease in Disneyland- related hotel bookings, a decline in corporate travel, the cutbacks in aerospace/defense activity. As the Disneyland expansion proceeds and the Anaheim Convention Center is expanded and renovated, Orange County will be better positioned to compete with the expanded and renovated convention facilities in Long Beach,Los Angeles,and San Diego. However, Huntington Beach's hospitality industry is not yet designed to serve large numbers of visitors, particularly in larger business groups, meetings, and conferences. In 1995,Huntington Beach had a total inventory of approximately 1,200 hotel rooms.Approxi- mately 40 percent of this total were in the two major hotels in the city,both of which are equipped to host smaller meetings and conferences. The ballroom,banquet facilities, and meeting rooms in the Waterfront Hilton,with approximately 21,000 total square feet of ball- room and meeting space, provide the largest conference and meeting facilities in Huntington Beach. An estimated 11,000,000 visitors came to Huntington Beach in 1995. Of this total, approximately 70 percent came from within 90 miles. Essentially all of the visitation is day trips to the beaches, with most of the activity during the weekends in the peak summer months. Two factors currently limit Huntington Beach's hospitality industry: • First is the limited hotel and meeting/conference capacity, which restricts the city's ability to attract larger regional and national business groups for trade shows and conferences. HUNTINGTON BEACH SITES 14 NOVEMBER 1996 • Second is the competition from established hotels and meeting facilities in Long Beach, Anaheim, and San Diego, which are the focal points for larger groups and ` national business visitors coming to Southern California. Expansion of regional and national hospitality activity in Huntington Beach through a program focused on group business travel and meetings is a major area of opportunity,in spite of the intense competition from established facilities in Long Beach,Anaheim,and San Diego. Competitive Developments in Market Area Entertainment/Retail. SKMG reviewed approximately 15 developments in the central Orange County area that could be competitive with elements of entertainment/retail activities on the sites. These include Huntington Center(assuming its repositioning with a multiplex cinema), Westminister Mall, Mainplace in Santa Ana, South Coast Plaza, South Coast Town Center,Metro Pointe, the Entertainment Center at the Spectrum, Park Place, Fashion Island, plans for resort development on the Newport Coast, Laguna Beach, the Tustin Marketplace, Belmont Shore in Long Beach, Downtown Long Beach, Disneyland, and Knotts Berry Farm. Overall, SKMG has concluded that the beach sites will compete effectively as an entertain- ment/retail location, even in the current crowded environment in Orange County. Exhibit 3 summarizes the sites' market relationships to three of the mostly directly competitive developments that SKMG selected to illustrate the current retail market in Orange County. Hospitality. There are approximately 46,000 hotel rooms in Orange County, with the greatest single concentration in the vicinity of Disneyland and a second large cluster in the Airport area. Huntington Beach's hospitality industry is well positioned to compete with other locations in the county,based on the unique amenity of its beaches and the strength of its 11,000,000 visitors who come to the beaches and the summer beach events. The current limited hotel and meeting/conference capacity in Huntington Beach restricts the city's ability to compete with other county locations for larger regional and national business groups for trade shows and conferences. When the capacity is expanded, resort facilities and timeshare units on the beach sites will compete effectively with established hotels and meeting facilities in Long Beach, Anaheim, and San Diego for a portion of the smaller groups and national business visitors coming to Southern California. HUNTINGTON BEACH SITES 15 NOVEMBER 1996 A EXHIBIT 3 SURVEY OF COMPETITIVE ORANGE COUNTY DEVELOPMENTS MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Beach Area Entertainment Center Newport Harbor Beachfront Huntington Beach Irvine Spectrum Newport Beach Laguna Beach Basic Fads Beach serving and community serving retail, New entertainmentfretail center, Major regional office center,regional mall, Small scale beach resort with specialty restaurant,and entertainment uses; 271,000 SF total;21 screen cinema; museums,conference facilities; retail,small scale hotels,and a wide 6 plex cinema; Moroccan architectural moth,in major resort and boating center variety of destination restaurants. 500 hotel rooms office center Demographics(10 mile radius) Total 1996 Population 944.838 819,228 848,217 478,732 1996 Per Capita Income $21,533 $26.447 $22,361 - $32.727 Total 1996 Income $20.35 billion $21.67 billion $18.97 billion $15.67 billion Business Activity Small office inventory 10 MSF office space and R&D 4 MSF office space No significant office space Local serving office space Regional and national headquarters Regional,national headquarters 35,000 employees on site Airport office area(25 million SF)4 miles away Retail Activity Retail both local serving and beach-oriented 271.000 SF total Major regional mall Small scale specialty retail, Focus on food and sports apparel 50,000 SF restaurants with 1,700 seats Wide Variety of specialty retail with focus on arts Entertainment Cinemas Edwards 6 plex 21 screen Edwards multiplex 6 plex cinema No major cinema Bars/Night Clubs Several night dubs,bars 50.000 SF of restaurants(1,700 seats) 350 restaurants citywide Very active night life Arena/Sports Team Traffic/Aocess Access from Route 1 PCH Access from 1-405,1-5,Rte 133 Access from Rte.73,Rte.55.Rte.1 Access from Rte.133,Rte.1 5 miles from 1-405 500,000 ADT 3 miles from Rte.73 8 miles from 1-405 60,000 ADT on PCH and Beach 100,000 ADT on PCH and Jamboree 30,000 ADT on PCH,Laguna Canyon Hospitality Facilities Hotel Rooms 1,200 rooms citywide Several large first class hotels in nearby 2,600 hotel rooms citywide Several small hotels along PCH Meeting/Conference Facilities Hotel meeting facilities airport area Hotel meeting facilities Convention Centers Hotel meeting facilities Huntington Center(5 miles) Competition Westminster Center(6 miles) South Coast Plaza(9 miles) South Coast Plaza(5 miles) Irvine Spectrum(8 miles) • South Coast Plaza(7 miles) Newport Harbor(9 miles) Irvine Spectrum(8 miles) Newport Harbor(9 miles) Newport Harbor(7 miles) Laguna Beach(8 miles) Laguna Beach(9 miles) South Coast Plaza(13 miles) Irvine Spectrum(17 miles) Disneyland(16 miles) Disneyland(18 miles) Disneyland(24 miles) Disneyland 17 miles Conclusions Beach Area's strengths are its location Entertainment center now draws from Newport Harbor is a major regional Laguna Beach's focus is its charm,artist on the beach,recreation facilities, nearby employment center and business center,resort and colony history,and small scale pedestrian and events. wide regional market,due to uniqueness entertainment destination. areas;wide regional draw as weekend of concept.. and summer destination. Source:Sedway Kotin Mouchy Group. 21-Nov-96 D-.WTX HUNT.WK4 Comparison With Other Developments For comparison to the beach sites, SKMG surveyed four additional successful regional commercial destinations—two in Southern California and two in Florida—that can serve as models for elements of Huntington Beach's market position;in addition,SKMG assessed the successes and shortfalls these successful regional destinations have experienced. The developments are the Pine Avenue area in downtown Long Beach (which is competitive to a degree with the beach area in Huntington Beach), the Third Street Promenade in Santa Monica, CocoWalk in Coconut Grove (a nationally recognized model for entertainment/ retail development), and Beach Walk in Fort Lauderdale (patterned to some degree after CocoWalk,but with no cinema,it is due to open within the next month). SKMG structured the comparison in the same format as the survey of competitive Orange County developments,and examined the market position of the four developments based on the strength of their demographics,supporting business activity,their supporting retail and entertainment space,supporting hospitality facilities,and relative ease of access. Exhibit 4 summarizes the comparison. The comparison shows that the four developments have found somewhat different ways to become successful,based on their own particular strengths. However,a few key patterns emerge from the comparison (these patterns are essentially the same as those from Exhibit 3, which reviews the Orange County developments). Among them are (1) the importance of multiplex cinemas as entertainment anchors; (2) the key role of large,branded destination restaurants to attract regional market support; (3) the critical support brought by lunchtime restaurant demand from adjacent employment centers; (4) the importance of a thematic orientation to give a clear identity to the development; and (5) the need to attract large destination retailers as retail anchors. Summary of Competitive Position Strengths.The beach sites have several key market strengths,based on their location and the size and characteristics of the market area: • very strong demographics; • annually, 11,000,000 visitors,based on City data; • unique location on the beaches; • two large sites under single well capitalized,experienced ownerships; and • renovation of the pier and the adjacent area. Weaknesses.The principal weaknesses of the location include the following: • lack of an employment base to support lunchtime restaurant and daytime retail activity; HUNTINGTON BEACH SITES 17 NOVEMBER 1996 EXHIBIT 4 SURVEY OF SELECTED COMPARABLE DEVELOPMENTS MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Pine Avenue The Third Street Promenade CocoWalk Beach Walk Long Beach Santa Monica Coconut Grove Fla. Fort Lauderdale Basic Facts Revitalized downtown with regional - Festival marketplace with 120 tenants and - Traditional bohemian area with smaller Main beachfront with large hotel mall,restaurant/entertainment uses, 7,000 parking spaces,50 restaurants, scale specialty retail,entertainment, inventory; large hotel inventory,and convention regional mall,regional office center, very active nightlife Major tourist destination; center. ocean front location Very active entertainment and restaurant Demographics(10 mile radius) Total 1996 Population 1,359,352 975,173 1,075.602 719,736 1996 Per Capita Income $18,333 $33,613 $15,706 $19,302 Total 1996 Income $24.92 billion $32.173 billion $16.893 billion $13.892 btttion Business Activity Three million square feet of office space 2 million square feet of office space No major employment centers Not a major employment center Major port Bdckell Avenue 10 minutes away Business center 3 miles away Retail Activity Some specialty retail Full range of specialty retail Major regional specialty retail location Major regional specialty area nearby Regional mall Regional mall adjacent Entertainment Cinemas AMC 16 screens 3 large cinema complexes(6,000 seats) 10 screen cinema at Cocowalk No cinema in Beach Walk Bars/Night Clubs Active bar/night dub area Active night dubs,bars Very alive nightlife Very active nightlife Arena/Sports Team Hockey team,Queen Mary,aquarium TrafficiAccess Access from 1-710 Access from 1-10 Access from Coast Highway Access from Coast Highway 160,000 ADT on 1-710 160,00 ADT on I-10 75,000 ADT on arterials,coast highway 100,000 ADT on arterials,coast highway Hospitality Facilities Hotel Rooms 5,000 rooms citywide,2,000 in downtown 3,000 rooms citywide 500 rooms citywide 5,000 rooms citywide Meeting/Conference Facilities Hotel meeting facilities Hotel meeting facilities Hotel meeting facilities Convention Center Major regional convention center Regional convention center Competition Belmont Shore/PCH(3 miles) South Main(1 mile) Bayside,Miami(10 miles) Galleda Mall(1 mile) Lakeview Mall(6 miles) Montana Avenue(1 mile) Cerritos Mall(8 miles) Westwood(5 miles) South Coast Plaza(22 miles) Century City(6 miles) Disneyland 22 miles Beverly Hills miles Conclusions Pine Avenue's strength is its restaurants The Third Street Promenade's focus is CocoWalk's strength is its cinema and Beach Walk Is scheduled to open soon; and cinemas;retail is secondary; on restaurants and cinemas;active restaurants,together with adjacent specialty no cinema;focus will be on restaurants employment base and holeVconvention bars and night clubs;regional mall retail;very active nightlife. and dubs/bars. activity is important. adjacent. Source:Sedway Kofin Mouchly Group. 21-Nov-96 D:VATX HUNT.WK4 • seasonality; • distance from freeways; • current market position of Main Street; and • the intensely competitive market for entertainment/retail and hospitality uses in Orange County. In summary,SKMG has concluded that the sites have the potential to capture support from a very large market area with unusually strong demographics,based on their unique beach location. DEVELOPMENT POTENTIAL The near-term development focus of the sites should be to expand hospitality facilities related to the beaches,while beginning to create some key elements of entertainment/retail activity strong enough to stand alone as regional destinations in an initial phase. SKMG recommends the three sites be developed in a coordinated program designed to create a unique beach-oriented destination and attract support from a broad regional market. The most feasible near-term products, which are summarized in Exhibit 5, include the following: • A 500-room resort hotel with approximately 60,000 square feet of conference/ meeting space on 12 to 14 acres at the southern end of District 9,as proposed by the Mayer Corporation on the Mayer site.This development is the key initial step to creating an image for the location. Development of the hotel,which will run counter to current trends in the Orange County hotel markets,will immediately position the beach area as a resort destination. • A 200-unit timeshare on 4 to 7 acres at the southern end of District 7 of the Shea Vickers site, adjacent to the Hilton. Of the available hospitality products, time- share developed and managed by a strong branded entity is the most feasible in the current financing market. • An initial entertainment/retail development with 30,000 to 45,000 square feet on 2 to 3 acres at the northern end of the District 7 portion of the Shea Vickers property, based on two to three branded theme restaurants. The issues of parking and critical mass will need to be addressed as developers phase the buildout of these uses. • Up to 100 units of timeshare on Blocks 104 and 105, developed in conjunction with supporting street-level retail and service uses. This will support the Main Street area. HUNTINGTON BEACH SITES 19 NOVEMBER 1996 EXHIBIT 5 SUMMARY OF NEAR TERM DEVELOPMENT POTENTIAL MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Property Approximate Potential Approximate and Use Site Size Uses Space Mayer Property(1) Resort Hotel 12- 14 acres 500 room resort hotel 400,000-450,000 SF 60,000 SF conference space Structured parking Small increment of retail/ service space High Density Residential 10 acres 125 DU minimum 150,000- 175,000 SF Shea Vickers Property (1) Theme Restaurant 2-3 acres 2 -3 theme restaurants 25,000-30,000 SF and Entertainment Venues 1 -2 entertainment venues 8,000- 15,000 SF Surface parking; convert to structured in later phases Timeshare 4-7 acres 200 unit timeshare resort 175,000-220,000 SF Structured parking High Density Residential 10 acres 125 DU minimum 150,000 - 175,000 SF Pier Plaza Area Timeshare 2.25 acres 100 unit timeshare 85,000- 120,000 SF Structured parking Theme Restaurant 1 acre Duke's Surf City Restaurant 18,000 SF Surface parking Totals Commercial Space 15- 18 acres 450,000-500,000 SF Timeshare 6.25 -9.25 acres 300 DU 260,000-340,000 SF Residential Units 20 acres 250 DU minimum 300,000-350,000 SF Grand Total of Sites 41 -47 acres 1,000,000- 1,200,000 SF Notes: (1)The developments in this exhibit represent near-term activity only (i.e., within a two year period). Subsequent mid-term and long-term development will build out the sites. Source: Sedway Kotin Mouchly Group. 21-Nov-96 D:\MTX HNT3.WK4 • Duke's in the Pier Plaza area, which will support both the three sites and the Main Street area. There are five key factors that will affect the near-term success of entertainment/retail development on the three sites: • Most importantly,the development of the 500-room resort hotel and conference/ meeting facilities proposed on the Mayer property, which will create an image for the beach area and will mitigate the seasonality of the current beach-related day trip activity. • The creation of an initial increment of 300 timeshare units on the Shea Vickers property,and Blocks 104 and 105,to provide activity in the Main Street area. • The creation of a core of three to four strong, stand-alone branded restaurants (including Duke's)as a regional destination,to create a clear entertainment focus for the beach area. • The expansion or repositioning of the existing multiplex cinema,or the creation of a live entertainment venue as an anchor on Pacific Coast Highway near Main Street. • The identification of interim and long-term parking resources. Thematic Orientation The entertainment/retail development will need a distinctive theme to create excitement and a regional identity separate from the current reputation of the beach area. Many of the interviewees suggested variations on the "Surf City" theme, focusing on the beaches, and active sports,with a strong family orientation. Merchandising Mix The merchandising mix SKMG recommends for the near-term development of the beach sites is based principally on hospitality, with destination restaurants. These elements can stand alone and attract regional support. SKMG does not recommend the development of a substantial increment of specialty retail on the beach sites in the near term,both because of competition with the existing retailers on Main Street and the need to first establish an identity for the beach sites as a high-quality resort and entertainment destination before extending activity into retailing. C:\W PDOCS\PROJECTSA36969i\036%.ROl HUNTINGTON BEACH SITES 21 NOVEMBER 1996 ASSUMPTIONS AND GENERAL LIMITING CONDITIONS Sedway Kotin Mouchly Group (SKMG)has made extensive efforts to confirm the accuracy and timeliness of the information contained in this study. Such information was compiled from a variety of sources,including interviews with government officials,review of City and County documents,and other third parties deemed to be reliable.Although SKMG believes all information in this study is correct,it does not warrant the accuracy of such information and assumes no responsibility for inaccuracies in the information by third parties. We have no responsibility to update this report for events and circumstances occurring after the date of this report. Further, no guarantee is made as to the possible effect on development of present or future federal, state or local legislation, including any regarding environmental or ecological matters. The accompanying projections and analyses are based on estimates and assumptions developed in connection with the study. In turn, these assumptions, and their relation to the projections,were developed using currently available economic data and other relevant information. It is the nature of forecasting, however, that some assumptions may not materialize, and unanticipated events and circumstances may occur. Therefore, actual results achieved during the projection period will likely vary from the projections,and some of the variations may be material to the conclusions of the analysis. Contractual obligations do not include access to or ownership transfer of any electronic data processing files, programs or models completed directly for or as by-products of this research effort,unless explicitly so agreed as part of the contract. This report may not be used for any purpose other than that for which it is prepared. Neither all nor any part of the contents of this study shall be disseminated to the public through publication advertising media, public relations, news media, sales media, or any other public means of communication without prior written consent and approval of Sedway Kotin Mouchly Group. HUNnNGTON BEACH SITES 22 NOVEMBER 1996 CityCouncil/Agency Beach Front Development Study Session a I Monday, December 9, 1996 5:00 PM HB Civic Center, Lower Level Meeting Roma-$-1 C o cc n2.