West Street Market by the Numbers

Here's what you need to know the city is up against, going into tomorrow's meeting. Staff Report

Issue #1: The market remains totally dead during the day. When the market was first envisioned, it was planned as a daytime market, busy from 11 a.m. to 10 p.m. Instead, the market is busier at night after 10 p.m. I feel part of the success of this project was link to the success/failure of the Montage. If we get the Montage filled with renters, then we have 800+ new customers for West Street Market.

Issue #2: The market was supposed to generate upwards of 140 jobs according to the staff repot, however thus far it has generated 5.31 jobs. Per HUD regulations you cannot count owner-operated positions as 'jobs'. Ha! Whatever, HUD obviously has never owned their own business. The project needs to generate 15 jobs to qualify for the CDBG it already utilized.

Issue #3: Dead in the Water - According to the staff report, there are less than 50 visitors a day to the market during regular operating hours (11am-10pm). Some tenants make no more than $25.00 a day while tending their stall from 11 am to 10 pm. So, even if Se7en is allowed to have concerts at night, this will not help the remaining tenants who close up shop at 10 p.m.

Issue #4: Operating Costs: According to City budget estimates, West Street Market in 2009/2010 was supposed to have a net income of $31,041. Instead, there was a subsidy to the market of $185,000. This is due in part to the lease the City of Reno pays to the property owner, which if my memory serves me is $12,500-ish per month.

Issue #5: It's stated in the staff report most tenants are late paying rent or do not pay full amount of the lease. This adds to the deficit of the market.

Issue #6: Events: Many of the events are now focused when most of the market is closed. Large numbers of visitors, usually over 100, to the market in the evenings on Thursdays Fridays and Saturdays to enjoy the bands, and performances usually last until 1:00 a.m. This is great for the two bars in the market, but does nothing to help the remaining tenants.

Issue #7: There were originally supposed to be 5 tenants in the rear of the market, 2 have since left, and areas being used for night-time performances were originally marked as tenant spaces. This creates problems when trying to meet a minimum job creation-count. If live performances are allowed to happen in the rear of the market, then according to the staff report, the Redevelopment Agency would have to remove the back room common area from existing tenant leases and consolidate the entire room into a single-use leased by Se7en Teahouse, and install push bar safety devices on exit doors. A catch 22

Issue #8: Lease Terms - According to the original lease term, the permitted use of the property is for an urban farmer's market. Live performances or use of the space primarily for entertainment has to be approved by the property owner. The Redevelopment Agency could approach the property owner for permission to apply for a special use permit that would allow the property to function as a night club. This would cost the Redevelopment Agency $4,500 plus additional costs to prepare the application.

The Options:

1. Maintain Original Vision for Market - Continue towards the achievement of the vision of an Urban Farmer's Market. This option would require additional funds to finish the original vision, including implementing Phase 3 of the construction process and create additional jobs.

2. Change the vision to reflect tenant desires: This will require additional renovations of the building, renegotiation of leases with all existing tenants, and review of tenant compliance by all city departments. As part of this option, Se7en would seek permission to apply for a Cabaret License and reconfigure the back area to be entirely Se7en's instead of additional tenant spaces. This reduces the overall potential for lease income. It could be more difficult to secure additional tenants using the concept of a daytime urban market using this option, and concepts for remaining lease spaces would need to be developed to convert the entire market to more of a night-life spot.

3. Develop Incubator Space: Non-leased spaces in the market would be marketed for not-for-profit incubator spaces. The market could continue to operate at a loss using this option.

4. Sub-Lease Entire Property to Single Entity - Would alleviate annual subsidy requirements from the Redevelopment Agency, and would need to abandon idea of Agency-supported urban market, and possibly repay the HUD CDBG loan in the amount of $350,000, and then sub-lease the entire space to a single owner. IF the sublease to one entity created additional jobs, the agency may not have to repay the CDBG loan. This would also require the relocation or lease termination of several or all tenants.

5. Close the Market. This would require termination of the Master Lease, default on the Master Lease, or proceed with the continuation of $12,500 monthly rent through the remaining 8 years. The CDBG loan would have to be repaid in an amount of $350,000. This would equate to a loss of $1,480,000 over the next 8 years.

So. What would YOU do?

Comments:

Post your comments
Posted by: Robert - 4/5/2010 6:01:27 PM
My opinion is that the West Street Market should work to keep true to the original plan with a bit of tweaking. Here are a few ideas. Work with the developer of Riverwalk to put in a Trader Joes or Whole Foods Market to fill up their empty storefront. Have both markets compliment each other. The downtown will become vibrant again once the economy starts getting better. Its best that Reno is ready for the rebound. Also this development is tied to the success of all of recent housing development downtown. Once the housing market starts to revive--and it will, the West Street market will be a hot commodity. Nightlife in the market is a good thing, a late night funky restaurant that serves the late night crowd could extend the market's use. Reno has to give the West Street Market a chance--the timing of its opening was not good but the economy will get better and the West Street Market will be a valuable asset.

