City uses Lowe’s departure as investment opportunity, looks to acquire building
The San Marcos City Council will consider an item at its Tuesday night meeting that proposes the City purchase the Lowe’s Home Improvement building at 555 Grand Avenue in the Creekside Marketplace. Staff estimates the move will earn the City more than $5.5 million over the next 10 years. Lowe’s will close its San Marcos location on Wednesday, September 11.
Lowe’s notified the City over the summer of its intent to close and since then the City has been exploring various options for the site including exercising a lease provision that would allow the City to purchase the building below market value.
“San Marcos has a long history of thinking outside the box, and this is another example of our entrepreneurial spirit in action,” explained City Manager Jack Griffin.
Under the deal points drafted by Griffin, the City would spend about $8 million in acquisition and capital costs and would collect $35 million over the next 10 years between rent revenues and the building’s increased terminal value. In comparison, the City would stand to gain just $19 million over the next 10 years if it simply allowed Lowe’s to transfer its lease to another tenant.
Future sales tax revenue also factors into the equation. Lowe’s has proposed to transfer its lease to Walmart, which would generate an estimated $600,000 per year in sales tax revenue for San Marcos. But under the deal being proposed Tuesday night, the City would reject that plan and seek another tenant to occupy the space. Conservative sales tax calculations estimate revenue for a space that size to garner about $250,000 per year.
“While these revenues may be less than a Walmart, they are still estimate to be greater than what the City has been receiving from that space over the past few years,” continued Griffin.
Even with the sales tax difference, the City would be $5.5 million in the black from the deal over the next decade, and then accelerated revenue improvement would happen beyond year 10 once acquisition and capital costs are no longer factored into the profits.
The San Marcos City Council will vote on the issue at its Tuesday, September 10 meeting, which starts at 6 pm at San Marcos City Hall, 1 Civic Center Drive.
READ the UT article on Lowe’s Moving