=L Attendees Mayor/Chairman & City Council/Redevelopment Agency Members C HAP%9F-Q. City Staff and Respective Consultants Contact Dept. Economic Development Department- 536-5582 Outline Topics... 1. Presentation by Sedway Kotin Mouchly Council/Redevelopment Agency Group Staff 2. Presentation by Shea Business Properties Council/Redevelopment Agency Staff 3. Presentation by The Waterfront Council/Redevelopment Agency - Staff 4. Closed Session Council/Redevelopment Agency Waterfront Real Property Negotiations Staff Attachments: 1. Market Overview of Three Beach Sites i SEDwAY KOTIN MOUCHLY GROUP Real Estate and Urban Economics r _ i+ I MARKET OVERVIEW OF THREE BEACH SITES IN HUNTINGTON BEACH Prepared for: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Prepared by: SEDWAY KOTIN MOUCHLY GROUP Date of Report: NOVEMBER 21,1996 1,:2- - Inc �-- San Francr,co Thrce Fmbarcadero Center,Suite 1150 Tel 415 ,81-8900 Lc•, .1n rlcc San Franci,co,California 94111 Fay 41� 781-8118 r L SEDWAY KOTIN MOUCHLY GROUP Real Estate and Urban Economics November 21, 1996 Mr. David C. Biggs Director of Economic Development City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Re: Market Overview of Three Beach Sites Dear David: Sedway Kotin Mouchly Group (SKMG) is pleased to submit this report entitled "Market Overview of Three Beach Sites in Huntington Beach." The report includes a review of the three sites to identify the key factors that will affect their development, a detailed survey of existing and near term competitive developments in Orange County, a definition of the competitive position of the three sites,and a definition of the most feasible near term development for the three sites. We were particularly pleased to be able to meet with the Mayer Corporation and Shea Vickers Development to review our analysis and their development proposals in some detail. In sum, SKMG projects that the sites have considerable market support, and will be successful in the near term in the highly competitive Orange County markets for the initial elements of entertainment/retail space, resort hotel,timeshare,and high density residential. It has been a pleasure working with you on this assignment. Please do not hesitate to contact us if you have any questions or comments about this report. Sincerely, VLA Sedway, CRE 7 ��_ ael Conlon, CRE ul�l Principal incipal NP:SK/nam Enclosure San Fr,wcisco Three Fmbarcadero Center,Suite 1150 Tel 41 781-S900 ✓ Loy Am-cle> San f ranci,co,California 94111 Fay 4F; 781-S11S TABLE OF CONTENTS Executive Summary Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Overviewof Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Robert L. Mayer Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Shea Vickers Development LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Pier Plaza Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Description of Uses Analyzed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Entertainment/Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Hospitality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Competitive Position of Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Sources of Market Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Competitive Developments in Market Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Comparison With Other Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Summary of Competitive Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Development Potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Thematic Orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Merchandising Mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ASSUMPTIONS AND GENERAL LIMITING CONDITIONS . . . . . . . . . . . . . . . . . . . . 22 LIST OF EXHIBITS Exhibit1: Map of Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Exhibit 2: Summary of Uses Currently Permitted on Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Exhibit 3: Survey of Competitive Orange County Developments . . . . . . . . . . . . . . . . . . . 16 Exhibit 4: Survey of Selected Comparable Developments . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Exhibit 5: Summary of Near Term Development Potential . . . . . . . . . . . . . . . . . . . . . . . . . 20 EXECUTIVE SUMMARY Sedway Kotin Mouchly Group (SKMG) was retained by the Redevelopment Agency of the City of Huntington Beach (the Agency) in August 1996 to prepare a focused market over- view that examines the near-term potential for regionally oriented commercial uses on three beach sites: (1) the balance of the Robert L. Mayer Corporation property, (2) the Shea Vickers Development LLC property, and (3) the Pier Plaza Area. The purpose of the market overview is to identify the conditions under which large-scale, regionally oriented commercial development(including hotel, resort, conference, retail, and entertainment uses) on the three sites could attract the market support needed to make the beach area in Huntington Beach a regional destination. SKMG analyzed an array of uses within two broad categories: (1) entertainment/retail uses, and (2) hospitality uses. Hence, the market overview focuses on creating places for people to shop,eat,and be entertained; and places for them to stay near the beach while they take advantage of these regional amenities. Competitive Position of Sites Entertainment/Retail. Most of the market support for the entertainment/retail uses on the sites will come from the area within a 10-mile radius of the sites. To assess the strength of demand,SKMG prepared a detailed demographic profile of the market area population and employment base. The profile shows a very large, affluent,well-educated market area with considerable discretionary income in relation to the scale of the uses that could be proposed on the sites. The incomes available in the market area will provide a very strong level of support for any amount of entertainment/retail space that could reasonably be proposed on the site. SKMG concluded that entertainment/retail development has adequate market support to be successful on the beach sites, and will compete effectively as an entertainment/retail location, even in the current crowded environment in Orange County. Hospitality. Huntington Beach's hospitality industry is well positioned to compete with other locations in the county,based on the unique amenity of its beaches and the strength of its 11,000,000 visitors who come to the beaches and the summer beach events. The current limited hotel and meeting/conference capacity in Huntington Beach restricts the city's ability to compete with other county locations for larger regional and national business groups for trade shows and conferences. When the capacity is expanded, resort facilities and timeshare units on the beach sites will compete effectively with established hotels and meeting facilities in Long Beach, Anaheim, and San Diego for a portion of the smaller groups and national business visitors coming to Southern California. Development Potential The near-term development focus of the sites should be to expand hospitality facilities related to the beaches,while beginning to create some key elements of entertainment/retail activity strong enough to stand alone as regional destinations in an initial phase. SKMG recommends the three sites be developed in a coordinated program designed to create a unique beach-oriented destination and attract support from a broad regional market. The most feasible near-term products include the following: • A 500-room resort hotel with approximately 60,000 square feet of conference/ meeting space on 12 to 14 acres at the southern end of the Mayer property, as proposed by the Mayer Corporation on the Mayer site. This development is the key initial step to creating an image for the location. • A 200-unit timeshare on 4 to 7 acres at the southern end of the Shea Vickers site, adjacent to the Hilton. Of the available hospitality products, timeshare developed and managed by a strong branded entity is the most feasible in the current financing market. • An initial entertainment/retail development with 30,000 to 45,000 square feet on 2 to 3 acres at the northern end of the Shea Vickers property, based on two to three branded theme restaurants. • Up to 100 units of timeshare on Blocks 104 and 105, developed in conjunction with supporting street-level retail and service uses. This will support the Main Street area. • Duke's in the Pier Plaza area, which will support both the three sites and the Main Street area. INTRODUCTION Sedway Kotin Mouchly Group (SKMG)was retained by the Redevelopment Agency of the City of Huntington Beach (the Agency) in August 1996 to prepare a focused market over- view that examines the near-term potential for regionally oriented commercial uses on three beach sites: • the balance of the Robert L. Mayer Corporation property,where there is a proposal for additional hotel rooms with conference/meeting space, and residential development; • the Shea Vickers Development LLC property, where the new owners are currently developing plans for a mix of commercial and residential development; and • the Pier Plaza Area, where the planned restaurant and public beachfront uses could support the Mayer property, the Shea Vickers property, and the downtown. The purpose of the market overview is to identify the conditions under which large-scale, regionally oriented commercial development(including hotel,resort, conference,retail, and entertainment uses) on the three sites could attract the market support needed to make the beach area in Huntington Beach a regional destination. During the assignment, SKMG completed the following tasks: • Reviewed the three sites to identify the key physical, legal, and regulatory factors that will affect their development potential. These included their sizes and configurations, permitted uses,other regulatory controls,access and traffic issues, other infrastructure issues,relations to adjacent uses, and relevant ownership issues. • Conducted a series of interviews with community leaders, business and property owners, representatives of local business and professional organizations, and City/ Agency staff, as well as a focused review of numerous documents, to frame the major land use options for the sites and provide background for the overview. • Defined the regionally oriented uses to be assessed in the market overview. Based on recent and current proposals for the sites and the results of SKMG's initial interviews and document review, these were focused on entertainment/retail (specialty retail, restaurants, cinema, music clubs and similar activities), and hospitality (hotel, resort hotel, small-scale hotel/bed and breakfast, timeshare, hotel-related conference and meeting facilities). • Surveyed the existing and near-term planned destinations in the central Orange County market area that will be most directly competitive with the uses assessed on the sites. SKMG initially reviewed approximately ten regional destinations in central Orange County, and prepared focused assessments of three that will be among the most directly competitive. HUNTINGTON BEACH SITES 1 NOVEMBER 1996 • Surveyed four additional successful regional commercial destinations — two in Southern California and two in Florida — that can serve as models for elements of Huntington Beach's market position, and assessed the successes and shortfalls they have experienced. • Defined the competitive position of the three beach sites in the central Orange County market based on the strength of their demographics, supporting business activity, their supporting retail and entertainment space, supporting hospitality facilities, and relative ease of access. • Defined the most feasible near-term development potential for the three sites, taken as a coordinated resource. This concise report presents a summary of the principal findings and conclusions of the market overview in five sections. Following this introduction, the second section of the report contains a brief overview of the sites to identify.the key physical, legal, and regulatory factors that will affect their development potential. The third section defines the uses assessed by SKMG and describes the potential for elements for the sites' development, based on examples of successful entertainment/retail developments and related hospitality facilities from around the country. The fourth section surveys three of the most competitive develop- ments in the central Orange County market area,reviews four other comparable develop- ments to assess the successes and shortfalls they have experienced, and delineates the competitive position of the sites. The fifth section defines the most feasible near-term development potential for the three sites. OVERVIEW OF SITES The balance of the Robert L. Mayer Corporation property, the Shea Vickers property, and the Pier Plaza area together contain approximately 77 acres of key beach locations, and represent an irreplaceable resource for Huntington Beach. For reference, Exhibit 1 on the following page shows the sites. Exhibit 1 outlines the districts defined in the Downtown Specific Plan that regulate the permitted uses, parcel sizes, densities, building heights, site coverages, setbacks, and open space requirements. This overview refers to the Districts to calculate permitted uses and densities, and to structure the definitions of development potential by subareas. Together, current land use regulations will permit the development of up to approximately 3.7 million square feet of commercial space and approximately 1,355 residential units on the sites.While these maximum densities are unlikely to be attained, the sites have the potential to be developed at a scale that would transform the beach area. The uses and densities permitted in the Downtown Specific Plan are summarized in Exhibit 2. HUNTINGTON BEACH SITES 2 NOVEMBER 1996 °°1°°'��!♦�'�i�,!�\\°°°�►�o+° °��,�°� ��,�°®°° uslt tug I gym= 7 - °.�°° Mai® �I •• �" �'�� °°°�°° ��e.e rtal�ail eeatlral eetaseAl Ise I��i a °� `\�°�0 � � � Armlrrl IIerIEldN rleArtm Wre , 'b� � °°@`��°\° � AA�r AAtt1eA.9 eye el umiardr eeeellm nv e� 1 �.�`�� AlIDmll I�mli 8e11m11 etulmed ImIA1flIA IA8_' ��+�''��► .�� lrlle� I�E99 eAAIImM EIABdHA mnn11E#�1 �` � ��AO�� .� � �� AliB116e ImBe911A mNlmr: aeIIAAB AAA; ,� ��``` � iAAe EilAlAi �18rAe 18AIrrA Illtleed 9miR�1 1® LN d�BA r11AABd IAg111Aa eAAAlllm mitlBddd Nliiilill I®1 M�IIFill•e II 0°� a0 �@ ® �',111A @■E�lo 1111111 1111111 9fll��llq 6gAA IBI Itl111II HIMI 1111 11 AgBlll IN gANAAA 1 "!_ ��@@ ��@.�� AdeAIIAeAed 18AlIAId IIIIItC IIGIII r1Nl II � � �� ' �@�atsgao A IleAelmellNd 91AIArr BBIII rll IIdlrlld fAgmtlrr h NII v1N®mlllrA AIIAHeI t<�im Illeflfllll q I�Bi gd@A� ' � Itl�ll�yl AimYAlll AI rlAq I Iqr IYllyd Illr— rf r!I NAIIEHI M91Afll11 IIII All INK A YIrI111 1�� f :tllll�•IAI■III MEMO or rtl lei errs � • III IIIiI IIAArII 8 ■ ■ rrllllll B®�� 8111110r Ig1glr� IRMO Illmrir r1lro m ! ®Imllm BIAAIr9 �irlet r II III� � I po0 ■ no Ila gI11111I1 qN tllm Ilion 1 gdA1n18 ft9®rrr �fillip tmlm0l rrl e®1AIIfl IImIIII frllmr■ rlllrBe liaie@i� ml. •• N�enur lusim filmrlrltrlr Ire l elf • A■Irpr IImWANI Iglllll IIIIAIIIA NA Aq■_ IPA 1■Iltlr we ImlrAlr IdIN1Y11 gArAd eY�� ■ an NpMllYtlr IN rNAe Ilrll !IdiAlll a�rl rArr-A111I Ill INN ■AdCll IgIIIIIr Bull lr6 Ill min IN Ill a AIIAAl:9 ®IAIItB AB®1 IIIIIIII IIIfiIIn HIM ' �IIAIIi IAIIprlll rMitllplm Ir111I1 low EXHIBIT 2 USES CURRENTLY PERMITTED ON SITES MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Site Uses Maximum Maximum Property Size Permitted FAR/Density Development Mayer Property District 9 18.01 acres Commercial Recreation 3.0 FAR 2.3 million SF District 8 24.70 acres High Density Residential 30 DU/acre 740 DU (50 foot height) Shea Vickers Property District 7 10.50 acres Visitor Serving Commercial 3.0 FAR 1.4 million SF (8 stories height) District 8 20.50 acres High Density Residential 30 DU/acre 615 DU (50 foot height) Pier Plaza Area District 3 2.25 acres Visitor Serving Commecial 2.0-3.0 FAR 250,000 SF (Blocks 104, 105) (3-4 story 35-40 foot height) District 10 +/- 1.00 acre Pier-Related Commercial None None (2 story or 25 foot height) Totals Commercial Space 30.76 acres Commercial 3.0 FAR 3.95 million SF Residential Units 45.20 acres Residential 30 DU/acre 1,355 DU Pier-Related 1.00 acre Commercial None None Total of Sites 76.96 acres Source: Sedway Kotin Mouchly Group. 21-Nov-96 D:\MTX HNT2.WK4 Robert L. Mayer Property This property contains two.very distinct areas, District 9 and the portion of District 8 that extends roughly from Huntington Avenue to Beach Boulevard. District 9, which includes the 290-room Waterfront Hilton parcel and an additional approximately 18 undeveloped or underutilized acres, is a strip of land with about 2,000 feet of frontage on Pacific Coast Highway (PCH), averaging about 350 feet in depth until it broadens substantially at Beach Boulevard. The portion of District 8 on the property contains some 24.7 acres in a roughly triangular form, and includes the Driftwood Mobilehome Park. The City of Huntington Beach owns the property,and the Robert L. Mayer Corporation has a ground lease that extends to 2010. SKMG has not reviewed the terms of the lease for this assignment. The Downtown Specific Plan (and related coastal and other regulations) currently permits commercial recreation uses on the District 9 portion of the property, with a maximum 3.0 floor area ratio (FAR), and no height limit. This FAR would permit just over 2.3 million square feet of additional space on the 18.01 undeveloped acres. The District 8 portion of the property permits high-density residential uses to a maximum of 30 units per acre and a maximum building height of 50 feet. These development regula- tions translate to a maximum of 740 units developed on the 24.7 acres. Several infrastructure issues related to the property will affect its near-term development potential.These include the extension of Walnut Avenue (Pacific View Drive), the environ- mental remediation of wetlands on portions of the property, reabandonment of oil wells, the acquisition and relocation of the remaining mobile homes,and the demolition of several improvements on the property. The costs for these activities, which are currently the subject of negotiations between the City of Huntington Beach and the lessee,were estimated to be approximately$11.3 million in early 1996. Shea Vickers Development LLC This 31-acre property is essentially undeveloped except for a motel and restaurant. Similar to the Mayer property,it contains two distinct subareas, District 7 and the portion of District 8 that extends roughly from First Street to Huntington Avenue. District 7, which includes approximately 10.5 undeveloped or underutilized acres, is a strip of land with about 1,000 feet of frontage on PCH,averaging about 350 feet in depth. The portion of District 8 contains approximately 20.5 acres from First Street to Atlanta Avenue to Huntington Avenue in a roughly rectangular form. Shea Vickers Development LLC, a joint venture between Morgan Stanley and Shea Business Properties, owns the property and is planning for its near-term development. HUNTINGTON BEACH SITES 5 NOVEMBER 1996 12- The Downtown Specific Plan (and related coastal and other regulations) permit visitor- serving commercial uses on the District 7 portion of the property, with a maximum 3.0 FAR and a maximum building height of eight stories. This would permit almost 1.4 million square feet of additional commercial space on the 10.5 undeveloped acres. The District 8 portion of the property permits high-density