By Meghan Hall
Napa Valley, and in particular downtown Napa, has opened itself up to development in recent years. In 2018, 39 new and expanding business were completed and opened in downtown, which totaled 87,000 square feet of space, according to Napa City Council’s Annual Commercial Business and Construction Update. Developers are taking notice, with one Napa-based developer leading the charge. Since the beginning of the market cycle, Zapolski Real Estate has emerged as an epicenter of development in the Napa, and has acquired, developed or entitled close to $500 million in commercial real estate projects, according to the firm’s Director and County of Napa Planning Commissioner Andrew Mazotti.
“If you take our current redevelopment, which includes our shops, our offices, the Gordon Building and the Archer Hotel, and if you combine the pieces we own that are slated for future redevelopment, we are probably looking at close to $500 million when all is said and done,” stated Mazotti. “That is the totality of the redevelopment.”
Zapolski Real Estate was founded in 1998 and, and at the beginning of the last market cycle, began acquiring property throughout downtown Napa, noting its potential to grow as locals and government officials began opening the city up to development.
“If you go to places like Walnut Creek or Marin, those markets are very well-established. Napa is an emerging market. We believe one day we will look back and say that [these investments] were part of the beginning of downtown Napa.”
Mazotti credits Napa’s growth to two critical initiatives put in place by the City and its constituents: the multi-phase Flood Project and the approval of the Downtown Specific Plan. The Flood Project, which began in 2000, was an undertaking by the Napa County Flood Control and Water Conservation District and the Army Corps of Engineers that improved the Napa Creek Bypass and the Napa River Dry Bypass. The 16-year, two-phase project was completed in the fall of 2016 and has thus far worked well, despite several years of record rainfall.
“Downtown Napa used to flood because the river runs through it. So once the Flood Project was approved and funded, that created an opportunity to start developing because developers had confidence going in. Nobody wants to do a big project in a flood zone; it just doesn’t pencil.”
In addition, the Downtown Specific Plan was adopted in 2012, at a time when little multifamily housing, residential development and commercial vacancies translated into limited activity for the city — and county’s — main commercial core. The emergence and solidification of a solid development framework was a signal that Napa was ready to welcome development. The day that the Specific Plan was adopted, Zapolski Real Estate closed on the former Napa Town Center, a key part of the firm’s redevelopment plan.
“[The plans] created the opportunity for us to go buy the critical mass necessary to look at a full redevelopment of the core of downtown,” said Mazotti. “Over the course of the last few years, people have been drawn to urban cores, and people are seeing that downtown Napa has a lot to offer and there has just been a lot of development focus here.”
The $200 million First Street Napa project, once completed, will include 325,000 square feet of retail, dining, hotel and creative office space spanning three city blocks along First Street. The 183-key Archer Hotel, also part of the project, opened its doors in 2018and features a fitness studio, water deck and rooftop bar and restaurant.
“We see downtown Napa as a live-work-play environment. It already is sort of a central commerce district, but I would like to see that grow,” said Mazotti. “I would like to see companies from Silicon Valley and San Francisco and other places look to create a second or third office up here, or even a headquarters up here.”
Zapolski Real Estate’s latest project includes renovations to the historic Gordon Building, a two-story, 20,000 square feet building located at First and Coombs Streets. The building was originally constructed in 1929/1935 and was acquired by Zapolski Real Estate and Trademark Property Co. in 2013. The repositioning of the building, however, stalled with the 2014 South Napa which extensively damaged the building.
“The Gordon Building is a building that we purchased to be part of our downtown assemblage. It is a historic, prohibition-era building and one of the few remaining historic buildings downtown,” explained Mazotti. “The earthquake was such a major hit to the building that the economics were upside down.”
The property owners caught a break when downtown Napa — and the Gordon Building — was designated an Opportunity Zone, providing the needed funds for the project to move forward. The project shell will be completed in October of this year, and overall renovations to the building will cost between $15 to $20 million.
“All of the sudden, beautiful downtown Napa got this opportunity zone designation. And that was something, I think, that caught us all by surprise,” said Mazotti. “What makes that interesting is that the opportunity zones are typically more distressed areas, and it’s the hottest topic in real estate right now. So people took notice that downtown Napa got the designation. But we’re saving this historic building, and we are now, I believe, the first project in Napa’s opportunity zone to break ground and go forward.”
Zapolski Real Estate has only just begun marketing the property for lease, but Mazotti says that after six years, the firm is excited to bring the project to fruition and reinvigorating a key corner in downtown.
“I’d say the Gordon building is on a key corner, and unfortunately with the earthquake it has been dark for a number of years. We’re really looking forward to activating that because once we do, that’s going to really round out the north end of First Street,” said Mazotti. “That’s the hole in the donut that we are going to finish out, and then it is really going to make First Street hum.”