Everyone loves a diner.
And these days there is a growing nostalgia for the old Thruway Diner which sat on the opposite side of Weyman Avenue for many years. As word has spread that a company with a long and storied history in New Rochelle is looking to build a diner not far from the site of the old Thruway Diner, it is natural that residents might be excited at the prospect of getting their diner back.
Don't be fooled.
UPDATE: City Council votes 7-0 to approve sale of Lot 50 and Lot 45A to DeRaffele, see complete update and bottom of this article, after the jump.
The City should not be selling valuable public property -- and a lot on the corner of one of the busiest intersections in New Rochelle, just off the New England Thruway, near a major retail area is valuable -- based on nostalgia or personal relationships but based solely on what is in the best interest of the City and, in particular, the taxpayers. In this case, getting the best price for a piece of retail-zoned city property from a purchaser that will deliver the maximum revenue to the city over the long-term.
To understand what is wrong with the current diner proposal that is now getting attention, it is instructive to look at two resolutions concerning City-owned property up for discussion by the New Rochelle City Council at the upcoming Committee of the Whole meeting on Tuesday, June 12th. At first glance, the two resolutions would appear to be entirely unrelated.
The first concerns the abandonment of a small parcel on Sylvan Place. The property is being sold to the abutting property owners for $1,000. The second concerns a property to be sold to construct a diner at the corner of Weyman Avenue and Main Street near the Home Depot. In the first case, the "natural buyer" of the property is the owner of the adjacent property. Not so in the second case. There is an interesting reason for that as will become apparent.
PROPOSED ABANDONMENT OF PORTION OF SYLVAN PLACE
(Intro. 5115/12; Public Hearing 6112/12)
3. Communication dated April 20, 2012 from Howard Rattner, Commissioner of Finance, wherein he recommends that a portion of City-owned property located on Sylvan Place at the southerly dead-end terminus be sold to abutting property owners, subject to certain terms and conditions, forwarded with approval of Charles B. Strome, III, City Manager, noted thereon, and appropriate legislation for consideration.
3.1. Planning Board Resolution No. 45 adopted on Tuesday, May 29,2012, wherein the Board recommends, in the best interest of the City, that the City Council deny the requested variance.
3.1.1. Resolution authorizing the sale of City-owned real property (portion of westerly end of Sylvan Place) to abutting property owners and abandoning same.
3.2. Communication dated June 8, 2012 from Howal'd Rattner, Commissioner of Finance, relative to proposed additional condition of sale, as well as neighbors' lack of objection to the proposed sale, forwarded by Charles B. Strome, l/1, City Manager.
PROPOSED SALE OF CITY -OWNED PROPERTY
RE: WEYMAN A VENUE/MAIN STREET, BLOCK 0550, LOTS 50 AND 45A TO DE RAFFELE MANUFACTURING COMPANY INC.
4. Communication dated May 25, 2012 from Michael W. Freimuth, Commissioner of Development, wherein he recommends that the City Manager be authorized to enter into a contract for the sale of the above-noted property, subject to certain terms and conditions, forwarded with approval of Charles B. Strome, III, City Manager, noted thereon, and appropriate legislation for consideration.
4.1. Resolution authorizing the City Manager to enter into a contract to sell City-owned property to DeRaffele Manufacturing Co., Inc. (Weyman Avenue/Main Street).
The original plan was for DeRaffele, the New Rochelle company that manufacturers diners that are shipped all over the country, to build one on a corner of the Home Depot parking lot.
Asked about the original plan, New Rochelle Development Commissioner Michael Freimuth told Talk of the Sound his understanding was that the plan for the diner on private property owned by Home Depot did not work out. Conveniently for DeRaffele, the City was ready with an alternative.
"The city put out a RFP in January for municipally owned land on Main/Weyman that is zoned retail. Among the respondents was a plan for a diner and a formal recommendation will be made in June to the City Council recommending one of the proposals for the site."
That is the recommendation to be made this week and discussed by the City Council.
There is little doubt among experienced commercial real estate brokers who spoke with Talk of the Sound that the Main/Weyman RFP was put together for the purpose of transferring the property to DeRaffele at the lowest possible price to DeRaffele after their deal with Home Depot fell through.
As the Sylvan Place deal highlights, the most natural buyer for a piece of property is the owner of the adjoining property. In the case of the Main/Weyman RFP they adjoining property is also owned by the City of New Rochelle.
The Main/Weyman RFP describes the property as follows:
The City-owned vacant lot (Block 0550 Lot 50) is approximately one-half acre and is bound between Industrial Place, Weyman Avenue, and Main Street (See attached Site Map). The lot is zoned LSR Large Scale Retail allowing the development of retail facilities and other permitted uses (see City Zoning Code) with an Floor Area Ratio (FAR) of 1.0 and a maximum building height of 40 ft. Currently, The Home Depot has a non-exclusive easement at the northwest portion of the property for the purposes of erecting signage to their retail store. It should also be noted that the adjacent, municipally owned, Lot 45A is not included in this RFP but it may be reconfigured to create a more viable site at Lot 50.
The RFP specifically says that "Lot 45A is not included in this RFP". Compounding matters, the RFP includes a map which mistakenly labeled Lot 45A as Lot 40A. The RFP says Lot 45A could be "reconfigured to create a more viable site" but says nothing about the city offering Lot 45A for sale, in fact the RFP specifically states Lot 45A is not for sale as part of the Main/Weyman RFP.