residential uses to a maximum of 30 units per acre and a maximum building height of 50 feet. These development regulations translate to a maximum of 615 units developed on the 20.5 acres. Two significant infrastructure requirements are related to the property's near-term develop- ment potential: the extension of Walnut Avenue (Pacific View Drive), and the remediation of oil production on portions of the property. There are no estimates for these costs. Pier Plaza Area The Pier Plaza Area,as shown on Exhibit 1,is defined in this overview as approximately 3.25 acres in the vicinity of the pier. The area includes three sites: the approximately one-acre restaurant pad just south of the pier to the west of Pacific Coast Highway; 1.6 acres of Block 104; and 0.65 acres of Block 105. The restaurant pad is developed with a now vacant restaurant, which is proposed to be replaced by Duke's Surf City. It surrounds the pier and has over 1,000 feet of frontage on Pacific Coast Highway in the heart of the beach area. The uses currently permitted on this property by the Downtown Specific Plan(and related coastal and other regulations) include pier-related commercial,with no maximum FAR,and a maximum building height of 25 feet or two stories. The public improvements to the Pier Plaza Area, which are out to bid, are projected to be approximately$5 million; the private investment in Duke's is projected to be an additional$5 million. Block 104 and Block 105 contain approximately 2.25 acres in District 3 of the Downtown Specific Plan,designated for a wide range of visitor-serving commercial uses. The maximum density ranges from 2.0 to 3.0 FAR,depending on lot size,with height limits of 3 to 4 stories (35 to 45 feet) based on lot size. Both blocks have existing development; new development must blend with existing structures. Block 104 is bordered by Pacific Coast Highway and Walnut Avenue, from Main Street to 5th Street. Block 105 is bordered by Pacific Coast Highway and Walnut Avenue, from 5th Street to 6th Street. DESCRIPTION OF USES ANALYZED The purpose of this market overview is to identify the conditions under which large-scale, regionally oriented commercial development on the three sites could attract the market HUNTINGTON BEACH SITES 6 NOVEMBER 1996 �3 support needed to make the beach area in Huntington Beach an exciting regional destination. During SKMG's interviews with community leaders and City/Agency staff, all the interviewees stressed the importance of creating high-impact,regionally oriented retail and visitor-serving uses on the three beach sites. SKMG's summary of the interviews revealed that the community leaders and City/Agency staff sought to creatively explore a wide range of uses and activities for the beach area. In response, SKMG analyzed an array of uses within two broad categories: (1) entertainment/retail uses, and (2) hospitality uses. Hence, the market overview focuses on creating places for people to shop, eat, and be entertained; and places for them to stay near the beach while they take advantage of these regional amenities. In addition to the two principal uses assessed, there are other supporting uses also addressed, including office space targeted to the services sector and residential units planned for development on the sites. SKMG anticipates that there will be a nominal increment of service office developed; but office is not likely to be a focus of the program. Orange County has a total office space inventory of approximately 64 million square feet,with the largest single focus being the 25- million-s qu are-fo ot regional cluster in the Airport area. The office markets in central and west Orange County have experienced lease rates well below replacement cost, low occupancy rates,and high tenant turnover until recent months.Although overall conditions are improving, the office markets in the county will not support significant new development in the near term, except for build-to-suits. Huntington Beach represents an insignificant share of the existing office space inventory in Orange County. Currently, there is an inventory of approximately two million square feet of non-owner occupied office space in Huntington Beach, most of it clustered on the major arterials near the I-405 freeway. With a few notable exceptions, the users are local-serving firms and back-office locations. These users are cost-sensitive and will not support the development of new office space. As a result, SKMG does not expect a substantial change in the office markets in the Huntington Beach area in the near term, and does not anticipate development of significant office space on the three sites. Residential development will be feasible where permitted on the sites, given the proven strong demand for a wide range of medium and higher density residential products in the areas near the beach. SKMG anticipates that the principal issues related to the development of residential uses on the sites will not be market issues but policy issues regarding ownership, density, amenities, and pricing. HUNTINGTON BEACH SITES 7 NOVEMBER 1996 Entertainment/Re tail Entertainment/retail development represents a very dynamic blend of new entertainment technology and new retail technology designed to create exciting and constantly changing environments for shopping,eating,and recreation. Entertainment/retail has evolved during the past several years, as the distribution systems for retail merchandise and entertainment products have been converging rapidly,producing creative new alliances between retailers and entertainment companies. On the retail side,the recent evolution of retail technologies (including the sudden and very successful development of category killers, power centers,big boxes, and outlet malls) has dramatically altered the retail landscape, increasing competition and forcing managers of many types of retail facilities such as regional malls to look for new ways to continually energize retail environments and attract shoppers looking for new experiences. In the entertainment industry, changing technologies and access to much larger amounts of capital have opened possibilities for retail distribution of products beyond the traditional theme parks, cinemas, and video cassettes. These new retail distribution channels include improved licensing methods,direct selling of branded merchandise, smaller scale rides, and games based on new computer technology. Components of Entertainment/Retail. As entertainment technologies have swept into retail- ing, several new types of retail space have begun to appear in major urban markets, sometimes as new tenants in regional malls and, increasingly, as new types of anchors in new centers driven by entertainment. Because these new technologies are not yet assimi- lated into retailing patterns, they are still called "entertainment/retail." The entertainment/ retail components that have had the most impact on retail activity to date include the following: • Cinema megaplexes with 12 to 24 screens of up to 100,000 square feet and 6,000 seats; some include large-screen,high-definition film formats such as IMAX, Cinetropolis by IWERKS,the Sony Theatres at Lincoln Square in New York,and Cinemania Showscan at CityWalk in Universal City. The megaplexes draw substantial traffic from regional markets, and have become the hottest new anchors for many malls. • Heavily themed, large, high-volume restaurants with brand name appeal that can draw from wide regional trade areas; they include Hard Rock Cafe, Planet Hollywood, Dive!, Rain Forest Cafe, B. B. King's Blues Club,Jekyll & Hyde, Wizardz Magic Club and Dinner Theatre, Front Row Sports Bar, All-Star Cafe, Country Star American Music Grill, Harley Davidson Cafe, Motown Cafe, and Marvel Mania. The heavily themed restaurants are designed to entertain their customers, and often focus more on selling entertainment and branded merchandise than food. HUNTINGTON BEACH SITES 8 NOVEMBER 1996 /5 • Large new entertainment-oriented retailers selling very powerful brand name merchandise directly; these include Sony, Nike Town, Coca-Cola, Disney Stores, I Warner Bros. Studio Stores, as well as several large music and book stores such as Virgin Records megastores, HMV, Barnes &Noble, and Borders. These new retailers create exciting environments, based on entertainment, to attract shoppers from regional markets. • Large-scale live entertainment venues with several nightclubs and other music-based activities; they include House of Blues, Wild Horse Saloon, Dave & Busters, cafe@play,Billboard Live.Most of these, like the themed restaurants,have developed national merchandising plans based on the creation of a themed, often interactive, environment. • Computer-based video entertainment facilities; these include Sony Wonder in New York,Virtual World, Magic Edge,Fightertown, and several new concepts that will be rolled out during the next few months. These facilities have not yet been generally successful to the same degree that the megaplexes, theme restaurants, branded retailers, and live entertainment venues have been. Types of Entertainment/Retail Developments. SKMG researched entertainment/retail development nationally to fund elements of a thematic orientation and merchandising mix that would be appropriate for the location of the beach sites. To provide a structured perspective on the wide range of existing entertainment/retail developments, SKMG arrayed the existing developments into four broad categories: (1) urban mixed-use areas that have come to focus increasingly on multiplex cinemas, other entertainment venues, and restaurants rather than specialty retail as their principal means of attracting activity; (2) major national tourist destinations and vacation locations that are using large-scale enter- tainment venues(both live and electronic) and branded restaurants to create excitement and provide new inducements for repeat visits; (3) cinema-based developments and other related entertainment venues where the anchor is the entertainment; and (4) recent suburban adaptations of entertainment retail in the form of regionally oriented entertain- ment/retail developments which are generally focused on multiplex cinemas and branded restaurants. Because the trend is so recent, new entertainment/retail developments include a broad i-lange of projects, some familiar and others very experimental. Urban mixed-use developments have increasingly come to focus on entertainment activities such as multiplex cinemas, nightclubs, live entertainment venues, and branded restaurants to attract market support. As shopping has become a more routinized activity, with many urban retail centers nationally having essentially the same merchandising mix and often the same tenants, shoppers have tended to look to entertainment activities for excitement. HUNTII\TGTON BEACH SITES 9 NOVEMBER 1996 lb Examples of urban mixed-use centers that have focused on entertainment activities include the following: • The Inner Harbor in Baltimore: more than 20 attractions built around Harborplace, including a children's museum, an entertainment center in the Power Plant, and the Disney Imageering marine biology exposition. Third Street Promenade in Santa Monica: �t.-marketplace with 120 total tenants, 50 restaurants, an adjacent regional mall, and three cinema complexes with 17 screens and 5,000 seats. • The huge Chelsea Piers family sports/entertainment complex: on four piers in New York, where there is a wide choice of activities involving sports and entertainment. • Old Town Pasadena: based on restaurants, specialty retail, and then movie theaters; this area has been in process of revitalization for several years. • Power & Light District in Kansas City, Missouri: a proposed 600,000-square-foot entertainment center located next to the major hotels,live theater district, and conven- tion center; will include a 30-screen AMC multiplex, several restaurants and live entertainment venues. Many of the best-known entertainment/retail developments completed to date are really very large-scale, tourist-oriented attractions in major cities and national vacation locations such as New York,Los Angeles, Orlando, and Las Vegas. Many of these venues depend on visitation by millions of vacationers looking for unique experiences. Examples include the following: • E Walk on 42nd street in New York: planned opening in 1998 for approximately 200,000 square feet of entertainment/retail space, with a 13-screen 90,000-square-foot Sony complex and Vegas! as anchors,and interest from many key tenants,in addition to a large hotel and possibly a smaller timeshare for subsequent phases. • Yerba Buena Gardens in San Francisco: planned opening in late 1997 of the Sony Retail Entertainment Center, a 15-screen multiplex with an IMAX theatre as the anchor; retail space based on unique San Francisco-themed shops; several highly themed restaurants, and clubs with live music; the central concourse to be called the Gateway,with large projection screens to display live events or create shows; to open in late 1997. • Several developments in Orlando, based almost exclusively on national tourism related to the theme parks and other large-scale destinations (Disney World, Church Street Station, Pleasure Island). Proposed is Pointe Orlando, a 450,000-square-foot HUNTINGTON BEACH SITES 10 NOVEMBER 1996 / 7 entertainment/retail center with a 23,000-square-foot FAO Schwartz and a 23-screen multiplex with an IMAX. • Several developments in Las Vegas, based on casinos and very large hotels, which need to create continually changing attractions for vacationers (Treasure Island, Circus Circus,Luxor,MGM Grand,the Forum Shops, the proposed Star Trek, the Experience at the Hilton). • CityWalk in Universal City: a 220,000-square-foot entertainment/retail center on 6.25 acres next to Universal Studios theme park containing approximately 40 retail shops, restaurants,and entertainment venues; opened in 1993; 1,500-foot-long street with 21 vintage neon signs and a stadium-sized Astrovision video screen,previously existing 18-screen 6,000-seat Universal City Cinemas (opened in 1987); several large local brand name restaurants; regular planned events; 10,000 people working on site; develop- ment and management by MCA. A third type of entertainment/retail is cinema-based developments that market a major multiplex (12 to 30 screens) with a large format venue (such as an IMAX), theater-based entertainment venues that are updated with technology to provide flexibility for several types of events. These projects, which are attracting increased interest, are designed for large regional markets. Examples include the following: • Lincoln Square in New York: Sony Theatres 12-screen multiplex with an IMAX theatre in an area of restaurants and other theatres. • Foxwoods Casino in Connecticut: the location of the prototype Cinetropolis facility by IWERKS. • Sundance Square, Fort Worth: an I1-screen AMC multiplex opened in 1993; several major national retailers and restaurants opened following the cinema; in May 1996 a second 12-screen AMC theater opened. • The $38 million Sony-Blockbuster Amphitheatre on the waterfront in Camden, New Jersey: an amphitheatre seating between 1,600 and 25,000 people designed for smaller concerts,ballet, opera, and big name entertainers. The emerging trend in more suburban locations is a loose entertainment/retail standard similar to CocoWalk, which includes approximately 100,000 to 200,000 square feet of total space,with about two-thirds containing entertainment and heavily themed restaurants, and the balance specialty retail.The retail uses are expected to generate the majority of the sales; as a result, the retailers must contain a high percentage of strong,highly productive credit tenants. HUNTINGTON BEACH SITES 11 NOVEMBER 1996 l t� Suburban entertainment/retail developments are still difficult to structure and to finance, and tend to be very management-intensive due to the need to be continually kept current. Because these developments are still unproven as longer term investments, the current lending criteria for entertainment/retail projects emphasize strong balance sheets, high levels of equity, substantial preleasing to credit tenants, and experienced, innovative management. Examples include the following: • Entertainment Center at Irvine Spectrum: a 271,000-square-foot entertainment/retail center on 35 acres; themed as a Moroccan village,with a 21-screen, 6,400-seat Edwards Cinema and an IMAX theatre; 50,000 square feet of restaurants with 1,700 seats. • CocoWalk in Coconut Grove,Florida: a 120,000-square-foot entertainment/retail center in the heart of the traditional bohemian area, with speciality shops, restaurants,and live entertainment venues; opened in 1993; 10-screen multiplex cinema is the major anchor; several large local and national brand name restaurants; regular planned events. • Beach Walk in Fort Lauderdale: a 150,000-square-foot center based primarily on restaurants and live entertainment venues, designed for beach visitors; there is no cinema; scheduled to open within the next two months. This overview will define the conditions under which elements of a suburban entertain- ment/retail concept can be developed successfully on the three sites and be used as an approach to attract regional market support for restaurants, clubs, shops, and related uses at a scale appropriate for the beach area of Huntington Beach. Hospitality The hospitality industry has been through a period of significant consolidation and change during the past few years, and is just now recovering from the recession of the late 1980s and early 1990s. To respond to several years of decreased occupancy and room rates, many hotel management companies have deferred capital investments, reorganized to create operational efficiencies,and reflagged properties. There has been very little development of traditional full-service hotels during the period. In fact, room rates do not yet generally support new full-service construction in most markets. However, the development of a few new hospitality products (including limited service hotels, extended stay facilities, and timeshare projects) has enabled some hotel management companies to gain market share in spite of increased competition. Three types of new hospitality products have had the most success: • Limited-service hotels (sometimes distinguished from no-service hotels, where there is no restaurant in the facility) provide basic accommodations at very competitive HUNTINGTON BEACH SITES 12 NOVEMBER 1996 / 9 rates. Examples include Marriott Courtyard, Fairfield Inn by Marriott, Holiday Inn Express, Days Inn,Travelodge. • Extended stay facilities, often defined as providing for stays of a week minimum (but sometimes defined to include suites hotels where many of the guests are on extended stays). Examples include Homestay, Homestead Inn, Summerfield Suites, Residence Inn. • Timeshare (now often referred to as interval ownership)facilities provide limited time periods of occupancy in resorts. Examples include a number of independent develop- ment and management organizations. Although Marriott is the largest by a wide margin,several other major hotel management companies are rapidly increasing their inventories. COMPETITIVE POSITION OF SITES This overview assesses the competitive position of the three sites by evaluating the portion of the market area's unmet demand that they must capture to be successful. SKMG concludes that the sites should be developed as a coordinated program that can be used to create a destination and attract support from a broad regional market. Sources of Market Support Entertainment/Retail. Most of the market support for the entertainment/retail uses on the sites will come from the area within a 10-mile radius of the sites. To assess the strength of demand,SKMG prepared a detailed demographic profile of the market area population and employment base. The profile shows a very large, affluent,well-educated market area with considerable discretionary income in relation to the scale of the uses that could be proposed on the sites. The total 