Highest and Best Use of Paseo Nuevo Mall
Open Letter to the Santa Barbara City Council:
My name is Jason Jaeger, and I’m involved in commercial real estate as an owner, property manager, and real estate broker in Santa Barbara. I understand that the City Council will be holding a closed meeting tomorrow, Tuesday, February 28, 2023, to discuss options for its fee ownership in portions of the Paseo Nuevo Mall.
The Macy’s building and the Nordstrom building have been vacant for many years. It is my understanding that there is approximately 42 years remaining on the city’s current lease for the Macy’s parcel.
Having a 42-year ground lease does not provide enough time for a real estate developer to get financing to amortize large development costs. Developers usually want a minimum of 99 years in most cases to obtain financing to do a large project.
It is my understanding that while the City Council was at one time considering extending the term of the current ground leases to encourage a developer to take on the project, the issue was sent by Council to the Planning Commission where it died.
By allowing a private developer to purchase the fee ownership of the ground under the Macy’s building and the Nordstrom building, it would provide higher and better uses for the properties, such as mixed-use housing, commercial, and retail. How does the city keeping its current ownership interest position in Macy’s and Nordstrom’s buildings, which have been vacant for approximately five and three years ago, respectively, benefit the community given the complexity and the roadblock it is currently imposing on attracting a developer to the site? The sale of the city’s fee interest would be subject to the ground leases currently in place. However, the city would attract developers that can reposition the Paseo Nuevo Mall into a better use.
It’s my opinion that repositioning Paseo Nuevo mall is the first major step to revitalizing State Street. Why not sell the Macy’s and Nordstrom’s building and use the capital in other areas, like much needed housing? Thank you for your time and consideration.