Unlike Lot 50, there is a natural buyer for Lot 45A but this buyer says he was never contacted by the City and never informed that Lot 45A was available. As Lot 45A was specifically excluded from the RFP, and even mislabeled in the RFP, this buyer never submitted a bid.
Gene Pepe's company owns Section 2, Block 550, Lot 45 a property which is contiguous to Section 2, Block 550, Lot 45A. The building he owns is a three-story property zoned LSR Large Scale Retail which has an entrance off Main Street for an upper parking lot and another entrance on Nardozzi Place. Pepe has been interested to purchase Lot 45A because it would allow him to add additional parking for Lot 45 which would better enable to lease the 26,000 square feet of retail space above Allen Carpet and Floors and Tile City at 40 Nardozzi Place
Despite the fact that the RFP excluded Lot 45A and despite the fact that the adjacent property was never notified it was even possible, the City of New Rochelle intends to recommend that DeRaffele be allowed to purchase both Lot 50 and Lot 45A combined with not a single competing bid for both lots. The price is said to be about $600,000. By way of comparison, the property across the street was reportedly leased for 49 years at a price of $50,000,000 to Walgreens. It sounds like DeRaffele is getting quite the bargain which is what happens when you are the sole bidder and the only natural bidder is specifically told a piece of property is excluded from an RFP.
The City of New Rochelle knows all this. They know they have another bidder for Lot 45A. They know the RFP was defective because it excluded Lot 45A when it was later included and it labeled Lot 45A incorrectly as Lot 40A in the RFP map. They also know they are highly likely to get a lawsuit from Pepe if they attempt to proceed with the sale to DeRaffele.
None of this even addresses the rather significant traffic issues. As anyone who has been to the Home Depot or CostCo on a Saturday can tell you, the traffic can be extremely heavy. Under the DeRaffele proposal the road which cuts down from Main Street to Nardozzi Place, a road which allows drives coming off I-95 to bypass the traffic light at the corner of Weyman Avenue and Main Street will be eliminated and a new lane with two 90 degree angles will be cut into Lot 50, wrapping around three sides of the parcel -- Main Street, Weyman Avenue and Nardozzi Place. In addition, the proposed diner will have an entrance from Main Street. The result will be vehicles slowing to between 0-10 mph in order to enter the diner parking lot or make the two sharp right turns onto Weyman Avenue and then onto Nardozzi Place. The resulting traffic shocks at each of these three points will cause traffic waves or stop waves backing all the way up onto I-95 and out onto the highway.
At the end of the day, this deal should be about getting the City of New Rochelle the best price for Lot 50 and Lot 45A in the short-term (the sale price) and the long-term (the taxes to be generated).
The first question is whether correcting the Main/Weyman RFP and allowing Pepe to bid would generate a higher price than the current $600,000 bid by DeRaffele. It would seem obvious that a second bidder would insure a higher price. The City apparently has no idea what the property should be worth because they are selling the property without an appraisal. The combination of no appraisal and a single bidder should raise a major red flag. By way of comparison, Walgreens reportedly signed a 49-year lease for $50 million on the old Thruway Diner property (a 50-year lease is considered a sale so to avoid triggering the tax implications of a sale deals are often written for 49 years). That property is directly across the street from Lot 50. The Net Present Value, what the property is worth today based on the future cash flow from the lease payments is somewhere around $20 million.
The second question is what sort of sales taxes a diner would generate compared to the 26,000 square feet of retail space plus whatever Large Scale Retail Pepe might choose to build on Lot 50.
Getting the answer to the second question should be quite simple: look at the sales tax paid now by Tile City and Allen Carpet and look at both the old Thruway Diner and the Mirage Diner on North Avenue. By doing this, the City Council could evaluate which type of use -- a diner or a retail space would generate the most revenue for the City.
If you want to understand why the City of New Rochelle is broke, you need look no further than deals like this one, the $1 lease of a Church to Mariano Riviera a long-time friend of former City Councilman Joe Fosina or the many other "insider" deals that reap big profits for the few at the expense of the many.
The solution is simple. Repair the Main/Weyman RFP so that it includes Lot 45A and put it back out for bid. That is certainly going to be faster than tying up the property in lawsuits and New Rochelleans will get the best price and the most productive use of the property.
Meanwhile, if you area in the area and really want to understand how poor the planning is here in New Rochelle, take a good look at the trees growing on Lot 45A. They are not indigenous. They are not the remnants of some forest that was cut down to build a Home Depot. Those are trees that were purchased to line the roads in that area. That they are all growing wild, clumped together on Lot 45A is is a story for another day.
UPDATE: The New Rochelle City Council voted 7-0 to approve the sale Lot 50 and Lot 45A to DeRaffele.
New Rochelle Development Commissioner Michael Freimuth said the City was projecting the proposed diner would have $3.5 million in sales which would generate $87,000 in sales tax for the City or about $7,250 a month. He told the Council that the traffic engineering study would be done after CostCo completed work on new gas pumps. CostCo intended to sell heavily discounted gas to members, a move expected to cause a significant increase in traffic.
Mayor Noam Bramson described the diner as a "expression of interest in the community."
Council Member Louis Trangucci described a meeting of the South End Civic Association the night before, saying "they were all excited about the diner".
Council Member Ivar Hyden hoped that the diner could be an attraction for New Rochelle.