1996 market area population is approximately 944,838 residents and approximately 316,300 households,based on projections from the 1990 U.S. Census. Since the market area is essentially developed, the population is expected to increase very slowly. The 1996 average age is 34.3 years,with a relatively large portion of families with children by regional and national norms. The 1996 market area per capita, average household, and median household incomes were quite high, at $21,533, $63,825, and $53,733, respectively, with relatively large numbers of households/families in the higher income brackets. This is well above national and even regional norms, and indicates a very affluent market base. HUNTINGTON BEACH SITES 13 NOVEMBER 1996 O The incomes available in the market area will provide a very strong level of support for any amount of entertainment/retail space that could reasonably be proposed on the sites. SKMG estimates that there will be approximately$1.1 billion expended by residents of the market ` area for eating and drinking places,and some$1.1 billion expended in department,apparel, and shoe stores. As an illustrative example,200,000 square feet of restaurants and specialty retail space on the site, needing to generate $350 per square foot to be successful, would need to capture approximately$70,000,000 in sales, or some one quarter of 1 percent of the total $2.8 billion in expenditure potential available in these merchandise categories in the : market area.Based on this very low capture rate, SKMG has concluded that entertainment/ retail development has adequate market support to be successful on the beach sites. Hospitality. The hospitality industry in Orange County is now improving rapidly after the several years of low room rates and occupancy rates, and little or no construction (except for budget and extended products) since 1989. However, most hotel development plans remain on hold or have been abandoned, and the products that continue to perform well in the county are the midprice and all-suite segments. The improving national and regional economies have mitigated the principal factors that most affected the hotel markets in Orange County—the recession, a decrease in Disneyland- related hotel bookings, a decline in corporate travel, the cutbacks in aerospace/defense activity. As the Disneyland expansion proceeds and the Anaheim Convention Center is expanded and renovated, Orange County will be better positioned to compete with the expanded and renovated convention facilities in Long Beach,Los Angeles, and San Diego. However, Huntington Beach's hospitality industry is not yet designed to serve large numbers of visitors, particularly in larger business groups, meetings, and conferences. In 1995,Huntington Beach had a total inventory of approximately 1,200 hotel rooms.Approxi- mately 40 percent of this total were in the two major hotels in the city, both of which are equipped to host smaller meetings and conferences. The ballroom, banquet facilities, and meeting rooms in the Waterfront Hilton,with approximately 21,000 total square feet of ball- room and meeting space, provide the largest conference and meeting facilities in Huntington Beach. An estimated 11,000,000 visitors came to Huntington Beach in 1995. Of this total, approximately 70 percent came from within 90 miles. Essentially all of the visitation is day trips to the beaches, with most of the activity during the weekends in the peak summer months. Two factors currently limit Huntington Beach's hospitality industry: • First is the limited hotel and meeting/conference capacity, which restricts the city's ability to attract larger regional and national business groups for trade shows and conferences. HUNTINGTON BEACH SITES 14 NOVEMBER 1996 02 • Second is the competition from established hotels and meeting facilities in Long Beach, Anaheim, and. San Diego, which are the focal points for larger groups and national business visitors coming to Southern California. Expansion of regional and national hospitality activity in Huntington Beach through a program focused on group business travel and meetings is a major area of opportunity,in spite of the intense competition from established facilities in Long Beach,Anaheim, and San Diego. Competitive Developments in Market Area Entertainment/Retail. SKMG reviewed approximately 15 developments in the central Orange County area that could be competitive with elements of entertainment/retail activities on the sites. These include Huntington Center (assuming its repositioning with a multiplex cinema), Westminister Mall, Mainplace in Santa Ana, South Coast Plaza, South Coast Town Center, Metro Pointe, the Entertainment Center at the Spectrum, Park Place, Fashion Island, plans for resort development on the Newport Coast, Laguna Beach, the Tustin Marketplace, Belmont Shore in Long Beach, Downtown Long Beach, Disneyland, and Knotts Berry Farm. Overall, SKMG has concluded that the beach sites will compete effectively as an entertain- ment/retail location, even in the current crowded environment in Orange County. Exhibit 3 summarizes the sites' market relationships to three of the mostly directly competitive developments that SKMG selected to illustrate the current retail market in Orange County. Hospitality. There are approximately 46,000 hotel rooms in Orange County, with the greatest single concentration in the vicinity of Disneyland and a second large cluster in the Airport area. Huntington Beach's hospitality industry is well positioned to compete with other locations in the county,based on the unique amenity of its beaches and the strength of its 11,000,000 visitors who come to the beaches and the summer beach events. The current limited hotel and meeting/conference capacity in Huntington Beach restricts the city's ability to compete with other county locations for larger regional and national business groups for trade shows and conferences. When the capacity is expanded, resort facilities and timeshare units on the beach sites will compete effectively with established hotels and meeting facilities in Long Beach, Anaheim, and San Diego for a portion of the smaller groups and national business visitors coming to Southern California. HUNTINGTON BEACH SITES 15 NOVEWER 1996 o2 EXHIBIT 3 SURVEY OF COMPETITIVE ORANGE COUNTY DEVELOPMENTS MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Beach Area Entertainment Center Newport Harbor Beachfront Huntington Beach Irvine Spectrum Newport Beach Laguna Beach Basic Facts Beach serving and community serving retail. New enlertainmenVrelail center; Major regional office center,regional mall, Small scale beach resort with specialty restaurant,and entertainment uses; 271,000 SF total;21 screen cinema; museums,conference facilities; retail,small scale hotels,and a wide 6 plex cinema; Moroccan architectural motif;In major resort and boating center variety of destination restaurants. 500 hotel rooms office center Demographics(10 mile radius) Total 1996 Population 944,838 819,228 848.217 478,732 1996 Per Capita Income $21.533 $26.447 $22,361 $32,727 Total 1996 Income $20.35 billion $21.67 billion $18.97 billion $15.67 billion Business Activity Small office inventory 10 MSF office space and R&D 4 MSF office space No significant once space Local serving office space Regional and national headquarters Regional,national headquarters 35,000 employees on site Airport office area(25 million SF)4 miles away Retail Activity Retail both local serving and beach-oriented 271,000 SF total Major regional mall Small scale specialty retail. Focus on food and sports apparel 50,000 SF restaurants with 1,700 seats Wide variety of specialty retail with focus on arts Entertainment Cinemas Edwards 6 plex 21 screen Edwards multiplex 6 plex cinema No major cinema Bars/Night Clubs Several night clubs,bars 50,000 SF of restaurants(1,700 seats) 350 restaurants citywide Very active night life Arena/Sports Team Traffic/Access Access from Route 1 PCH Access from 1405,1-5,Rte 133 Access from File.73,Rte.55,File.1 Access from Rte.133.Rte.1 5 miles from 1405 500,000 ADT 3 miles from Rte.73 8 miles from 1405 60,000 ADT on PCH and Beach 100.000 ADT on PCH and Jamboree 30.000 ADT on PCH,Laguna Canyon Hospitality Facilities Hotel Rooms 1,200 rooms citywide Several large first class hotels in nearby 2,600 hotel rooms citywide Several small hotels along PCH Meeting/Conference Facilities Hotel meeting facilities airport area Hotel meeting facilities Convention Centers Hotel meeting facilities Huntington Center(5 mites) Competition Westminster Center(6 miles) South Coast Plaza(9 miles) South Coast Plaza(5 miles) Irvine Spectrum(8 miles) South Coast Plaza(7 miles) Newport Harbor(9 miles) Irvine Spectrum(8 miles) Newport Harbor(9 miles) Newport Harbor(7 miles) Laguna Beach(8 miles) Laguna Beach(9 miles) South Coast Plaza(13 miles) Irvine Spectrum(17 miles) Disneyland(16 miles) Disneyland(18 miles) Disneyland(24 miles) Disneyland 17 miles Conclusions Beach Area's strengths are its location Entertainment center now draws from Newport Harbor is a major regional Laguna Beach's focus is its charm,artist on the beach,recreation facilities, nearby employment center and business center,resort and colony history,and small scale pedestrian and events. wide regional market,due to uniqueness entertainment destination. areas;wide regional draw as weekend of concept.. and summer destination. Source:Sedway Kotin Mouchly Group. 21-Nov-96 DAMTX�H�UNT WK4 \N Comparison With Other Developments For comparison to the beach sites, SKMG surveyed four additional successful regional commercial destinations—two in Southern California and two in Florida—that can serve as models for elements of Huntington Beach's market position; in addition, SKMG assessed the successes and shortfalls these successful regional destinations have experienced. The developments are the Pine Avenue area in downtown Long Beach (which is competitive to a degree with the beach area in Huntington Beach), the Third Street Promenade in Santa Monica, CocoWalk in Coconut Grove (a nationally recognized model for entertainment/ retail development), and Beach Walk in Fort Lauderdale (patterned to some degree after CocoWalk,but with no cinema,it is due to open within the next month). SKMG structured the comparison in the same format as the survey of competitive Orange County developments, and examined the market position of the four developments based on the strength of their demographics,supporting business activity, their supporting retail and entertainment space,supporting hospitality facilities,and relative ease of access. Exhibit 4 summarizes the comparison. The comparison shows that the four developments have found somewhat different ways to become successful,based on their own particular strengths. However, a few key patterns emerge from the comparison (these patterns are essentially the same as those from Exhibit 3, which reviews the Orange County developments). Among them are (1) the importance of multiplex cinemas as entertainment anchors; (2) the key role of large,branded destination restaurants to attract regional market support; (3) the critical support brought by lunchtime restaurant demand from adjacent employment centers; (4) the importance of a thematic orientation to give a clear identity to the development; and (5) the need to attract large destination retailers as retail anchors. Summary of Competitive Position Strengths.The beach sites have several key market strengths,based on their location and the size and characteristics of the market area: • very strong demographics; • annually, 11,000,000 visitors,based on City data; • unique location on the beaches; • two large sites under single well capitalized, experienced ownerships; and • renovation of the pier and the adjacent area. Weaknesses. The principal weaknesses of the location include the following: • lack of an employment base to support lunchtime restaurant and daytime retail activity; HUNTINGTON BEACH SITES 17 NOVEMBER 1996 'r EXHIBIT 4 SURVEY OF SELECTED COMPARABLE DEVELOPMENTS , MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Pine Avenue The Third Street Promenade CocoWalk Beach Walk Long Beach Santa Monica Coconut Grove Fla. Fort Lauderdale Basic Facts Revitalized downtown with regional Festival marketplace with 120 tenants and Traditional bohemian area with smaller Main beachfronl with large hotel mall,restaurantlenlerlainment uses, 7.000 parking spaces,50 restaurants, scale specialty retail,entertainment, inventory; large hotel inventory,and convention regional mall,regional office center, very active nightlife Major tourist destination; center. ocean front location Very active entertainment and restaurant Demographics(10 mile radius) Total 1996 Population 1.359,352 975,173 1.075,602 719,736 1996 Per Capita Income $18,333 $33,613 $15,706 $19.302 Total 1996 Income $24.92 billion $32.173 billion $16.893 billion $13.892 billion Business Activity Three million square feet of office space 2 million square feet of office space No major employment centers Not a major employment center Major port Brickell Avenue 10 minutes away Business center 3 miles away Retail Activity Some specialty retail Full range of specialty retail Major regional specialty retail location Major regional specialty area nearby Regional mall Regional mall adjacent Entertainment Cinemas AMC 16 screens 3 large cinema complexes(6,000 seats) 10 screen cinema at Cocowalk No cinema in Beach Walk Bars/Night Clubs Active bar/night club area Active night dubs,bars Very active nightlife Very active nightlife Arena/Sports Team Hockey team,Queen Mary,aquarium TratficlAccess Access from I-710 Access from I-10 Access from Coast Highway Access from Coast Highway 160,000 ADT on 1.710 160,00 ADT on 1-10 75,000 ADT on arterials,coast highway 100.000 ADT on arterials,coast highway . .I Hospitality Facilities Hotel Rooms 5,000 rooms citywide,2.000 in downtown 3,0OO rooms citywide 500 rooms citywide 5,000 rooms citywide Meeting/Conference Facilities Hotel meeting facilities Hotel meeting facilities Hotel meeting facilities Convention Centers Major regional convention center Regional convention center Competition Belmont Shore/PCH(3 miles) South Main(1 mile) Bayside,Miami(10 miles) Gaileria Mall(1 mile) Lakeview Mall(6 miles) Montana Avenue(1 mile) Cerritos Mall(8 miles) Westwood(5 miles) South Coast Plaza(22 miles) Century City(6 miles) Disneyland 22 miles Beverly Hills 7 miles Conclusions Pine Avenue's strength is its restaurants The Third Street Promenade's focus Is CocoWalk's strength is its cinema and Beach Walk is scheduled to open soon; and cinemas;retail is secondary; on restaurants and cinemas;active restaurants,together with adjacent specialty no cinema;focus will be on restaurants employment base and hotel/convention bars and night clubs;regional mall retail;very active nightlife. and dubs/bars. activity is important. adjacent. Source:Sedway Kotin Mouchiy Group. 21-Nov-96 D:\MTX HUNT.WK4 1-4-1 h V j - - j seasonality; • distance from freeways; J current market position of Main Street; and the intensely competitive market for entertainment/retail and hospitality uses in Orange County. In summary,SKMG has concluded that the sites have the potential to capture support from a very large market area with unusually strong demographics,based on their unique beach location. DEVELOPMENT POTENTIAL The near-term development focus of the sites should be to expand hospitality facilities related to the beaches,while beginning to create some key elements of entertainment/retail activity strong enough to stand alone as regional destinations in an initial phase. SKMG recommends the three sites be developed in a coordinated program designed to create a unique beach-oriented destination and attract support from a broad regional market. The most feasible near-term products, which are summarized in Exhibit 5, include the following: • A 500-room resort hotel with approximately 60,000 square feet of conference/ meeting space on 12 to 14 acres at the southern end of District 9,as proposed by the Mayer Corporation on the Mayer site.This development is the key initial step to creating an image for the location. Development of the hotel,which will run counter to current trends in the Orange County hotel markets,will immediately position the beach area as a resort destination. • A 200-unit timeshare on 4 to 7 acres at the southern end of District 7 of the Shea Vickers site, adjacent to the Hilton. Of the available hospitality products, time- share developed and managed by a strong branded entity is the most feasible in the current financing market. • An initial entertainment/retail development with 30,000 to 45,000 square feet on 2 to 3 acres at the northern end of the District 7 portion of the Shea Vickers property, based on two to three branded theme restaurants. The issues of parking and critical mass will need to be addressed as developers phase the buildout of these uses. • Up to 100 units of timeshare on Blocks 104 and 105, developed in conjunction with supporting street-level retail and service uses. This will support the Main Street area. HUNTINGTON BEACH SITES 19 NOVEMBER 1996 EXHIBIT 5 FF SUMMARY OF NEAR TERM DEVELOPMENT POTENTIAL MARKET OVERVIEW OF BEACH SITES HUNTINGTON BEACH Property Approximate Potential Approximate and Use Site Size Uses Space Mayer Property (1) Resort Hotel 12- 14 acres 500 room resort hotel 400,000-450,000 SF 60,000 SF conference space Structured parking Small increment of retail/ service space High Density Residential 10 acres 125 DU minimum 150,000 - 175,000 SF Shea Vickers Property (1) Theme Restaurant 2 -3 acres 2-3 theme restaurants 25,000-30,000 SF and Entertainment Venues 1 -2 entertainment venues 8,000 - 15,000 SF Surface parking; convert to structured in later phases Timeshare 4-7 acres 200 unit timeshare resort 175,000 -220,000 SF Structured parking High Density Residential 10 acres 125 DU minimum 150,000- 175,000 SF Pier Plaza Area Timeshare 2.25 acres 100 unit timeshare 85,000- 120,000 SF Structured parking Theme Restaurant 1 acre Duke's Surf City Restaurant 18,000 SF Surface parking Totals Commercial Space 15- 18 acres 450,000-500,000 SF Timeshare 6.25-9.25 acres 300 DU 260,000- 340,000 SF Residential Units 20 acres 250 DU minimum 300,000- 350,000 SF Grand Total of Sites 41 -47 acres 1,000,000 - 1,200,000 SF Notes: (1)The developments in this exhibit represent near-term activity only (i.e., within a two year period). Subsequent mid-term and long-term development will build out the sites. Source: Sedway Kotin Mouchly Group. 