PRESENTER: Presenter
Jeff Jewell, Economic and Community Development Director
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SUBJECT: Title
Presentation and discussion on a proposed economic development incentive to 210 S. Castell, LLC for the Co-Op Marketplace project
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DEPARTMENT: Economic and Community Development
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COUNCIL DISTRICTS IMPACTED: 5
BACKGROUND INFORMATION:
In 1945, 210 S. Castell Avenue, a 2.460-acre plot, was conveyed to the Producer’s Cooperative Marketing Association. The site was used as the Producer’s Co-Op Feed and Supply from November 1945 until the property was sold in 2021 to 210 S. Castell, LLC. The new owners intend to rehabilitate and convert the approximate 29,000 square feet into a destination public marketplace that blends retail and food concepts and provides a public and civic gathering space. The plan includes renovations of existing buildings to house a public market and specialty grocery spaces and includes public amenities that include a grand lawn, performance plaza, and public restrooms. The space will provide an opportunity to relocate and expand the existing downtown Farmer’s Market. The proposed incentive of up to $4.5 million is provided mostly in support of the cost of the public amenities and associated improvements.
The project intends to create opportunities for small businesses to operate and grow and will act like an incubator by providing leased spaces with low overhead/risk. The developers plan to accommodate 20-30 retail/food businesses in 12,900 square feet Marketplace building which will provide an expanded venue for the New Braunfels Farmer’s Market. Additionally, the project contains a large entry plaza, splash pad, and grand lawn to be used as an open gathering space. Envision New Braunfels, the 2010 Downtown Implementation Plan, and the 2021 Downtown Action Plan have all indicated the need for increased public, open, and gathering spaces.
Public markets are unique places of commerce and energy in a community. They can encourage economic and community development by providing low-risk opportunities for vendors and local businesses to market and sell their products in an incubator-like environment. Public markets, even if they only operate one day a week, act as an anchor for local businesses, encourage spin-off development, and keep dollars in the local economy. The increased activity from the market will support further retail growth along South Castell Avenue and in downtown generally. A survey by the Project for Public Spaces of over 800 public market customers found that 60% of market shoppers also visited nearby stores on the same day. Of those 60%, more than half said that they visited those additional stores only on days that they visited the market. While serving and buttressing locally owned and operated businesses, public markets can also serve public goals.
These markets can serve as focal spaces for the community and civic events by providing active public space and a unique destination for New Braunfels residents to enjoy. The proposed project includes a substantial amount of activated space adjacent to the market that can be used by the public. The extent of the improvements will create a park like setting in the downtown area. This type of space has been identified as a desired improvements in multiple plans and public forums. The open space, planned splashpad, public restrooms, lighting, benches, trees and improved pedestrian connectivity will upgrade the downtown experience for all users.
ISSUE:
The total cost of the project is estimated at $19.34 million but is not financially feasible as designed. The development is projecting aggressive rents, reasonable vacancies and reasonable expenses. The project’s economics only justify a private sector investment of approximately $15 million. As such, the project has an approximate $4 million funding shortfall or financing “gap.” With a gap of this nature, there are only two options: decrease development costs or increase the potential revenue from the site. Without an incentive, the planned public space and amenities would likely be cut in favor of including parking around the site, which is a more financially beneficial opportunity for the owners. The owners also have the opportunity to clear the site of all existing improvements, seek any associated rezonings needed and construct a new series of buildings or structures.
STRATEGIC PLAN REFERENCE:
☒Economic Mobility ☐Enhanced Connectivity ☐Community Identity
☐Organizational Excellence ☐Community Well-Being ☐N/A
FISCAL IMPACT:
The proposed incentive of $4.5 million is proposed to be delivered over a 10-year period. The proposed terms would reimburse $2 million to the owner after the improvements are constructed and provide an grant payment of $250,000 for 10 years as long as the market continues to operate. This incentive provides a stabilized cash on cash return to the owner of approximately 7% and an unlevered Internal Rate of Return in year 10 of approximately 7.5%
Recommendation
RECOMMENDATION:
NBEDC to provide staff the direction to move forward with next steps.