Posted by: SmartBrander - 4/5/2010 6:03:00 PM
#2...and a shot of tequila. We need to repurpose that area to make it work for the tenants that are there. The City can't maintain a property that's not making the lease payments, but I personally don't think they did a good enough job of promoting the location and events. They'll have to lower the rent fees, and get creative in this market (like everyone else) to change the business model. Easier said than done...but it should be done.

Posted by: Clint Jolly - 4/5/2010 6:18:25 PM
I was approached during the planning phases of this project as a potential tenant which encouraged me to keep an eye on the project as it unfolded. I stopped in frequently towards the beginning and became quickly uninterested. In my opinion, there is not enough to draw folks in during the day. I have made it a point to stop by there to grab lunch only to find three different vendors offering the same type of food, mostly sandwiches. I haven't seen any type of farmer's market vendors in my visits, may be there at the wrong time? On the food front, I believe the setup of the property is counterproductive for food vendors. No real kitchen space and hard to setup a restaurant type feel with the current layout. I think that one well run food establishment would be the best way to go to draw a lunch crowd. For the market concept I would like to see some serious vendors filling specific needs- a fish monger, small butcher shop/charcuterie, produce vendor and cheese shop. A wine retailer and good bakery would round out the offering of fresh foods and allow folks to pick up everything they need for a good meal. In my opinion it would be hard to fit all of these outlets in the space provided without some creative planning on the operations end but it could work. I don't believe that any of the businesses could operate on only 800 customers coming from the Montage. I realize it would give you a good pool of potential customers but would be a mistake to bank on those folks supporting the whole center. You would have to assume that only a fraction would do substantial business there regularly. I haven't seen the current tenants working together to promote a social atmosphere which i think is a necessary component to the success of the market. Few ideas for social events- With a good restaurant, cheese, wine, bakery, etc. you could knock the socks off of folks with regular wine tastings. Bring in a local brewery for beer tastings once in a while, hold art shows featuring local artists, open jam sessions for musicians on weekends and/or weeknights, use the open area for fashion shows, movie screening, improv performances, etc. I think there needs to be a bigger social value added to the current operation to draw people in from outlying neighborhoods. Our area is full of talented folks that could make this a success, the trick is to get them all involved and motivated to make it happen. You can reach me at clint@misterfnygy.com or twitter @misterfnygy if you want to chat more.

Posted by: Clint Jolly - 4/5/2010 6:22:25 PM
To Robert- I would much rather see local vendors in the market than a national chain. I don't believe you could ever get enough traffic to entice either Whole Foods or Trader Joe's to consider the property anyhow. A national chain would never adopt the ideas behind a community market in the same way that the local guy would. I do agree that it needs that level of product to get people interested though.

Posted by: Rick Martinez - 4/5/2010 6:46:03 PM
As owner of the West Street Wine Bar at the West Street Market I need to clarify some information. The Market is not dead before 10pm. The Wine Bar is busy almost every night, usually beginning around 5:00. And we have been very successful and growing since our opening 16 months ago. We are committed to the West Street Market and believe there is significant opportunity for anyone willing to take the risk and open a quality business here. During the warm weather months the market enjoys significantly higher foot traffic both day and night than in the winter. Our events, including the Sunday Farmer's Market, outdoor jazz, outdoor classical music, Artown and many others draw huge crowds. And let's not forget that the challenges facing the West Street Market are not exclusive to it. We are in the midst of a sever global recession that is affecting commercial and retail development everywhere. And in spite of the recession the West Street Wine Bar has had the good fortune to thrive. Finally, a response to Clint Jolly's post. I agree with many of your suggestions for the West Street Market. Especially, the atisinal food businesses. They would be excellent additions. As far as retail wine sales and wine tastings go, we already have both at the wine bar. And they are very popular. Regards,

Posted by: Downtownmakeover Dude - 4/5/2010 6:59:38 PM
Great comments Rick! It's the city's own staff report that mentions the 'deadness' of West Street Market during the day. It might be useful if you go to either tomorrow's meeting or the city council's meeting and clarify this, because the RAAB/City Council will be basing their decision partially on what this staff report says. Realistically though, I go there quite often and on occasion everything, even Se7en is closed at 6:00 p.m. except for your bar. I agree with you that a lot of people forget downtown ALWAYS does this in the winter, then springs to life each summer. But it's not working for some tenants to only be busy 5 months out of the year, particularly those who don't serve alcohol. So maybe West Street Market needs to morph into both a daytime market and a night-time hotspot. Yeah?