21-Nov-96 D:1MTX HNT3.WK4 � '')' • Duke's in the Pier Plaza area, which will support both the three sites and the Main Street area. There are five key factors that will affect the near-term success of entertainment/retail development on the three sites: • Most importantly,the development of the 500-room resort hotel and conference/ meeting facilities proposed on the Mayer property, which will create an image for the beach area and will mitigate the seasonality of the current beach-related day trip activity. • The creation of an initial increment of 300 timeshare units on the Shea Vickers property, and Blocks 104 and 105, to provide activity in the Main Street area. • The creation of a core of three to four strong, stand-alone branded restaurants (including Duke's)as a regional destination, to create a clear entertainment focus for the beach area. • The expansion or repositioning of the existing multiplex cinema, or the creation of a live entertainment venue as an anchor on Pacific Coast Highway near Main Street. • The identification of interim and long-term parking resources. Thematic Orientation The entertainment/retail development will need a distinctive theme to create excitement and a regional identity separate from the current reputation of the beach area. Many of the interviewees suggested variations on the "Surf City" theme, focusing on the beaches, and active sports, with a strong family orientation. Merchandising Mix The merchandising mix SKMG recommends for the near-term development of the beach sites is based principally on hospitality, with destination restaurants. These elements can stand alone and attract regional support. SKMG does not recommend the development of a substantial increment of specialty retail on the beach sites in the near term,both because of competition with the existing retailers on Main Street and the need to first establish an identity for the beach sites as a high-quality resort and entertainment destination before extending activity into retailing. CAWPD0C5VROI EC7SV13696T3696.R01 HUNTINGTON BEACH SITES 21 NOVEMBER 1996 ASSUMPTIONS AND GENERAL LIMITING CONDITIONS Sedway Kotin Mouchly Group (SKMG) has made extensive efforts to confirm the accuracy and timeliness of the information contained in this study. Such information was compiled from a variety of sources,including interviews with government officials,review of City and County documents,and other third parties deemed to be reliable. Although SKMG believes : all information in this study is correct, it does not warrant the accuracy of such information and assumes no responsibility for inaccuracies in the information by third parties. We have no responsibility to update this report for events and circumstances occurring after the date of this report. Further, no guarantee is made as to the possible effect on development of present or future federal, state or local legislation, including any regarding environmental or ecological matters. The accompanying projections and analyses are based on estimates and assumptions developed in connection with the study. In turn, these assumptions, and their relation to the projections,were developed using currently available economic data and other relevant information. It is the nature of forecasting, however, that some assumptions may not materialize, and unanticipated events and circumstances may occur. Therefore, actual results achieved during the projection period will likely vary from the projections,and some of the variations may be material to the conclusions of the analysis. Contractual obligations do not include access to or ownership transfer of any electronic data processing files, programs or models completed directly for or as by-products of this research effort,unless explicitly so agreed as part of the contract. This report may not be used for any purpose other than that for which it is prepared. Neither all nor any part of the contents of this study shall be disseminated to the public through publication advertising media, public relations, news media, sales media, or any other public means of communication without prior written consent and approval of Sedway Kotin Mouchly Group. HUNTINGTON BEACH SITES 22 NOVEMBER 1996 �9 - a g �4Aq 90 L-2 Council/Agency Meeting Held: l� --Z Deferred/Continued to: Approved ❑ Conditionally Approved ❑ Denied i- Clerk's Signatuffi Council Meeting Date: December 18, 1995 Department ID Number: CS 95-050 CITY OF HUNTINGTON BEACH REQUEST FOR COUNCIL ACTION SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS SUBMITTED BY: MICHAEL T. UBERUAGA, City Administra __ PREPARED BY: RON HAGAN, Director, Community Service ROBERT FRANZ, Deputy City AdministrWT SUBJECT: PIER PLAZA AND DUKE'S SURF CITY RESTAUR Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environrnental Status,Attachments) Statement of Issue: The Pier Plaza project and Duke's Surf City Restaurant project are ready for Council review and conceptual approval. Funding Source: Private investment for Duke's Restaurant; various city funding sources for Pier Plaza (funding analysis attached). Recommended Action: 1. Approve the final design plans for Duke's Surf City Restaurant as presented by TS Management Corporation of California and Hawaii (TS) and approved by the Planning Commission and Design Review Board; 2. Review the proposed lease terms with TS for the development and operation of Duke's Surf City Restaurant as contained herein, and direct staff to prepare the final lease document for Council approval; and 3. Direct staff to continue with development of funding alternatives for the Pier Plaza. Alternative Action(s): Do not approve the Pier Plaza or Duke's Surf City Restaurant projects and give staff alternative direction. Analysis: In August, 1994, the city received an approved Coastal Development Permit for the Pier Plaza project. The development of the plaza is dependent upon rev- enue received from several sources including lease revenues from the restaurant site (formerly Maxwell's by the Sea). A Council subcommittee (Harman and Garofalo) worked with staff to review the submissions from the Request for Qualification and has negotiated a lease agreement with TS for the development and operation of their theme restaurant ""e-i3 r REQUEST FOR COUNCIL ACTION MEETING DATE: December 18, 1995 DEPARTMENT ID NUMBER: CS 95-050 'Duke's Surf City." The city's Design Review Board has unanimously approved the restaurant concept. The Planning Commission has approved the project, and the California Coastal Commission approved the project as an amendment to the previously approved Coastal Development Permit for the former Maxwell's. The former proposal was for a 31,000 square foot building. TS is proposing an 18,000 square foot restaurant. Because of the difference in the type of operations, TS is able to provide a facility that can offer a full- service restaurant, banquet facilities, and indoor/outdoor dining, bar, and entertainment which will produce gross revenues equal to or greater than the proposals submitted by former tenant, WPL Industries. Staff and the Council subcommittee have extensively reviewed TS operations and financial capabilities, and have determined that they are the best firm to enter into a lease agreement for the restaurant site within the Pier Plaza. Attached are the architectural designs of the proposed restaurant and relevant material from their proposal regarding their financial background. Staff and the Council subcommittee have negotiated terms and conditions that would have the city provide a ground lease to TS and have them pay for the building of the restaurant and its maintenance and operation. The estimated cost to build the style and quality of restaurant contained herein is $5 million. The city's obligations would be to fund and build the Pier Plaza which surrounds the restaurant pad. The cost to the city is currently estimated to tatal $5,192,387. Attached is an analysis of various funding alternatives. The Pier Plaza consists of the master plan previously approved by Council with hardscape and softscape improvements to the entrance to the pier and the rebuilding and redesign of the parking lots north and south of the pier. The plaza project has been approved by all affected state agencies including the Department of Parks and Recreation, the architectural office, and the Coastal Commission. I. Funding Scenario Under the proposed agreement, TS will pay all costs of building and operating a new restaurant on the former Maxwell's footprint. The city will pay for all costs associated with the construction and operation of Pier Plaza. The estimated cost to TS for the restaurant is $5 million. The estimated cost to the city for Pier Plaza is $5.2 million. Consequently, both projects combined represent a public and private dollar investment of an estimated $10.2 million of improvements to the city beach. The entrance to the pier and the parking lots north and south thereof are currently in a state of disrepair and deterioration. The last time this area received major capital improve- ment was in 1963 (thirty-two years ago) when the city issued a Parking Authority Bond for the existing facilities. The former Maxwell's building has been condemned and cannot be renovated because of structural damage. The proposed Pier Plaza and Duke's Surf City projects will provide a new restaurant on the existing Maxwell's footprint and the same use 0015882.01 -2- 12/11/95 11:09 AM REQUEST FOR COUNCIL ACTIUN MEETING DATE: December 18, 1995 DEPARTMENT ID NUMBER: CS 95-050 that has existed on this site since 1968. For these reasons, a Charter Section 612 vote is not necessary. II. Lease Terms and Conditions To achieve the above scenario, staff is negotiating a lease agreement with TS that would provide for a ground lease of the restaurant pad at 4 percent of the first $8 million gross revenue and 5 percent over $8 million gross revenue, with a $200,000 minimum annual rent. The lease term is for ten years with options to extend in ten year increments provided that TS is not in material default of any of the terms and conditions of the lease. Under this scenario, TS would own the building until the lease is terminated, at which time the building would become city property. At that time, the city could solicit proposals under the tenant lease scenario similar to Ruby's Restaurants. The lease agreement also contains other terms and conditions dealing with the public's right to use the rest rooms in the facility, the building being a no smoking facility, the lessee's right to obtain an ABC permit for the serving of alcohol, operating hours, terms of construction, alterations, etc. III. Construction Schedule If Council gives conceptual approval this month, and final approval of the lease agreement in January, 1996, the city and TS will prepare working drawings during the winter months. We should be into plan check in the spring and return to Council in early summer to advertise for bids. If a bid were awarded in July or August, construction would begin right after Labor Day, 1996. Staff has prepared two construction riders to accommodate two construction scenarios. The first is if one contractor were successful in obtaining the bid for both the restaurant and the Pier Plaza developments. In that case, the project should take approximately nine months, thus the grand opening date for the new restaurant and Pier Plaza would be the summer of 1997. The second construction scenario is if separate con- tractors were awarded separate bids for the restaurant and the plaza. The city would then start construction of the plaza and, approximately three months later, the restaurant contractor would be allowed to begin construction. This scenario would take approximately twelve months and the grand opening would take place in the fall of 1997. Council will know which construction scenario will be chosen when it awards the bid next summer. Plans for the grand opening ceremonies can then be made accordingly. IV. Operation and Maintenance Staff believes that this project is the cornerstone for the entire city and must be operated and maintained to a very high standard. Consequently, staff has built into the project substantial revenue dedicated to maintenance and operations. Staff anticipates having twenty-four hour security on site as well as twelve hour maintenance staff. Although the Pier Plaza area has been designed to be as vandal-free as possible, it is inevitable that the area will sustain graffiti and vandalism. Staff has budgeted for and will make a 0015882.01 -3- 12/11/95 10:52 AM REQUEST FOR COUNCIL ACTION MEETING DATE: December 18, 1995 DEPARTMENT ID NUMBER: CS 95-050 commitment to remove graffiti and repair vandalism immediately so as to present a safe, clean, and inviting environment for all visitors to the pier and Pier Plaza area. The same is true of TS. There are a number of maintenance safeguards built into the lease agreement and the lessee's track record with the Duke's theme restaurants has shown them to provide facilities with an extremely high degree of maintenance and security. In summary, the approval of the Pier Plaza/Duke's Surf City Restaurant projects will be the culmination of over three years of work by a twenty-seven member citizens task force, numerous input from organizations such as the Downtown Business Association, Downtown Residents Association, downtown committee of the Chamber of Commerce, beach con- cessionaires, and many other city and beach activity groups and organizations. It will enable the city to provide a beautiful setting and magnificent atmosphere for beach events as well as casual strolls and dining at the foot of the pier. The Pier Plaza will act as the gateway both to the pier and to the Main Street area. Although the process has been a long one, the final result will be the future showpiece of the city. Environmental Status: Negative Declaration and Coastal Development Permit already approved. Attachment(s): City Clerk's Page . - 1 Funding Alternatives 2 Request for Qualification 3 Design Drawings 4 Pier Plaza Master Plan 5 Coastal Commission Staff Report 0015882.01 -4- 12/11/95 10:52 AM CITY OF HUNTINGTOiv BEACH INTERDEPARTMENTAL COMMUNICA TION TO: MICHAEL T. UBERUAGA, CITY ADMINISTRAT / - FROM: ROBERT J. FRANZ, DEPUTY CITY ADMINISTRATO SUBJECT: PIER PLAZA FUNDING ALTERNATIVES DATE: December 11, 1995 Attached is an analysis of alternative funding approaches for the Pier Plaza Project. We have identified available funds of$2.15 million. The current estimate of the total costs for the project with over $800,000 of bid alternates is $5.19 million, leaving a potential funding shortfall of$3.04 million. Numerous potential funding sources exist to reduce or eliminate the funding shortfall, including Orange County bankruptcy recovery, Oil Spill litigation proceeds, and grants. If none of these funding sources materialize, and if construction costs are not reduced from $5.19 million, the City could issue new 30 year debt (Certificates of Participation)to finance the shortfall. New revenues from parking, restaurant lease, etc. could be used to pay the debt service and maintenance costs resulting from the project. Current estimates of the first year new revenues and new expenses resulting from the project are as follows: First Year Revenue/Expense Projections Minimum Standard Optimistic New Revenues $510,000 $675,000 $800,000 New Expenses $698,995 $698,995 $698,995 Surplus (Shortfall) $1( 88,995) ($23 995) $101,005 Staff will continue to review construction expenses for opportunities to reduce costs and pursue grants and other non-debt funding sources to eliminate any potential annual shortfall as result of Pier Plaza Project. Using the above revenue and expense estimates, we have also attached a projection of the first 10 years of revenues and expenses. Because debt service is a fixed cost that does not increase annually, the first year shortfall summarized above would be eliminated after a period of years. (Both revenues and maintenance costs are projected to increase 3% per year in the multi year projection). cc: Ron Hagan, Director Community Services Pierplza.doc 12/11/953:31 PM a Pier Plaza - 10 Year Revenue/Expense Projections $1,100,000 ......... - -..... ......- - $1,000,000 A,. Q•. Optimistic Revenue Projections • $900,000 - -- __ .... . -- _ ........ . . ,er" Standard Revenue Projections $800,000 ..... __................... - - - - - ......... .. .............. - -._................................... . ,mµN,„�,,��„� Expense Estimates wwimurmiommwa„7i,mu mi i'u a uowru,i,�„m;i ioouuomuouuuxiuurv.IN _❑ $600,000 ❑_ •p Minimum Revenue Projections ❑•. $500,000 -----..._...................._........................_............. -- .......................... -....................... ...... $400,000 1 2 3 4 5 6 7 8 9 10 Year PLAZA.XLS Chart 12/11/95 Pier Plaza Funding Alternatives Projected First Year Increased Revenue Minimum Standard Optimistic Revenue Source Parking Fees $200,000 $275,000 $350,000 Restaurant Lease 200,000 240,000 280,000 Sales Tax 40,000 60,000 70,000 Property Tax (Redevelopment) 45,000 50,000 50,000 ATM Lease 25,000 50,000 50,000 Total $510,000 $675,000 $800,000 New Ongoing Costs (Annual)* Maintenance/Operations $275,000 Debt Service - Unused COP's 150,000 Debt Service - New Debt 273,995 Total New Costs $698,995 *Assumes City Issuance of New Debt to Fund the Maximum Funding Shortfall for One-Time Costs. Summary Surplus/Shortfall using Different Revenue Projections: First Year Revenue Projected New Revenue Minimum Standard Optimistic Surplus/Shortfall ($188,995) ($23,995) $101,005 PLAZA.XLS 12/11/95 Pier Plaza Funding Alternatives Estimated City Costs (One-Time Costs) Construction Costs* $4,123,892 Contingency (10%) 412,389 Incidentals (5%) 206,195 Construction Management (8%) 329,911 Revenue Loss during Construction 120,000 Total $5,192,387 * Includes bid alternates of over $800,000 (estimated) Available Funding Sources for One-Time Costs Available Due from Funding the County Unused COP's $1,500,000 $410,000 Unused Golf Course Funds 172,000 374,000 Unused Park Bond Reserves 75,000 98,000 Unused Parking Authority Reserves 80,000 102,000 Unused Blufftop Grant 241,000 Bike Trails Grant 80,000 2,148,000 $984,000 Summary Estimated Costs $5,192,387 Less Available Funds ($2,148,000) Maximum Funding Shortfall $3,044,387 Less Potential Return from County ($984,000) Minimum Funding Shortfall $2,060,387 PLAZA.XLS 12/11/95 Pier Plaza Funding Alternatives Capital Expenditure Funding Shortfall Estimated Shortfall = $2,060,387 to $3,044,387 Potential Funding Alternatives: 1. Grants Coastal Conservancy, Urban Waterfront, Bike Trails, others. 2. Oil Spill Litigation Recovery Our outside Legal counsel advises that there is a good chance of funding from this pending litigation for a project such as Pier Plaza. 3. Private Funding - North of Pier Improvements If the City is willing to forego control and revenue from the parking lot north of the pier, a private operator may be willing to finance the improvements to the lot (estimated improvement cost= $1,500,000). 4. Long Term City Debt The City could issue debt to finance the "shortfall' in funding, using the new revenue from the restaurant (lease, sales tax and property tax) and new parking revenue to pay the debt service. 