Aug 15, 2010
Downtown apartments popular, but retail never took off
Mixed use stumbles without the mix
The Moore Building in downtown Santa Rosa was lauded as a shining example of urban mixed-use development when it opened in 2007.
The $15 million project — with retail space on the ground floor and luxury apartments above — was praised by city leaders and the Greenbelt Alliance, a Bay Area nonprofit group that advocates city-centered growth.
The four-story, 79-unit complex on Healdsburg Avenue at 10th Street is near transit, shops, museums and restaurants.
“That’s what people love,” said Natalie Moore, granddaughter of the couple who once owned a beauty college on the site. “They can walk downtown to a restaurant or to a movie at The Roxy.”
But the Moore Building has fallen victim to the recession. While the apartments are 80 percent full, there are no takers for its 7,500 square feet of retail space.
The project’s lender, U.S. Bank, has started foreclosure proceedings, and the family partnership that owns the Moore Building could lose the property if it can’t reach a deal with the bank.
“We’re working with the bank, trying to get the payment lowered,” said Linda Moore, one of the owners. “We’re not going to give up.”
U.S. Bank didn’t respond to a request for comment.
The Moore Building is another example of distress in the market for commercial real estate. Just as
homeowners struggle to make their monthly payments, the owners of retail, office, industrial, hotel and apartment properties also are feeling the pinch.
Commercial defaults and foreclosures are on the rise in Sonoma County as the recession grinds on.
Weak demand for retail space has put particular pressure on mixed-used projects like the Moore Building, which depend on retail leasing to succeed.
“The retail market is 20 times worse than the apartment market,” said Scott Gerber of NorCal Commercial, a San Rafael firm that brokers Marin and Sonoma apartment sales. “Any time you combine those uses, it is challenging.”
Still, the Moore Building’s financial plight doesn’t spell the end of mixed-used development in downtown Santa Rosa, said builder Hugh Futrell, who owns three such projects in the urban core.
“From our standpoint, the downtown market is stronger than some other sub-markets,” he said. “There’s not a lot of housing downtown. Our occupancy levels are pretty strong.”
The Moore Building was the dream of Fred and Jean Moore, who operated Santa Rosa Beauty College from 1954 to 1991.
After years of planning, they won city approval in 2002 to tear down the beauty school and build the mixed-use project.
The Moore family brought in other investors — mostly local residents — to help with the financing.
Construction began in 2005 and it opened two years later. Within a year, most of the apartments were filled, despite some of the highest rents in the city.
The apartments are unique, overlooking downtown Santa Rosa and the city’s historic St. Rose neighborhood, with its restored Victorian homes. Upper floors have sweeping views of the mountains east of town.
The Moore Building has striking architecture, indoor gated parking, a gym with saunas, a landscaped courtyard terrace, granite kitchen counters, stainless steel appliances and other luxury amenities.
The building attracts a mix of apartment tenants, from seniors to young professionals to corporate travelers looking for longer-term accommodations.
But the project hasn’t drawn retail tenants.
“Someone was going to put in a pizza parlor, a coffee shop, a panini shop,” said Linda Moore, daughter-in-law of Fred and Jean Moore, who died in 2008 and 2006 respectively.
“It didn’t happen,” she said. “The economy took a dive.”
Meanwhile, the owners have had to cut rents to keep the apartments filled. A deluxe two-bedroom, two-bath unit that went for $2,670 a month in 2008 now costs $1,950.
After they failed to make payments on the project’s $15 million construction loan, U.S. Bank filed suit in June in Sonoma County Superior Court. The Moore Building is now under control of a court-appointed receiver, although the owners continue with day-to-day management.
They’re working hard to turn the business around, Linda Moore said.
“If we could get the retail going, it would help,” she said.
They’re also trying to get the building’s tax bill reduced. “The property isn’t worth $15 million,” Linda Moore said.
Like some homeowners, the Moore Building’s partners were hurt by bad timing, said NorCal’s Gerber.
“They built it at the top of the market.” he said. “Their rent projections and financing were based on a market that was red-hot.
“By the time they got it done, that market was gone,” Gerber said. “They just got caught on a road that didn’t take them in the right direction.”
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http://www.pressdemocrat.com/article/20100815/BUSINESS/8151037/1350?p=all&tc=pgall&tc=ar
