Council makes tax deal with potential new auto dealership
It’s not often you hear the words “blight” and “Claremont” spoken in the same sentence, but they were heard time and time again by city council members on Tuesday night as they discussed the possibility of a new auto dealership coming to Auto Center Drive.
Council unanimously adopted a resolution approving an Owner Participation Agreement between the city and Premier Automotive Group, thereby removing a speed bump in its effort to restore Auto Center Drive to its intended glory as an automobile sales Mecca in Claremont.
“Without the Redevelopment Agency and other factors that we used to have, this is the way we have to go in revenue-sharing,” Councilman Larry Schroeder asserted. “Without this agreement, we would have nothing. We appreciate the new revenue to the city—we appreciate the new jobs in the city and the shopping opportunities. So thank you very much.”
Premier Automotive Group entered into a purchase and sale agreement with Brandywine Homes earlier this year for seven acres of property on the western terminus of Auto Center Drive. Brandywine had purchased the property in May 2013 with the goal to build a residential housing development. Premier intends to operate an auto dealership for the sale of new Dodge, Jeep, Chrysler and Ram vehicles and says it will invest more than $14 million into real estate and improvements to the property.
To support the feasibility of the dealership operation, the city agreed to reimburse Premier Automotive Group for 50 percent of its sales and use tax generated by the dealership for a period of 10 years to a cumulative maximum amount of $4,375,000. Payments will be made on a quarterly basis for a term of 10 years commencing on or before March 31, 2016, when the dealership anticipates opening for business.
The city was quick to point out that any sales tax Premier Automotive Group of Claremont would be eligible to receive is based solely on the success of the dealership. The city would be eligible to receive 100 percent of the sales tax after 10 years.
Claremont’s attorney Vanessa Locklin, a shareholder with the firm Straddling Yocca Carlson & Rauth, prepared the agreement and was available in chambers Tuesday night to answer any questions. There was really only one.
“So, the 20th time’s a charm on this one?” asked Mayor Pro Tem Sam Pedroza, half-joking. “This is one of those projects where I follow the concept, ‘A bird in the hand is worth two in the bush.’ However, there was never anything in the bush. This is what we got and we really appreciate the diligence of our city manager, city staff and the developer. I think this is one of those deals where, ultimately, all of Claremont benefits. When you look at the cost of blight, that area was getting pretty dumpy. So the fact that we’re going to have it useful and provide some revenues to the city is a good thing.”
Over the past decade, multiple proposals have been discussed as to what to do with the shuttered dealership located just west of Toyota of Claremont. A Home Depot and housing and retail developments were both considered for the 11.4-acre property once owned by Penske Motors; however, those proposals were abandoned due to lack of support.
Brandywine Homes purchased the property in May 2013 with the intention of creating residential housing, but that proposal never really got off the ground. The developer soon began looking for a buyer and found one in Premier when they expressed interest in establishing a dealership in Claremont.
Jodi Meade, principal and national director of the automotive properties group for Avison Young, is brokering the deal between Brandywine and Premier, who began discussing the possibilities earlier this year.
“Premier is very excited about being a new addition to the Claremont community,” said Ms. Meade. “Not only will the community benefit from their presence with revenue but they are in tune with the community’s needs. It’s a great marriage of community and business.”
Premier Automotive Group intends to purchase seven of the 11.4 acres available.
The seven-acre parcel currently houses two buildings that were constructed in 1985 for use as an auto dealership, which operated on the site until December 2004. The building has remained vacant and unused ever since. With escrow set to close the first week of September 2015 pending any additional obstacles, the new owner is already looking to the future.
“The northerly-most building will be completely demolished and will become the sales lot for inventory,” Larry West, general manager of Premier Automotive Group, Southern California told the COURIER after the council meeting. “The rear service and body shop building, which is about 67,000 square feet, will be gutted. The bones will remain and that will become the new flagship store for the west coast.”
Projection of sales tax revenues and covenant payments prepared by Keyser Marston Associates, Inc. for the automotive group indicate the city will retain $297,930 in sales tax revenue for 2016, with a steady increase throughout the term of the 10-year agreement. By 2027, the city would be receiving 100 percent of the dealership’s sales tax revenue, which is projected to be $1,517,220 annually.
Premier Auto Group noted several salient points in its operational forecast that were to be considered, including the substantial ramp-up time needed—three or more years is not uncommon—to get the business to approach a profitable level, particularly in a location that has been inactive for many years, as evidenced by their current dealership in West Covina.
Premier Automotive of West Covina opened its doors in March 2014 and has experienced losses in excess of over $1 million in the last 16 months. The previous dealership had been closed for five years before Premier Automotive Group took on the challenge; it’s a situation they say mirrors Claremont’s on many levels, with identical brands and real estate challenges.
Premier Automotive Group believes in their model and says they are willing to take the financial risk associated with establishing a dealership on Auto Center Drive.
“We are a profit-with-a-purpose company and our driving force, our message, is HOPE—Helping People Every Day,” Mr. West said. “We’re looking forward to doing that here in Claremont and we’re thankful for the opportunity.”
Now that Premier is one step closer to closing its deal with the Auto Center Drive property, there’s talk that Hyundai is interested in setting up shop on the remaining 4.4 acreage at the end of the cul-de-sac.
Ms. Meade maintains that Avison Young will not identify a buyer for the remaining acreage until close of escrow with Premier.