5. Other Park Acquisition and Development fund, sponsors, fund raising, Arts Foundation, General Fund, County Harbors and Beaches. These funding sources are not likely to be available. PLAZA.XLS 12/11/95 RE TST FOR Q UALIFICATIONS , (Please answe, _,questions and attach any material you w, m be considered) Name of Organization: T S Enterprises, Inc. dba T S Restaurants of California and Hawaii Mailing Address: 200-Kapalua Drive, Lahaina, HI 96761 Phone: (808)669-9624 Fax: (808)669-8754 Type of Business: Corporation Describe similar restaurants you own/operate that are full service theme restaurants and bar, with banquet facilities, outdoor dining, and which are located in a tourist community. (Attach additional information). T S Restaurants is a company that specializes in operating beachfront theme restaurants and bars almost all of which have outdoor dining and are located in tourist communities. Our larger facilities also have banquet facilities. The following are some examples of T S Restaurants: KIMO'S: The first T S Restaurant location was Lahaina, Maui, where we were able to obtain the last waterfront parcel. We opened KIMO'S Restaurant in the spring of 1977. In the fifteen years since its opening, KIMO'S has become nationally renowned. Time Magazine touted it as one of the best restaurants on Maui. KIMO'S has become an "institution" in Lahaina, because it best represents the architecture and theme of the Old Whaling Town with its tin roofs and outdoor dining right on the ocean. JAKE'S DEL MAR is on the beach in Del Mar, California, a town famous for its summer horse racing season. Since its opening in January of 1981 the restaurant has been acclaimed one of the top restaurants in North County San Diego by the San Diego Tribune and San Diego Magazine, including "Best San Diego informal dining." JAKE'S offers a rather sophisticated menu in an informal dining atmosphere including an open-air deck perched above the sand. LEILANI'S ON THE BEACH: Opened in 1983,this beautifully designed building sits on the main beach at the center of the famous Kaanapali Resort on Maui, Hawaii. The upstairs dining area has distinctive specialties ranging from charbroiled local fresh fish to kiawe wood smoked ribs to shrimp Polynesian style. The downstairs seafood bar and outdoor cocktail lanai are only a few feet from the sand. SUNNYSIDE RESORT: In June, 1987 T S opened the SUNNYSIDE RESORT. This property is located on the water at West Shore Lake Tahoe overlooking a public marina. We have 23 guest rooms with bar seating of 150 and indoor and outdoor dining seating totaling 350. It has been a landmark in Lake Tahoe since 1908 and with a total renovation in excess of$7 million in 1987, it will remain a"classic"for many years to come. We have large banquet facilities right on the lake. DUKE'S CANOE CLUB in Waikiki opened in December 1992 ana is now one of the busiest restaurants in the United States. More than a dining facility, the 12,000 square foot restaurant features a veritable museum of Duke Kahanamoku memorabilia, a koa wood canoe, vintage surfboards, a salt water aquarium, and framed photos of"Old Waikiki". The interior design incorporated almost 15,000 board feet of koa,wood, as well as lauhala, bamboo, peeled rattan plaiting, all natural stone floors, and palm-thatched roofs, evoking memories of an earlier, more romantic period in Waikiki when the beachboys were renowned and Duke was The King of Surfing. The surf theme is carried throughout the entire building. JAKE'S SOUTH BAY: In December 1989,JAKE'S on the Chula Vista Marina became the first ever on-the-water restaurant south of the Coronado Bay Bridge and downtown San Diego. The exterior architecture is that of an east coast boat house with an interior that captures the theme of a 1950's yacht dub with big exterior decks. JAKE'S may be approached by water and docking is available in one of the restaurant's boat slips. The menu focuses on serving fresh seafood. JAKE'S has had a great experience with our banquet facilities hosting everything from weddings to City meetings, Olympic fund raisers, and golf tournament awards ceremonies. LA OUINTA CLIFFHOUSE: During the winter season 1992, T S opened the CLIFFHOUSE. Dramatically perched halfway up the historic little mountain of Point Happy, the restaurant captures the ranch heritage and architecture of the early 1900's and the history of the Coachella Valley, Indian Wells, and La Quinta. Diners can look out to the Santa Rosa, San Jacinto, and San Bernadino Mountain ranges or step out onto the outdoor terraces next to craggy, granite outcrops. Inside,the rooms reflect different themes from the desert's romantic history with the Cahuilla Indians and early ranch life to the grandeur of the wealthy 20's and Hollywood 30's. Our banquet facilities have been very popular here also. HULA GRILL: In June 1994,T S celebrated the opening of HULA GRILL at Whalers Village on Maui. The architectural theme is reminiscent of a casual 1930's Hawaiian beach house, in the style conceived by renowned architect C.W. Dickey. The characteristic Dickey-style double pitched roof extends over open air lanais. The exterior walls are rough hewn wood painted white. The interior features warm koa walls, antique consoles, and armoires with collections of Hawaiian memorabilia. A more casual menu and cocktails are served outdoors under large palm thatched umbrellas rising from a sandy beach in front of the restaurant. Tropical gardens, waterfalls, and ponds surround the restaurant on three sides with the beach and ocean in the front. The food is Hawaii Regional Seafood developed by our partner, Peter Merriman, one of America's most celebrated chefs. Mr. Merriman also serves as Executive Chef for the other T S Restaurants. DUKE'S CANOE CLUB, located right on the sands of Kalapaki Beach in front of The Kauai Marriott in Lihue, re-opened in June, 1995 after having been closed due to Hurricane Iniki. On the inland side of DUKE'S, a waterfall begins at an elevation above the upper dining room level and forms small streams as it actually flows through the restaurant into a pond filled with carp at the lower, bar level. DUKES is a restaurant that is reminiscent of an earlier, even more romantic , 2 period of Hawaiian histc The single person who best per 'fied that era was Duke Kahanamoku. There is a great deal of"Duke memorabilia" in the restaurant: photos of Duke with various celebrities, his old surfboard, his original koa canoe, and much more. Describe your compan�s management setup, attach an organization chart and resumes of the principals. (Please see organization chart and histories of the principals attached). T S has a somewhat unique management philosophy. In each restaurant the General Manager is an equity owner in that operation. This allows this managing partner a long-term stable position. He or she is able to get involved in local affairs and become a full-time resident and active member of the community. We have had preliminary discussions with two of our management team members who would like to come back to be part of our Huntington Beach leadership. Our tentatively planned General Manager attended Los Alamitos High School and Orange Coast College and grew up in Seal Beach, and our proposed Kitchen Manager grew up in Huntington Beach(his family still lives there). Both of them are very excited about getting back to their roots and being members of the Surf City community. Do you have the financial capability to raise equity to complete this project? Yes. Describe your relationship with major lenders or resources you would use to build, furnish, and operate this restaurant. We have the capability to capitalize DUKES SURF CITY. In the past we have used our excellent relationship with First Hawaiian Bank in Hawaii and Wells Fargo Bank in California as our major lenders. How important is it to you to be established in Huntington Beach and to become a Surf QV, Huntington Beach premier restaurant attraction? It is a very very high priority of T S Restaurants to own and operate DUKE'S SURF CITY at the base of the Huntington Beach Pier. As you know, we own and operate DUKES WAIKIKI which this year will have annual volume in excess of $8 million. The theme is based on Duke Kahanamoku,the beach boys, and surfing in general. We feel that there are only a few absolute first rate sites for such a concept, and Huntington Beach has to be the Number One location in California! Our company is structured such that we will have a strong owner/operator at Surf City which will give us much more flexibility than any chain operation. Our General Manager will have as one of his highest priorities working with the city to coordinate any events, helping in any way possible to market Huntington Beach as a Surf City tourist attraction, and in general cooperating in every way possible to promote the restaurant and Surf City itself. We will be willing to sign an agreement that we will not go into any neighboring cities with the DUKES concept, because we certainly don't want to do anything that will take away from Surf City being the premier restaurant attraction in the area. 3 Are any of the above deso d facilities a publig&rivate operation? —�s. If M. please describe the relationship. Many of our operations require that we cooperate with large outside entities. For an example, SUNNYSIDE RESTAURANT in Lake Tahoe is operated with a public pier in front of it as is JAKE'S ON THE LAKE and JAKE'S SOUTH BAY. We have a number of restaurants that are within hotel facilities such as DUKE'S WAIKIKI which is on the ground floor of the Outrigger-Waikiki, and DUKE'S KAUAI which recently opened and is on the grounds of the Kauai Marriott. We understand the importance of being able to cooperate with others on a project so that everyone can achieve their objectives. t 4 Describe the economic st.- s of the operations you listed in tr is of size, annual gross revenue, annual operating costs, and net profit or loss. T S RESTAURANTS 1995 INCOME BEFORE UNIT VOLUME T S FEES T S FEES INCOME KIMO'S 5,300,000 900,000 159,000 741,000 WE'S TAHOE 2,250,000 195,000 67,500 127,500 GRILL&BAR 2,300,000 102,000 69,000 33,000 LEILANIS 4,233,000 670,000 148,155 521,845 JAKES DEL MAR 4.350,000 850,000 130.500 719,500 CHICO'S CANTINA 2,250,000 159,000 67,500 91,500 KE0,KI'S 2,200,000 100,000 66,000 34,000 SUNNYSIDE 3,000,000 310,000 90,000 220,000 SUNNYSIDE LODGE 850,000 180,000 25,500 154,500 DUKES KAUAI* 2,400,000 75,000 72,000 3,000 SHARKY'S* 2,860,000 118.000 85,800 32,200 SOUTH BAY 3,300,000 230,000 99,000 131,000 CLIFFHOUSE 2,700,000 125,000 27,000 98,000 DUKE'S WAIKIKI 8,800,000 1,500,000 264,000 1,236,000 HULA GRILL 4,800,000 456,000 96,000 360,000 ------------- ------------ ------------ ------------- 51,593,000 5,970.000 1,466,955 4,503.045 'SHARKM and DUDS KAUAI have been dosed due to Hurricane Ink. These volume and income fees are based on our Insurance Compares assumptions. (DUKES opened on June 28, 1995. SHAW-I S will open ne)d year.) 5 Describe the architectural design approach for both the interior and exterior of your current aerations. We design each of our restaurants to have an appropriate theme and a "sense of place"so that they fit into their surroundings and sometimes even represent or embody the best of a particular town or area. For an example, KIMO'S in Lahaina is done in the architectural style of turn-of-the- century Hawaii with its influence from the New England whalers and missionaries merging with the requirements of living in a tropical climate such as Maui's. At Lake Tahoe, SUNNYSIDE Resort represents the feeling of an old time Sierra Nevada Ski Lodge with the restaurant itself following the theme of the old wooden Chris Craft boats that are so popular on the lake. The HULA GRILL on the beach in Kaanapali, Maui is reminiscent of an old local family beach house that one might have seen in the late 20's or 30's. With this design philosophy in mind, we want to do something that highlights and represents the very best of Surf City/Huntington Beach. We would want to underscore the marketing elements that are already seemingly underway. For an example, the emphasis on being the home of many major amateur and professional surfing contests and volleyball tournaments. This will be very easy for us as almost all of the top management have been surfers and volleyball players since their early years growing up in Southern California. In fact, the beach lifestyle is really the underlying theme in almost all of our restaurants today. One of our current thoughts is to incorporate museum quality memorabilia of not only Duke Kahanamoku but also of surfing and volleyball through the years in Huntington Beach. This informal museum-like decor will help establish a"sense of place"for the restaurant and a"sense of pride"for Huntington Beach residents. We would design a building that would be able to expand and contract based on the level of business during the various seasons. For an example, our banquet rooms would be designed to handle overflow dining on the weekends and during the summer months. We would want to have outdoor and/or open air dining and cocktail lounge areas that would be inviting to people strolling on the pier or walking along the beach. We will work within the design guidelines established by the City. We are confident that we can develop an architectural design that will make the City of Huntington Beach very proud and establish DUKE'S SURF CITY as the premier landmark restaurant on the California coast! 6 m J. Robert"Rob"Thibaut, President S_ John A. "Sandy"Saxten III, Chairman ROB THIBALTT President SANDY SAXTEN Chairman of the Board Sandy Saxten started working for Chuck's Steak House of Hawaii in eadiy 1966. After graduating from Stanford University in 1967 with an Honors Degree in Business Economics, he opened his first restaurant called The Loft in San Jose,California. Rob Thibaut,after finishing at the University of California at Santa Barbara with a major in Political Science,joined Sandy at The Loft as a manager. In 1971,they opened the Symposium Restaurant in Lafayette,Califomia,as equal partners. In late 1971.Sandy and Rob merged their restaurant interests into a newly fomied corporation called Borel Restaurant Corporation. At that time, Borel consisted of five restaurants including the aforementioned two. From 1971 Sandy and Rob and four other partners expanded the Borel Restaurants operation to a 16-unit nationwide restaurant chain, operating under the name of Rusty Scupper in major metropolitan areas such as Boston, Philadelphia, Pittsburg,Chicago, Minneapolis,and San Francisco. At that time,the annualized volume made Borel one of the 100 largest restaurant companies in the United States. During that period, Sandy and Rob worked in every phase of the restaurant business with Sandy concentrating on real estate development,construction, and corporate finance,and Rob concentrating on restaurant operations,financial cost control,and purd-asing. In 1975, Rob and Sandy and their partners sold the Borel Restaurant Corporation to Nestles'subsidiary, Stouffers Hotels,and Sandy and Rob left Borel to form their own privately held restaurant company,T S Enterprises, Inc. Rob moved to Lahaina,Maui to find their first site,and Sandy retumed to Hastings Law School in San Francisco, graduating in 1977. Rob subsequently graduated from Harvard Business School(Owner/President's Program). Sandy and Rob's new goal was to develop, build,and personally operate a limited number of high quality restaurants in California and Hawaii. By growing at a slow pace, T S felt it could run superior restaurants(1)by waiting for the best,unique real estate sites,(2) by both Rob and Sandy personally working on the architecture and restaurant concept of each new restaurant,and(3)by personally training each new General Manager. T S Enterprises is currently listed by Hawaii Business magazine as the 157th largest corporation in the state of Hawaii. T S is the third largest restaurant chain in the state and the seventh largest corporation headquartered in Maui. T S employs over 1,000 people. In the future, Rob and his family plan to continue to live on Maui,and Sandy has settled his family in Rancho Santa Fe,California. T S will continue to grow at a controlled rate using the principles that have contributed to their success thus far: (1) Open restaurants only in the finest locations in the finest resort areas, (2) Develop restaurant concepts for their speck markets. We never superimpose a concept on an area where that isn't what the customers want. We always try to offer a restaurant that fills a need(e.g.,casual? Mexican?"country club"?, seafood,etc.), (3)Take great care of our top management. The General Manager is always made a partner/owner in the restaurant he or she operates. This gives us a dedicated, honest person on the spot who is constantly looking afterthe owners'best interests. Because we don't move our Partner/General Manager around, it also adds stability to each respective restaurant and allows the General Manager to become an involved member of the community and an even greater asset to his restaurant,and (4)Show respect for our employees. We attempt to take care of our employees as if they were dose friends. We realize it is the individual employee that relates to the individual customer. T S RESTAURANTS OF HAWAII 200 KAPALUA DR.,LAHAINA,MAUI,HAWAII 96761 (808)669-9624 FAX(808)669-8754 Lahaina•Kapalua•Kaanapali•Poipu Beach•Kauai Lagoons• Waikiki•Cardiff•Del Mar•S.D.South Bay•Tahoe City•Sunnyside•La Quinta T S ENTEMISES ROB THffiAUT SANDY SAXfEN PRESIDENT CHAIRMAN SO% 50% T S HAWAH T S CAU FORNIA ROB THIBAUT SANDY SAXIEN PRESIDENT CH—ij AIRMA DICK MOON DAVID ALI.eiRA ROB T JBAUT BILL PARSONS KATHY EASIER ROB THHRAUT& C.F.O. PERSONNEL DBVELOPMENT OPERATIONS CONTROLLER SANDYSAXTEN DEVELOPMENT DISTRICT CONTROLLERS MANAGERS THE GRILL&BAR KIMUS JAMS DEL MAR LEILANCS KEOKPS JAKE'S SOUTH BAY CHICO'S DUKES KAUAI JAKVS ON THE LAKE SHARKYS DUMPS WAIKIKI SUNNYSIDE HULA GRILL LA UINTA CLIFFHOUSE I i CI_"f ° u;- - — Q to r�' r 'llt� J_u_1 ----- - /�/��•-- �c•��io.` �.>�r ��i�- �-rzt-;q'ir jry�it�o P.C.H. FACINGELE_V. EAST ELEV. 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SS�Vk 06 5EP 1995 STEVEN LANGFORD ARCHITECTS,INC. 1 B- = 1'•0- M1CNi1fCYVNE•W IfPiON OESN:N•f OOD fFNVICE •��,� 95-0520 o : 9 MAXWELL'S PREVIOUS APPROVAL EXISTING MAXWELL'S 90 -- --� •• - rl1 DUKE'S SURF CITY G 11 J U11(�C�lI CAI [ c�G'�o CA. TVk STEVEN LANGFORD ARCHITECTS.INC. •ROMiECEME•xi�tROR OESroM•f000 E[RVICE MAXWELL'S PREVIOUS APPROVAL EXISTING MAXWELL'S DUKE'S SURF CITY l®f`i�l CCG'Jv CA. TLvk STEVEN fANOPORD ARCMITECTS,INC. •RCMTlC1VRE•MT[I1g110Efgx•EOOD ffRY1C! I _ iin 1�■�n_A ♦_le� �a■il♦�♦ ♦�+ iSIR �lt�♦�•1.!►...W O I�:rlr_►�_♦ ♦ �+ �I I■■�■L�: �:°RI:►,e-:!c:' �I� "" ._.._. 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'i , --- oll 1�1�1 1,11�1�II!>•�1 I11:N1—Ipagl-1._:':1—I11.PI-1 ♦` MCI Sit I .le No- 1 �,. �■■■■u•• ��, ��/Ills■i �► u. ��, ��• �� lII,. � 1■• ■ ■• IL■• �titI �■a�� :��.� �1.�.,, „��♦ �♦ ��il n'�u1a..�■.�_I. •lr;�°•� � �♦ ( I♦� ♦O♦ II II♦♦♦ ♦♦♦ III ir�.i�l.��:��ilr4•7��1� — _ i r Y c PLAZA LIGHT STANDARDS[15' HIGH, TOTAL # OF LIGHTS, 78) o € EMERGENCY/MAINTENANCE ACCE55 g ORNAMENTAL BOLLARDS J u?i u )OTHS PLAZA DEDICATION WALL 51GNAGE PLAZA SIGNAGE/INFORMATION BOOTI 9ICATION WALL EXPAN51ON TURN AROUND/DROP-OFF AREA RETAII VALET �1 PLAZA � ' ' �;;�;r � �� VIEW ; Y O C�j4 - ' � 0 ORNA SERVU W \1 r/ RETAII X iz � ,�C A F - RAMP T1 G , � E - — DOWN ADDRESS: 2000 win Street �� •� � � • Huntington Beach CA tr2.4.O r0 q•p pp 40s1Sq�4p 9+o qQ 7 p6 APPLICANT: .-.-----.-.---.- .-_-.._ -•- - _'_ d3 T.b +Y O4 OiS O.Ot�•C aG TS RESTAURANTS -1 1 I 225 Plaza Street,Suite 300 Solana Beach,CA 9270S AT LAWN I i F IER I _ DUKE'S RESTAURANT- _. :• SITE PLAN -1 -- — I^ 1 ENTRY LEVEL »_ • • .- - ♦ I • I • • • • 06 SEP 1995 - -OS2 AL K 0� 5 10 7 )f 3F t F f 1 � 1 1 r ZIA IL DUKE'S PROPOSED FOOTPRINT �MAXWELL'S PREVIOUS PROPOSED FOOTVRINT EXISTING MAXWELLis -MAXWELL'S EXISTING FOOTPRINT MAXWELL'S PREVIOUS APPROVAL t/a LLOYD HAMROL P.O. BOX 861025 b LOS ANGELES, CA 90086-1025 / /7 (213) 587-0945 EDUCATION University of California, Los Angeles, B.A., Art 1959 University of California, Los Angeles, M.A., Art 1963 SITE PROTECTS 1995 Moore's Stone Volute, Caltech, Pasadena, CA 1992 Out of Bounds,Avery Road Park, Dublin, OH 1992 Grenada Promenade, Grenada Schools, Phoenix, AZ 1989 Crown Lair, Stagecoach Park, Carlsbad, CA 1988 Serpent Mound, Green Valley Library, Henderson, NV 1988 Butterfield Ranch Project, Chino, CA 1987 Sea Look Out, Isla Vista Park, Santa Barbara, CA 1986 Garden Gate, Zeidler Collection, Los Angeles, CA 1986 . Gate House, Front Park, Cambridge, MA 1986 Uptown Rocker, Bunker,Hill, Los Angeles, CA 1985 Black Cactus, Quinn Collection, Beverly Hills, CA 1985 De Anza Walk, Lake El Estero Park,.Monterey, CA 1985 Twenty-One Stones, position Park, Los Angeles, CA 1984 Coral Square, Broward Community College, Hollywood, FL 1984 Slide Stone Mound, Harborview Developmental Ctr, Valdez, AID 1983 . Stonerise, University of Iowa, Iowa City, IA 1983 Flagstone-Ramp,City Centre, Fountain Valley, CA 1983 City Terrace, Civic Center, Anaheim,CA 1982 Rockwalls, Gallaudet College, Washington, D.C. 1980 Highground, School of Law, Univ of N.M., Albuquerque 1979 - Thronapolis, Russell Federal Bldg.,Atlanta, GA 1979 Gyrojack, Regrade Park, Seattle, WA. 197_7 I..n. whole, Gri^stei:� Collection, Los Angeles, CA 1974 Log Ramps, Western Washington Univ.,Bellingham, WA PROTECTS IN DEVELOPMENT City of Phoenix,AZ; Bridge at 7th Avenue and Cave Creek Wash. SOLO EXHIBITIONS 1986 Exhibition/Installation, Municipal Art Gallery, Los Angeles 1970 Installation, California State Univ., Fullerton, CA 1969 Installation, Pomona College, Pomona, CA 1968 Installation, La Jolla Museum of Art, La Jolla, CA i LLOYD HAMROL 2 SELECTED GROUP EXHIBITIONS 1985 The Artist as Social Designer, LACMA 1981 The Museum as Site: Sixteen Projects, LACMA 1980 XIII Olympic Winter Games, Fine Arts Exhibit, Lake Placid, NY 1980 Across the Nation: Fine Art for Federal Bldgs, 1972-79: National Collection of Fine Arts, Smithsonian Institute, Washington, D.C.; Hunter Museum of Art, Chattanooga, TN 1980 Sculpture in California 1975-80, San Diego Museum of Art, CA 1980 Urban Encounters/Art Architecture Audience; Institute of Contemporary Art, University of Penn., Philadelphia, PA 1977-79 Los Angeles in the Seventies: Fort Worth Art Museum, T'X; Joslyn Art Museum, Omaha, NE 1976-77 Painting and Sculpture in California: The Modern Era: San Francisco Museum of Modern Art; Smithsonian Institute 1976 Artpark, Lewiston, NY 1975-77 Site Sculpture, Zabriskie Gallery, New York, NY 1974 Public Sculpture/Urban Environment, Oakland Museum, CA 1973 Four Los Angeles Sculptors, Museum of Contemporary Art, Chicago, IL ' 1972 15 Los Angeles Sculptors, Pasadena Museum of Modem Art, CA 1970 String and Rope, Sidney Janis Gallery, New York, NY 1967 American Sculpture of the Sixties: L.A. County Museum of Art; Philadelphia Museum of Art 1966 Annual Exhibition,Sculpture and Prints, Whitney Museum of American Art,New York, NY AWARDS AND GRANTS 1993 Miller Award, Friends of the Junior Arts Center, Los Angeles 1991 La Napoule Art Foundation, France, Artist Residency 1990 NEA, Artist Fellowship Grant 1980 NEA, Artist Fellowship Grant 1974 NEA, Artist Fellowship Grant 1965 LACMA, New Talent Purchase Award TEACHING POSITIONS 1978-79 University of California, Los Angeles 1977-78 University of California, San Diego 1975-76 University of California, Irvine 1970-74 California Institute of the Arts, Valencia 1969-70 California State University, Los Angeles 1968-69 California State University, San Diego 1962-68 UCLA Extension TEACHING RESIDENCIES 1977 University of Kentucky, Lexington Wright State University, Ohio Moore College of Art, Philadelphia California State University, Long Beach 1975 University of Minnesota, Minneapolis 1974 Western Washington University, Bellingham LLOYD HAMROL 3 CONSULTING 1989-91 City of Phoenix, A.Z. Public Works Project 1987-88 The L.A. Group, Landscape Architects, Calabasas Park, CA. DESIGN TEAM COLLABORATIONS 1987 Tito Patri & Associates., Landscape Architects, San Francisco, CA. Runners-up, Todos Santos Plaza Competition,Concord, CA. 1987 The L.A. Group, Calabasas Park, CA. Finalists, Inspiration Point Design Competition, Newport Beach, CA. 1980 Charles Tapley Associates, Architects, Houston, TX. Finalists, Duncan Plaza Design Competition, New Orleans. SELECTED REVIEWSaRTICLES Pincus, Robert L., 'Public Art Finds a Friend", San Diego Union, August 13, 1989. 