Posted by: Mike McGonagle AKA doofus - 4/5/2010 7:55:02 PM
Wow, I rated a sidebar! Aside from being a pundit and muckraker on RRB, I am also an architect. If RDA chooses move foreword with WSM, here are some suggestions: - Complete phase 3, the carriage house. This is what you see from the street, and it is an eyesore now. Open it up with a lot of glass to the courtyard, and make it really sexy â€“ it needs to be the visual stimulus to draw people into the courtyard (moth to the flame). - With the current design, a casual walk-by wouldn't even know Nickâ€™s or Se7en exist. Thatâ€™s why drawing people into the courtyard is so important. Then open up the wall to the courtyard with a lot of glass / garage doors so customers can see into the main market spaces. Maybe even eliminate direct access to Earthly Delights and the wine bar from West Street â€“ make people enter through the courtyard (this could be a violation of their leases, and the owners will hate me for bringing it up). - You are going to have to add more restroom capacity to meet code for assembly occupancy (cabaret). They were probably never adequate based on occupancy loads for the market as it developed. - It is all about the courtyard and its potential as a gathering space and an amenity for the retail tenants. The original design missed this, and it is not too late to get it right. I'm interested if you readers / renters have other suggestions about how to move WSM successfully ahead.

Posted by: Clint Jolly - 4/5/2010 8:43:20 PM
To Rick- Glad to hear that your business is doing well. And when I mentioned that a wine shop would be a good idea I didn't mean you weren't doing a good job, just that it's a necessary part of the package in my estimation. Do you think that having other raw food vendors would help your daytime business? And to Mike- good thoughts on finishing the project. I agree that the courtyard could be the biggest draw if used correctly.

Posted by: Nevets - 4/5/2010 9:53:05 PM
Oh man. Sorry folks, but what this town needs is a mondo-big overhaul of its vision. I look at typical projects like Fourth Street Live in Louisville (by Cordish - remember them?) completed in 2004. Granted, Louisville is bigger than Reno, but not New York City-bigger. Check out the website ,www.4thstlive.com, see the entertainment, dining, and shopping options, then look at West Street (farmers?) Market. YAWN. Fourth Street Live replaced the Louisville Galleria which failed to renew the area. The Galleria replaced another venue that failed in the same way. So, try until you succeed. The Aces baseball stadium and it's future vision gets a big "Hell yeah" from this reviewer. Maybe this area will be our equivalent. I hope so. Reno needs to think on a different scale. Namely big. Yes, I know, there's a knarly recession right now. We should plan now on a scale like this to be prepared for recovery and growth. Or the Indians will take us to the cleaners. Gaming is all well and good, but we can be so much more. Even with recent improvements, we are WAY behind in urban development. It's time to change some paradigms. Walt Disney said something to the effect of, "Do something so unique, and so well, that people won't be able to resist telling others about you." FWIW, I have traveled all over the world, and have been to cities big and small, and have seen so much cool stuff. I come home to Reno and say, WTF?" I'm tired of saying that.

Posted by: TracyV - 4/7/2010 10:43:42 PM
Agree, that in summer, WSM is all about the courtyard as community space. If the city gives the WSM enough time, eventually it will become an anchor for more on the 2nd street corridor but markets like these are seldom successful over night--it takes time. Marketing has always been a big problem. Right now, the site features a shot of the empty courtyard! I think focus needs to move toward making it the market a lunch destination for people downtown.

Mike McGonagle's Take

Mike is a blogger over at Reno Realty Blog. He's known for digging up numbers on property sales, and controversial posts, so he offered up his take on the situation:

"Originally, APN 11-042-13 included the 3 lots now comprising WSM and the retail / residential hotel property on the West Street – 2nd Street corner. It was purchased in November 2000 for $1,007,400. A parcel map was recorded splitting the parcel into 4 lots, the WSM lots sold to West Street Venture in July 2005 for $675,000 and the retail / residential hotel parcel was sold in January 2006 for $3,304,541. A reversion map was recorded in June 2008 combing the WSM lots into 1 parcel, 11-042-21.

- Judging from the staff report, it looks like the RDA has spent $625,021 on actual base building construction and soft costs. Plus the salary for the coordinator.

- Now that RDA has done all the improvements, and factoring in the decline in property value from the 2005 purchase, the property probably has a FMV of about a million.

- Note that the rent escalates a minimum of 3% and maximum of 5% per year, so rent is $1.84 PSF today, $12,880 per month. Assuming the minimum 3% annual escalation over the remaining lease term, RDA is looking at $1,944,000 in lease payment.

- RDAs cheapest way out of the lease is to buy the building for $1,000,000 or so on a property they could have bought 2 years ago for about $500,000, prior to the improvements. This assumes the ownership is open to this. I know we’re broke, but owning the building would reduce equivalent rent by about 50%.

- They could try a lease buy out. It would probably be 50% of the remaining rent due, or about $900,000. Why not just buy the building?"