011man, Leah, "Overdue Fanfare for the Common Artwork", LA.Times, August 11, 1989, Part VI. De Herrera, Maria, 'Artful Beaches;Redesigning a California Park", Christian Science Monitor,July 11, 1988,p. 30 Schipper, Merle, "Lloyd Hamro4 Municipal Art Gallery",Art News, Summer 1986,pp. 127-28 . Wilson, William, 'A Museum Where Art is a Site to Behold", Los Angeles Times, Calendar, July 26, 1981, p. 93 Larson, Kay, 'The Expulsion from the Garden:Environmental Sculpture at the Winter Olympics", Artforum, Vol XVIH No:8, Apr. 1980 p. 37-9 McFadden, Sarah, 'Report from Lake Placid- The'Big Secret:Art at the Olympics", An in America, Vol 68, No.4,Apr 1980, Lippard, Lucy, 'Art Outdoors, In& Out of the Public Domain'; Studio International, (London) Vol 193, No. 984, Mar-Apr 1977, pp 83-90 PUBLICATIONS Bourdon, David, Designing the Earth: The Human Impulse to Shape Nature,Abrams, 1995. Marrow, Marva, Inside the L.A.Artist, Gibbs M. Smith Inc., 1988. Lloyd Hamrol:Works,Projects, Proposals, (Catalogue),Los Angeles Municipal Art Gallery Associates, 1986. Hopkins, Henry, 50 West Coast Artists, Chronicle Books, 1981. Thalacker, Donald W, The Place of Art in the World of Architecture, Chelsea House, New York, London, 1980. Raven, Arlene, Contemporary Artists, St.James Press, 1977. Plagens, Peter, Sunshine Muse,Praeger Publishers, 1974. SELECTED PUBLIC COLLECTIONS Smithsonian Institute, Washington D.C. Los Angeles County Museum of Art, Los Angeles, CA Laguna Beach Museum of Art, Laguna Beach, CA y '� Terry Schoonhoven Collections: Los Angeles County Museum of Art California Walker Art Center Minneapolis,Minnesota Newport Harbor Art Museum California Atlantic Richfield Corporation Security Pacific Bank Australian National Gallery Canberra San Antonio Museum of Art Texas Museum of American Art Smithsonian Institution United Bank of Denver Colorado Home Savings of America California Great American Savings The Principal Group Des Moines, Iowa Books included in: Sunshine Muse 1974 Peter Plagens Bict Art 1977 Environmental Communications Towards a peoples Art 1977 Cockcroft and Weber Street Murals 1982 V. Barthilmeh California Museums 1984 W. Wilson The Security Pacific Collection 1984 Security Pacific American Art Now 1985 E. Lucie Smith The Big Picture 1988 M. Levick Wall Art 1988 Merkin and Merkin Grand Illusion., 1988 Cass American Art Since 1940 1994 Art Today 1995 E. Lucie Smith Articles and Reviews: Newsweek 9/70, 8/81 Life Magazine 8/70 Earth Magazine 3/72 New York Times 7/9/72, 7/4/76, 12/16/85 Art News 7/73 , 1/80, 11/81 L.A. Times 7/73, 5/78, 3/5/79, 1/20/80, 6/22/84, 7/15/90, 4/19/91, 2/13/93 Rolling Stone 1/31/74 Art in America 5/75, 9/78, 3/80 New West 3/26/79 Progressive Architecture 7/81 Images and Issues winter 81/82 L.A. Herald Examiner 10/82 Daily News 3/26/89 St. Louis Dispatch 4/6/89 Art of California June 1993 A Terry Schoonhoven One Man Shows: 1 . "Terry Schoonhoven Paints a Mural for the Newport Harbor Art Museum" 1975 . Show to travel a.Colorado Springs Art Center 1976 b.University Art Center, Tempe, Arizona 1976 c.E.B. Crocker Art Center, Sacramento, California d.California State University Art Center, Chico, California 2 . "Downtown Los Angeles Underwater and Other Proposals" 1980 ARCO Center for Visual Art, Los Angeles, California 3 .Hogarth Gallery, Sydney, Australia 4 . "Six Walls Downtown" 1982 Koplin Gallery, Los Angeles, California 5 . "Vapor Dreams in L.A. , Terry Schoonhoven's Empty Stage" 1982 University Art Museum, California State University, Long Beach 6 . "Olympic Mural Studies" 1984 Koplin Gallery, Los Angeles, California 7 .Studies for Recent Murals" 1985 Koplin Gallery, Los Angeles, California 8 . "Studies for Time Travel" 1991 Koplin Gallery, Santa Monica, California 9 . "Poe' s Vacation" 1994 Koplin Gallery, Santa Monica, California Selected Group Shows: 1. "New Painting in Los Angeles" 1971 Newport Harbor Art Museum. California 2 .Paris Bienalle 1971 Paris, France 3 .Betty Gold Gallery 1973 and 1974 Los Angeles, California 4 . 11A Drawing Show" 1975 Newport Harbor Art Museum 5 . "The River: Images of the Mississippi" 1976 Walker Art Center Minneapolis, Minnesota 6 . 11I1lusion and Reality" 1977 circulated by the Australian Council throughout Australia 7 . "Five L.A. Artists Look at L.A. " 1980 Municipal Gallery, Los Angeles, California 8 . "Humor in Art" 1981 L.A. Institute for Contemporary Art 9 . "California, the State of Landscape" 1981 Newport Harbor Art Museum 10. 1'Museum as a Site, 16 Artists" 1981 Los Angeles County Museum of Art 11. "California Drawing, a Survey" 1984 Modernism San Francisco 12. "Interactive Arts, Art and Architecture" Welton Becket Associates Santa Monica, California 13 .Cirrus Gallery 1986 Los Angeles, California 14 . "Transitory Structures" 1995 Occidental College Los Angeles, California z Terry Schoonhoven 16.Passaa 1981 14 ' by 250' San Antonio Museum of Art, Texas 17 .Untit1ed Murals 1982 39" by 39" by 36" and 12 ' by 12 ' Doumani House, Venice, California 18.White City 1982 11' by 11' California State University at Long Beach 19 .Cityscape 1984 21' by 150' Olympic Mural Project, Los Angeles, California 20.Morning Room Mural 1985 walls and ceiling Federal Court of Appeals, Pasadena, California 21.Occulus 1985 10 ' diameter semi dome collaborative project, mural and sculpture with Michael Davis Koll Center, Irvine, California 22 .Landscape with Musicians 1988 35' by 11' Venice, California 23 . Story Book Murals 1989 2 walls, each 122 ' by 42 ' North Hollywood, California 24.The Time Stream 1989 2 walls, each 22 , by 26 ' Metropolitan Life, St. Louis, Missouri 25.Ciy Above 1990 approx. 2000 sq. foot ceiling Home Savings of America, Los Angeles, California 26 . Gr y Boat. Green Bridge. Twilight 1990 26, by 37 ' ceiling inset collaborative project, mural and sculpture with Michael Davis Sheraton Hotel, San pedro, California 27 .Traveler 1991 10' by 26' ceramic tile mural for Metro-Rail Alameda Station, Los Angeles, California 28 .Projector 1991 Barrel Vault, 12 ' by 24 ' Gilbert Building, Beverly Hills, California 29 .Landscar)e with Four Actors 1992 7 ' by 27 ' oil on applied canvas Beals Cut 1992 oil on applied canvas The Orange Grove 1992 ceramic tile lunette, 10 ' radius Valencia Town Center, California 30 .Des Moines Dream Serruence 1993 2 oils an canvas, 9 ' by 35' and 9 ' by 28 ' The Principal Group, Des Moines, Iowa 31.View From the Old City 1993 7 ' by 27 ' with ceiling 9 ' by 18 ' 6300 Wilshire Building, Los Angeles, California 32 .Muralists 1995 25 ' by 45' multiple surfaces acrylic paint CalState Los Angeles METROLINK Station Los Angeles, California Grants and Awards: Special Projects Grant; California Arts Council 1978 Artists Fellowship; National Endowment for the Arts 1980 Louis Comfort Tiffany Foundation Grant 1983 Rose Award for best public artwork; Los Angeles 1991 Terry Schoonhoven 554 North Lucerne Boulevard Los Angeles , California 90004 (213 ) 463 - 3818 Born: April 25, 1945 Freeport, Illinois Attended University of Wisconsin. Received B.S. degree in 1967 . Did 2 years graduate work in art and taught lithography at U.C.L.A. Co-founded the Los Angeles Fine Arts Squad in 1969 to do large exterior murals. The Squad disbanded in 1974 . Murals executed with the Los Angeles Fine Arts Squad: 1.Brooks Street Painting 1969 191 by 251 Venice, California 2.Beverly Hills Siddhartha 1969 201 by 3001 Beverly Hills, California 3 .Venice in the Snow 1970 201 by 70 - Venice, California 4.B lack Sutbma ri ne 1971 91 by 4 0 - Newport Beach, California 5.Isle of California 1972 42 , by 65 - Los Angeles, California 6.Hippie Know How 1971 191 by 501 Paris, France 7 .Ghost Town 1973 141 by 401 Thousand Oaks, California Murals ; Terry Schoonhoven 8 .S.P.O.R. 1975 14 - by 501 University of California, Los Angeles 9 .Study in Chrome and Gray 1976 14 - by 401 Venice, California 10.Adobe Gillis 1976 141 by 401 Thousand Oaks, California ll.No River 1976 241 by 351 Minneapolis, Minnesota 12.St. Charles Painting 1979 501 by 1001 Venice, California 13 .9tu in Silver 1979 10 - by 321 Century City, California 14 .Pasadena Painting 1981 6000 sq. feet including ceiling Pasadena, California 15.Study in Copper 1981 11- by 12 - Los Angeles County Museum of Art SHEILA KLEIN 690 BAYVIEW-EDISON ROAD BOW,WASHINGTON 98232 360.766.6102 SOLO EXHIBITIONS SCULPTURE,Nancy Lurie Gallery-Chicago,IL 1991 VOCABULARY, MIA Gallery-Seattle,WA 1990 CITY BEJEWELLED,MIA Gallery-Seattle,WA 1988 CULTURAL RELATIVITY, Rubin/Mardin -Seattle,WA 1983 AMERICA IN A BOX,Memory and Lands of the 20th Century-Florence,Italy 1983 INTERNATIONAL FURNISHINGS, Rubin/Mardin -Seattle,WA 1981 TI lE PRINCESS AND THE PEA,Rosso Louie Gallery- Seattle,WA 1980, Installation of companion pieces DOMESTIC SET UP, Foster White Gallery-Seattle,WA 1979, Installation of companion pieces SELCCTED EXHIBITIONS NINE ONE SPECIAL,Union Station-Los Angeles,CA 1992 TI IE I IOME SI IOW,Security Pacific Bank Gallery-Custa Mesa,CA 1992 SUMMER LIGHTING,Dreadnought Seamens Hospital-Greenwich,England 1992 REVOLUTION,Curated by Stuart Katz,The Works Gallery-Long Beach,CA 1992 LEGACY OF KARL BLOSSFELDT,Curated by Malinda Wyatt,Jan Turner Gallery- Los Angeles,CA 1991 LOST AND FOUND,Jose Drudis-Biala Art Gallery- Los Angeles,CA 1991 ENVIRONMENTAL DELIGHTS, Installation Space,City of Los Angeles- Los Angeles,CA 1991 BIG OBJECTS,Tacoma Art Museum-Tacoma,WA 1991 EMPTY PEDESTAL PROJECT,Storefront for Art and Architecture -New York,NY 1991 IN/SCALE,Bennett-Seiqel-New York,NY 1991 FRONT AND BACK/IN AND OUT,Nancy Lurie Gallery-Chicago,IL 1991 NEW WORK,Ilelander Gallery- Palm Beach,FL 1990 METROIMETRO,New Art from Atlanta and Los Angeles,Curated by Madeleine Grynsztejn -Atlanta,GA 1990 RECYCLED LOS ANGELES,Artists Space,New York City,NY 1990/Municipal Art Gallery-Los Angeles,CA 1990 GROUP SHOW,Curated byJosine Starrels,Long Beach Museum-Long Beach,CA 1989 GROUP SHOW La Luz de Jesus-Los Angeles,CA 1989 SCULPTURE CHICAGO, Equitable Building and Northwestern University- Chicago,IL 1989 RITES OF SPRING,Suzanne Rezak Gallery- Chicago,IL 1989 BEFORE AND AFTER, Center on Contemporary Art- Seattle,WA 1988 INFORMATION AS ORNAMENT, Feature/Suzanne Rezak Gallery-Chicago,IL 1988(Catalog available) LOS ANGELES•PITTSBURGH,Mendelsohn Gallery- Pittsburgh, PA 1988 AMERICAN POP CULTURE,La Foret Museum-Tokyo,Japan 1986(Catalog available) MAGICAL MYSTERY TOUR,Municipal Gallery of Los Angeles,Barnsdall Park-Los Angeles,CA 1985 WORKSHOP EXPERIMENTS,Brattleboro Museum and Art Center-Brattleboro,VT 1985 -1986 STATE OF TI IE ART,Northwest Artists Workshop- Portland, OR 1982 "Flags of the World"Installation TIIE FIGURE IN AMERICAN ART,Museum of the Southwest-Corpus Christi,TX 1981 CHOICE&CHANCE,P.S.1,Institute for Art and Urban Resources-Long Island City,NY Companion Installation 1981 WIN,PLACE OR SHOW,Installation,Henry Art Gallery-University of Washington,Seattle,WA 1981 WOMEN ON WOMEN,Kohler Art Center-Sheboygen,WI 1981 CONTEMPORARY WEST COAST ARTISTS,Curated by Matthew Kangas- Plymouth,MA 1980 IN SITE,Five Person Show,Womens Building-Los Angeles,CA 1980 GOVERNORS INVITATIONAL-Olympia,WA 1975 MAJOR PUBLIC COLLECTIONS CHICAGO HISTORICAL SOCIETY- Chicago,IL BASS MUSEUM-Miami Beach,FL SEATTLE ART MUSEUM- Seattle,WA Bequest of Anne Gerber FORMICA CORPORATION - Cincinnati,OH IL BARBARO - Collection of objects by Artists and Architects,Sienna, Italy CITY OF SEATTLE -Seattle,WA 1%for Art Collection SEATTLE FIRST NATIONAL BANK -Seattle,WA WASHINGTON STATE- 1%for Art Collection NORRY CORPORATION-Coconut Grove,FL SHEILA KLEIN 690 BAYVIEW-EDISON ROAD BOW,WASHINGTON 98232 360.766.6102 COMMISSIONS AND PUBLIC ART KCAC/KENT REGIONAL JUSTICE CENTER, Kent,WA 1994 FEDERAL AVIATION AGENCY TOWER,LAX AIRPORT,Los Angeles,CA 1992 VERMONICA URBAN CANDELABRA, Cultural Affairs Grant,Los Angeles,CA 1992 CITY OF MANHATTAN BEACH, Public Art Program, Permanent Public Commission/Neptune's Garden 1992 METRO RAIL STATION,Hollywood and Highland,Design Team Artist 1991 SCULPTURE CHICAGO'89,Competition for Monumental Sculpture-Commemorative Ground Ring FORMICA CORPORATION,Water Palace,Portable Fountain,Traveling Piece Beginning March 1988 RAISON D'ETRE,Espresso Bar, Foyer,Seattle,WA 1981 CANYONVIEW ELEMENTARY,Washington State Arts Commission 1977 EDMONDS COMMUNITY COLLEGE,Washington State Arts Commission 1978 COTTONWOOD ELEMENTARY SCI IOOL,Washington State Arts Commission 1977 SPECIAL PROJECTS MUSEUM OF THE STREET, Los Angeles,CA 1992-Present(Conceptual Phase) ISLAND OF LIGHTS,Los Angeles,CA 1994 (Hoover Union Community Initiated Proejct) URBAND, Los Angeles, CA 1992(Traffic Signal Ring -Union Station) TRAFFIC NECLACE,Las Vegas,NV 1992 VERMONICA CANDLE STICKS/220,000 STREETLAMPS,Los Angeles,CA 1992 APPOINTMENTS AND AWARDS OJAI ARTS COMMISSION,Ojai,CA CITY OF LOS ANGELES,Meg itorious Achievement Award/Vermonica,Los Angeles,CA BARNSUALL ART PARK BOARD OF OVERSEERS, Los Angeles, CA MERITORIOUS ACHIEVEMENT AWARD,Board of Public Works,Los Angeles,CA TEACHING EXPERIENCE UNIVERSITY OF CALIFORNIA AT SANTA BARBARA, Lecturer/Teaching Pool 1994 OTIS SCHOOL AT PARSONS,Co-Chair,Environmental Department,Los Angeles,CA 11.88 tc 199 ART CENTER COLLEGE OF DESIGN, ErMrcnrnental Design and Academic Departments,Pasadena,CA 19II3 to qJIIg VISUAL ART CENTER OF ALASKA,One week Residency and Workshop,Anchorage,AK 1980 INSTITUTO ALLENDE,Assistant Instructor,Textile Processes,San Miguel De Allende,Mexico, 1971-1972 RELATED EXPERIENCE ADVISORY BOARD,New Art Examiner Magazine 1989 ARTIST IN RESIDENCE, Pilchuck School,Stanwood,WA 1984 JUROR and/or Grants Program for Artists, Seattle,WA 1984 CONSULTANT- Bumgardner Architects, Interior Installation,Seattle,WA 1984 CONSULTANT- Olson/Walker Architects,Design Team for South Arcade, Interiors,Seattle,WA 1982-1984 BOARD MEMBER AND FOUNDING MEMBER,Center on Contemporary Art,Seattle,WA 1979-1983 PROFESSIONAL EXPERIENCE PARTNER"AH"Design and Architecture Firm 1983-1986 SELF EMPLOYED AS ARTIST 1976 to present INVENTIONS Lino Rug, 1983 prototypes,1986 line of Navajoleum rug in mini-production GOOFYCREST Artist Residence, 1989 a:> n t t4 Ills+' r ,��•'��•' .:. d ' I �y l yyp .•t r2 - 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Ra ,I ..RCJ:7:N .♦IM .H Nla•.. • •_ _ •1 11� is �F t'��9 i �� 1 1• '.��..-. _ �- � fit:J_3�° _ 9-1 _ • • - • • • • • - li L •• • - • • • •• - • • • �`•*t�.. p r"`6�`—Its-�_-�,�.y'I�v: � rF-a ,. : � "' r � �� !a MUM 1 hit � s= ■ •• -• - • - • •' • - rT� :II 4i 111 • / 111 � �� ? ;ji � +�;� $ F .,..m r�i��hl I,�� (- I � � � 1 L M _ MW LL `. �—- hi 1 f } ! _ r � r. S,Alt OF CALIFORmA—THE RESOURCES AGENCY PETE WILSON, Gooemor CALIFORNIA COASTAL COMMISSION SOUTH COAST AREA ,s 245 W. BROADWAY, STE 380 Date: 11-28-95 P O BOX 1450 LONG BEACH, CA 90802-4416 IMPORTANT PUBLIC HEARING NOTICE AMENDMENT NUMBER: A5-HNB-95-098A APPLICANT: City of Huntington Beach, Dept. of Community Development PROJECT DESCRIPTION: request to modify restaurant, reduce size to 18,000 sq. ft. (in 2 stories) and reduce parking. PROJECT LOCATION: 317 Pacific Coast Highway, on ocean side of Highway, south of Municipal Pier at Main Street, Huntington Beach, Orange County SEARING DATE AND LOCATION: DATE: Friday, December 15, 1995 TIME: 9:00 a.m. PLACE: Cathedral Hill Quality Hotel Van Ness Ave. & Geary Blvd. San Francisco HEARING PROCEDURES: People wishing to testify on these matters may appear at the hearing or may present their concerns by letter to the Commission on or before the hearing date. Copies of all correspondence will be provided to the Commission if received a minimum of three working days prior to the public hearing. Written comments may be of any length; oral testimony may be limited to 5 minutes or less for each speaker, depending on the number wishing to be heard. Note: The above item may be moved to the Consent Calendar for this area by the Executive Director if, prior to Commission consideration of the Consent Calendar, staff and the applicant are in agreement on the staff recommendation. If this item is moved to the Consent Calendar, the Commission will either approve it with the recommended conditions in the staff report or remove the item from the Consent Calendar by a vote of three or more Commissioners. If the item is removed, the public hearing described above will still be held at the point in the meeting originally indicated on the agenda. Questions regarding the report or the hearing should be directed to Meg Vaughn at the above address. :bll 5845F • STATE OF CALIFORNIA—THE RESOURCES AGENCY t PETE WILSON, Govemor CALIFORNIA COASTAL COMMISSION SOUTH COAST AREA Fi 1 ed: 10/27/95 m~ 2A5 W. BROADWAY, STE 3E0 49th Day: 12/15/95 ` P.O sox 14W 180th Day: 4/24/9 J LONG BEACH, CA W802-"16 Staff: MV-LB Staff Report: 11/20/95 Hearing Date: 12/12-15/95 Commission Action: STAFF REPORT: PERMIT AMENDMENT APPLICATION NO. : A-5-HNB-95-098-A APPLICANT: City of Huntington Beach, Department of Community Services AGENT: Ron Hagen & Wayne Carvalho, City of Huntington Beach PROJECT LOCATION: 317 Pacific Coast Highway (south of Municipal Pier at Main Street on the ocean side of Pacific Coast Highway), Huntington Beach, Orange County. DESCRIPTION OF PROJECT PREVIOUSLY APPROVED: Demolition of an existing restaurant building (Maxwell 's) and construction of a 31 ,000 square foot, 3 story, 28 foot high restaurant with banquet facility. DESCRIPTION OF AMENDMENT: Modify the previously approved restaurant structure by reducing the square footage to 18,000 square feet, 2 stories and 25 feet high and a reduction in the required parking. LOCAL APPROVALS RECEIVED: City of Huntington Beach Approval in Concept; Conditional Use Permit No. 94-25; local Coastal Development Permit No. 94-10. SUBSTANTIVE FILE DOCUMENTS: City of Huntington Beach certified Local Coastal Program; Coastal Development Permit A-5-HNB-95-098 (City of Huntington Beach); Coastal Development Permit; A-5-HNB-94-135 (Huntington Beach Redevelopment Department) ; A-5-HNB-91-312 (Chodos/Redevelopment Agency) . A-5-HNB-95-098-A Page 2 PROCEDURAL NOTE: The Commission's regulations provide for referral of permit ' amendment requests to the Commission if: 1) The Executive Director determines that the proposed amendment is a material change, 2) Objection is made to the Executive Director's determination of immateriality, or 3) the proposed amendment affects conditions required for the purpose of protecting a coastal resource or coastal access. If +the applicant or objector so requests, the Commission shall make an independent determination as to whether the proposed amendment is material . 14 Cal . Admin. Code 13166. In this case the Executive Director has determined that the proposed amendment is a material change. SUMMARY OF STAFF RECOMMENDATION: The staff recommends that the Commission determine that the proposed development as amended, subject to the conditions below, is consistent with the requirements of the Coastal Act. STAFF RECOMMENDATION I. APPROVAL WITH CONDITIONS The Commission hereby grants, subject to the conditions below, an amendment to the permit for the proposed development on the grounds that the development, as conditioned, will be in conformity with the provisions of Chapter 3 of the Coastal Act of 1976, will not prejudice the ability of the local government having jurisdiction over the area to prepare a Local Coastal Program conforming to the provisions of Chapter 3 of the Coastal Act, is located between the sea and first public road nearest the shoreline and is in conformance with the public access and public recreation policies of Chapter 3 of the Coastal Act, and will not have any significant adverse impacts on the environment within the meaning of the California Environmental Quality Act. II. SPECIAL CONDITIONS NOTE: All previous conditions, except as modified herein, remain effective. 1 . Special Condition No. 2 imposed under Coastal Development Permit No. A-5-HNB-95-098 which required a parking and signage plan is replaced with: 2. Parking Plan a. Prior to issuance of the coastal development permit, the applicant shall submit, for the review and approval of the Executive Director, a parking and signage plan which identifies where and how parking will be provided and managed to serve the proposed development. At a minimum the parking plan shall include: A-5—HNB-95-098—A Page 3 1 . Certification that existing parking spaces identified in the Downtown Parking Master Plan will not be displaced. 2. The parking plan shall provide, at a minimum, one—hundred—eighty (180) parking spaces. 3. The parking plan shall provide up to seventy—four (74) total parking spaces located within the existing beach lease area currently reserved for the former Maxwell 's restaurant and the remainder of the 180 spaces provided for by restriping the top level of the City's existing downtown parking structure. r 4. The beach area parking spaces reserved for the subject restaurant's patrons shall be clearly separate from the public beach parking, shall be subject to valet parking, and shall be signed for exclusive use by the subject restaurant's patrons. There shall be a fee for the beach valet parking, however, the fee shall not exceed the parking fee of the adjacent public beach parking lot. The beach parking area shall be conspicuously posted informing restaurant patrons that free (validated) parking is available at the downtown parking structure. 5. At a minimum, a total of one—hundred—six (106) spaces shall be provided at the City's downtown parking structure. If valet parking is required to achieve this number of parking spaces, the valet parking shall be provided at no charge to the patrons of the subject restaurant. The subject restaurant shall provide a minimum of ninety minutes of free validated parking for patrons using the spaces within the downtown structure. Conspicuously posted signage shall be provided at the structure informing the public of availability of free (90 minute with validation) parking for patrons of the subject restaurant. 6. A site plan of all parking for the proposed project shall be provided including the parking within the existing beach lease area. The plan shall show existing striping and proposed . restriping. The site plan shall also include the location, size, and content of all signage as required above. b. The operation of the parking program shall be consistent with the approved plan. 2. Special Condition No. 3, Limitation of Use of the Banquet Facilities, imposed under Coastal Development Permit No. A-5—HNB-95-098 is hereby deleted. New Special Condition No. 3 regarding public restroom signage is added as follows: 3. Public Restroom Signage Prior to issuance of the Coastal Development Permit the applicant shall submit, for the review and approval of the Executive Director, a public restroom signage plan. At a minimum the signage plan shall include location where the signs will be posted, the size of the signs,- and the wording of the signs. Public restroom signage shall occur consistent with the approved plan. A-5-HNB-95-098-A Page 4 III. FINDINGS AND DECLARATIONS The Commission finds and declares: A. Amendment Description The proposed amendment requests a modification to the previously approved project by reducing the size of the structure from 31 ,000 square feet to 18,000 square feet, reducing the number of stories from 3 stories to 2 stories, and reducing the maximum height from 28 feet to 25 feet. The use of the structure is still proposed as a restaurant. The amendment request also includes modifications to the special conditions regarding parking to reflect the reduction in parking demand based on the reduction in square footage of the structure. The previously approved structure included public restrooms accessible from outside the structure. The amendment request proposes public restrooms accessible from inside. Signage indicating that the public restrooms are available to the general public is proposed to be conspicuously posted at the Pacific Coast Highway entry area and at the beach level entry area. The project is located at the site of an existing restaurant structure commonly known as Maxwell 's. The Maxwell 's structure has existed at the site since 1938. The structure was originally used as "an ocean front civic hall suitable for dances and other events. . . . In the 1960s the Pavilion [Maxwell 's] was used as a skating rink and teen club, until it was gutted by a fire in 1966." (Pierside Village SDEIR, 90-2, page 20). In 1966, the structure was converted to restaurant use, and in 1977 it became Maxwell ' s restaurant. The subject site is located between the sea and the first road paralleling the sea (Pacific Coast Highway). The site is within the certified area of the City of Huntington Beach. The permit came under the Commission's jurisdiction when the City's approval of a local coastal development permit was appealed to the Commission and the Commission found substantial issue was raised by the appeal . At the de novo stage of the appeal the Commission approved the project, subject to four special conditions. The four special conditions were: 1 ) incorporation of the City' s conditions; 2) requirement of a parking plan indicating how parking would be provided; 3) limitation on the use of the banquet facilities; and 4) limiting the project to that portion of the site now occupied by the existing Maxwell ' s structure to assure no further encroachment onto the 1932 granted easement. The proposed amendment would modify special conditions 2 and 3. Because the square footage of the proposed restaurant would be significantly reduced by the proposed amendment, the parking demand would be reduced correspondingly. The City has proposed to provide parking by adding 12 new spaces within the leased area historically used by Maxwell ' s, bringing the total in that area to 74 spaces and providing the remaining spaces by restriping the adjacent public beach parking lot. Restriping the adjacent public beach parking lot by providing 20% compact stalls would provide an additional 106 new parking spaces. This is the City' s preferred alternative. However, the City also suggested two other options which are not preferred by the City. These are to A-5-HNB-95-098-A Page 5 provide the 62 existing spaces within the parking area historically used by Maxwell 's and provide the remaining 118 spaces in the parking structure; or to restrict the use of the proposed banquet facility to after 4:00 p.m. between Memorial Day and Labor Day. B. Standard of Review The City of Huntington Beach has a certified local coastal program. Section 30604(b) of the Coastal Act states that "after certification of the local coastal program, a coastal development permit shall be issued if the issuing agency or the commission on appeal finds that the proposed development is in conformity with the certified local coastal program." Evaluation of the proposed amendment will therefore be based on the certified local coastal program for the City of Huntington Beach. In addition, Section 30604(c) requires that every coastal development permit issued for any development between the nearest public road and the sea include a specific finding that the development is in conformity with the public access and public recreation policies of Chapter 3 of the Coastal Act. C. public Access 1 . Parking Section 30252(4) of the Coastal Act provides that new development shall + maintain and enhance public access to the coast by providing adequate parking facilities or providing substitute means of serving the development with public transportation. This Coastal Act section is specifically incorporated into the Land Use Plan portion of the City' s certified LCP. In addition, the certified Implementation Plan provides parking ratios to determine parking demand generated by new development. Because the proposed amendment would significantly reduce the parking demand, the previously imposed special conditions should be modified to reflect the decrease. The previously approved 35,651 square foot structure generated a parking demand of 313 spaces (the public restroom and City storage areas, 4,260 square feet, were not included in the parking demand calculations) . Use of the 10,466 square foot banquet facility was restricted to after 4 p.m. between and including Memorial Day weekend and Labor Day weekend and on weekends from April 1 to Memorial Day weekend and on weekends after Labor Day through October 15. The restriction on the banquet facility was imposed during the peak beach use periods based on a City survey. This reduced the parking demand by 105 spaces. The remainder of the parking demand was met by providing a minimum of 125 parking spaces in the parking structure, and up to 83 spaces in the existing Maxwell 's lease area (62 existing spaces plus up to 21 additional spaces by restriping). If all 83 spaces could not be accommodated in the existing Maxwell 's lease area, the previous approval required that the additional spaces be provided in the parking structure. Only if these options proved infeasible could up to 21 spaces be provided by restriping the adjacent public beach parking lot. Provision of the additional spaces by restriping the public beach parking lot was also only allowed if there was no loss of existing beach parking. A-5—HNB-95-098—A Page 6 The City's LCP provides two standards for determining parking demand. The first, one space for every sixty square feet of gross floor area, is for free standing restaurants. The second, one space for every one hundred square feet of gross floor area, is applied to restaurants within an integrated complex. In approving the project the Commission found that the one space per every hundred square feet of gross floor area was the appropriate ratio. In making this determination the Commission found: "Although the project is not strictly within an integrated complex, it is within walking distance of additional visitor uses such as the Main Street shops, nearby movie theater, and the Municipal Pier. It is possible that patrons of the restaurant may also partake of some of these uses. In addition, it is likely that a stroll along the pier or along the beach level pedestrian/bicycle path may be a part of the restaurant patron's overall outing." Based on this parking ratio, the proposed 18,000 square foot restaurant would require 180 parking spaces. The existing Maxwell 's structure has historically used 62 spaces within the Maxwell 's lease area. The City has indicated that this area could be restriped to provide a total of 74 parking spaces. This leaves 106 spaces still to be provided. The City's preferred alternative for providing the remaining 106 spaces is to restripe the adjacent public beach parking lot. In restriping, by providing 20% of the lot with compact stalls, an additional 106 spaces could be provided. However, this option does not protect or enhance public access to the sea. The public beach parking lot should remain available to the general public. If additional parking can be accommodated within the public beach parking lot it should serve the general beach goer, not private development, to assure that public beach access is maximized. Alternatives to providing parking for private development within the public beach parking lot do exist. In the previously approved project, 125 parking spaces were to be provided in the City parking structure. The City's public parking structure exists approximately one block inland from the project site. The parking structure provides a little over 800 parking spaces which are allotted for the use of development within the Downtown Parking Master Plan area. The subject - restaurant site is not located within the Downtown Parking Master Plan area and therefore is not entitled to use the existing spaces within the structure to meet the parking demands of the proposed project. The City has indicated, however, that the top level of the parking structure could be restriped to provide an additional 125 parking spaces. Under the previously approved permit, a minimum of 125 new parking spaces were to be provided by restriping the top level of the parking structure. With the proposed reduction in square footage and provision of up to 74 spaces in the existing restaurant lease area only a minimum of 106 new parking spaces, rather than 125 spaces, would need to be provided in the parking structure. The City has stated and the Commission's previous approval indicates that this option is feasible Therefore, the proposed project' s parking demand can be met by providing parking within the parking structure rather than allowing parking within the public beach parking lot to serve private development. • A-5-HNB-95-098-A Page 7 Under the City's current proposal , their preferred option is to provide 106 parking spaces by restriping the adjacent public beach parking lot. The public beach parking lot is located adjacent to the public bicycle/pedestrian path adjacent to the beach. It is located on either side of the foot of the pier and at the end of Main Street. This area is one of the most heavily used areas of all of the Huntington Beach beach areas. If additional spaces are created within this lot, they should serve the general beach going public, not private development. Under the previous approval the City indicated that a minimum of 125 additional parking spaces could be created by restriping the top level of the parking structure. The proposed amendment would result in needing only 106 parking spaces in the structure. Consequently, it has been demonstrated that providing the parking in the parking structure is feasible. The previous approval only allowed parking within the existing beach parking area if the other alternatives proved to be infeasible. Therefore, the City's second parking option must be pursued: any parking that cannot be accommodated within the restaurant lease area must be provided in the top level of the City's parking structure. Special condition 2 has been modified accordingly. Special condition 2, subsections a.2 and a.3, as a result of this amendment reflects the overall parking demand reduction to 180 spaces, and that the s spaces shall be provided in the existing restaurant lease area and by restriping the top level of the City's parking structure. Also special condition 2, subsection a.5, has been modified to reflect the reduction in parking demand. Finally, special condition 2 has been changed to correct references to "Maxwell 's" restaurant. The existing special condition refers to the future restaurant at the subject site as "Maxwell ' s." However, the future tenant at the subject site will not be operating as "Maxwell 's." Consequently, the future restaurant should not be referred to as "Maxwell ' s." Any reference to Maxwell 's should refer only to the previously existing restaurant, not future development. Therefore to correct this and for clarification, special condition 2 has been modified to delete references to the proposed restaurant as "Maxwell 's." The remainder of special condition 2 is unchanged. Special condition 3 required limitations on use of the previously proposed banquet facilities. Because of the overall reduction in the size of the structure, parking is available to serve the entire restaurant. Therefore the existing special condition 3 is no longer necessary and has been eliminated. 2. public Restrooms As part of the City's proposal , the two interior restrooms are to be available to the general public. The City's amendment proposal states that "the City' s lease with its tenant requires posted public access to restrooms. Interior access will be provided to the bathrooms through the entry area on the beach level , and near the entry area on the Pacific Coast Highway level . Signs will be placed on the building in conspicuois locations to identify the availability of public restrooms." A-5-HNB-95-098-A Page 8 The previously approved project included public restrooms accessible from outside the structure. The provision of public restrooms has the effect of greatly enhancing public access by enabling greater public use and longer visits to beach areas. Although the City has proposed the restrooms as public as well as signage indicating their public nature, no signage plan has been submitted for Commission review. The size and placement of the signs can effect their usefulness. In order to assure the proposed public restroom signage is conspicuous and effective, as a condition of approval , the applicant (the City) shall submit a public restroom signage plan. At a minimum the signage plafn shall indicate the dimensions of the signs including lettering, the wording of the signs and the location of the signs. Existing special condition 3 is deleted and shall be replaced with a new special condition 3 which requires a public restroom signage plan. Therefore, as conditioned, the Commission finds the project is consistent with the City's certified LCP and Section 30210 of the Coastal Act which requires maximum public access be provided with new development. D. California Environmental Ouality Act Section 13096 of the Commission's administrative regulations requires Commission approval of a Coastal Development Permit application to be supported by a finding showing the application, as modified by any conditions of approval , to be consistent with any applicable requirements of the California Environmental Quality Act (CEQA). Section 21080.5(d)(2)(i ) of CEQA prohibits a proposed development from being approved if there are feasible alternatives or feasible mitigation measures available which would substantially lessen any significant adverse impact which the activity may have on the environment. The proposed project, as conditioned to provide additional parking, avoids any potential adverse impacts resulting fro the project. Therefore, the Commission finds that the project, as conditioned, will not have any adverse impacts on the environment within the meaning of CEQA. 5718F I �41e�enme fn ` THE CITY OF HUNTINGTON BEACH OVERSIZED DOCUMENT ON FILE WITH CITY CLERK �41e�enme fn ` THE CITY OF HUNTINGTON BEACH OVERSIZED DOCUMENT ON FILE WITH CITY CLERK �41e�enme fn ` THE CITY OF HUNTINGTON BEACH OVERSIZED DOCUMENT ON FILE WITH CITY CLERK �41e�enme fn ` THE CITY OF HUNTINGTON BEACH OVERSIZED DOCUMENT ON FILE WITH CITY CLERK