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Redevelopment Agency · City of San Bernardino
300 Ncrth "D" Stree~ Fourth Floor . Son Bernardino, Califcmia 92418
(714) 384-S081 FAX (714) 888-9413
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Steven H. Dukett
Executive Direcror
JUNE 27. 1989
STATUS OF AGREEMENTS IN DEFAULT OR TECHNICAL DEFAULT
Synopsis of Previous Commission/Council/Committee Action:
6/27/89
Committee reviewed the report on the status of projects in default
or technical default.
Recommended Motion:
a. That the attached report of the status of projects in default or
technical default be received and filed; and
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b.
That the agreement with Ted and Jacqueline DeGroot be declared in
default and that Agency staff and counsel be authorized to pursue
all remedies under the agreement.
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Supporting data attached:
Hard:
FUNDING REQUIREMENTS:
Project:
Commission Notes:
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Agenda of: July 5. 1989
Item No. 10
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STAFF REPORT
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On June 8, 1989, staff presented the Redevelopment Committee a
current activity status report which, among other things, indicated
which projects were in default of, required an amendment to, or did
not comply with the terms of their agreements. The report was
shared with the Commission on June 19, 1989. The Committee
requested that a separate report on projects in default or technical
default be prepared and that appropriate options be listed. The
data contained in the attached report on twelve (12) of the Agency's
projects was, therefore, culled from the earlier report, updated and
expanded by adding two additional elements to each effected
project. The first element clearly states the reason for the
default or technical default; and the second provides one or more
options to pursue.
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The projects listed on the attached report are divided by type. The
first three listed (DeGroot, King and Platt Building) represent
projects with significant problems. The Commission has already
declared the King and Platt Building projects in default. Given the
current status of DeGroot; it is staff's recommendation that this
project also be declared to be formally in default. The next five
projects (i.e., Nos. 4 through 8).need resolution on significant
issues, but in each case the developer is activity negotiating with
Agency staff for appropriate amendments to their agreements. The
last four projects (i.e., Nos. 9 through 12) have only minor
technical problems for which resolution is imminent.
It is, therefore, recommended that the report be received and filed
and that the Commission declare Ted and Jacqueline DeGroot in
default on their agreement and that Agency staff and counsel be
authorized to pursue all remedies under the agreement.
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STATUS OF PROJECTS IN DEFAULT
OR TECHNICAL DEFAULT
(As of June 20, 1989)
1) DEGROOT
* Description: A 20,000 SF industrial building to be built on
Riverview Drive.
* Owner: Ted and Jacqueline DeGroot
*
Status: The Agreement has been amended five times to allow
in-lieu fees to be paid instead of proceeding with
construction. Construction is once again overdue, but this time
The Sunset Group expressed interest in amending the agreement
for a longer time frame and considered substituting themselves
for DeGroot. We were receptive to the concept of substitution
and suggested a format for the new agreement which still retains
the concept in-lieu payments until construction is completed.
The Sunset Group informed staff on June 7, 1989 that they have a
been unable to find a viable plan for development and, thus,
will not proceed.
*
Estimated Development Value: $600,000
* Reasons for Default or Technical Default: Construction is late.
* Options: Declare the developer in default and pursue revesting.
The principal alternative is to attempt to negotiate a sixth
amendment with the DeGroot's, however, they appear reluctant to
pay any further in-lieu fees and are, apparently, unwilling or
unable to develop the property.
2) KING DEFAULT
* Description: An 11.3 acre parcel of industrial property on the
NWC of Tippecanoe and Cooley Avenues. The developer was
obligated to construct 5 industrial buildings totaling 145,000
SF and worth $5,000,000 under an agreement signed in 1979.
* Developer: Chuck King & Associates
*
Status: Only one building (23,000 SF) was built and a second is
currently under construction. Developer owed the Agency $44,000
in in-lieu fees as of January I, 1989. On November 21, 1988,
the Commission authorized the City Attorney to proceed with
litigation to recover the fees due.
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* Reason for Default or Technical Default: Refusal to pay in-lieu
fees due under the agreement.
* Options: That the City Attorney continue to proceed with the
litigation.
3) PLATT BUILDING DEFAULT
* Description: Renovation of an historic building at the SEC of
5th Street and E Street. The Agency was involved in obtaining
parking which was used to expand the downtown parking lots as
well as for the Platt Building.
* Owner: Art Gregory.
* Status: Owner is in default on completion of exterior
improvements, partially due to difficulties in obtaining
tenants. Remedy under existing agreement is $50,000 to Agency
from owner.
* Estimated Development Value: $1,200,000
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Reason for Default or Technical Default: Developer is unwilling
to proceed.
* Options: That the staff continue to pursue the recent action
taken by the Commission, notifying the developer that the
agreement is in default and that $50,000 is due.
4) CAREL AND ASSOCIATES INC., (COURT & ALLEN)
* Description: A five-phase project for 154 multi-family units and
170 mini-storage units on former Agency-owned property located
between 3rd and 4th streets, west of Waterman.
* Developer: Cliff R. Carel and Associates.
* Status: Developer has completed Phases I through III. Phase IV
for 70 multi-family units and Phase V for 170 mini-storage units
have not been started. Property for Phase IV has transferred to
the developer, but property for Phase V remains in the ownership
of the Agency. Developer is in default on commencement of
Phases IV and V. Negotiations have been carried on for some
time and were temporarily suspended awaiting the adoption of the
amended General Plan. Negotiations have now been reopened.
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*
Estimated Development Value: $5,980,000
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* Reason for Default or Technical Default: Construction is late on
Phases IV and V and developer has not completed installation of
an underground storm drain.
* Options: The developer has been given until July 7, 1989, to
respond to staff's recent request for a specific development
proposal as a result of the amendment of the General Plan.
Staff will endeavor to negotiate an appropriate amendment upon
receipt of the proposal. The prinicipal alternative option
would be to declare the developer in default and attempt to
revest the Phase IV property which has been encumbered by at
least one subsequent lien of $100,000.
5) COLLEGE PARKWAY DEVELOPMENT ASSOCIATES
* Description: Ten parcels of land on the SWC of University
Parkway and I-215. Existing development is comprised of Papa's
Pantry, Motel 6, and Taco Bell.
* Developer: College Parkway Development Associates.
*
Status: College Parkway received a loan of $350,000 from the
Agency secured by second trust deeds. It was substantially paid
back and then reloaned under an amendment to their loan
agreement which substituted new deeds of trust. The loan has
now been paid down to $140,000 in connection with releases of
various parcels. They are aSking that the Agency once again
loan funds for the final phase of the development and increase
the principal balance to $500,000. The developer has not met
the time requirements for construction of Phase II and is now in
technical default. The developer has been requested to submit
detailed economic data justifying the need for additional
funds. Agency staff together with our economists will evaluate
the developer's proposal to determine if the project is eligible
for further Agency assistance once the developer provides the
requested data.
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* Estimated development value: $15,125,000
* Reason for Default or Technical Default: Construction is late
for Phase I.
* Options: Once in receipt of a complete proposal, staff will
complete the evaluation of the developer's proposal and make
further recommendations. The principal alternative option would
be to proceed with collection of the $140,000 balance plus
interest and sue for performance.
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6) 4TH AND "E" STREET (NWC)
* Description: A 15,000 square foot building with a total value of
approximately $300,000.
* Developer: H. Frank Dominguez DBA Vanir Research Company.
* Status: On February 5, 1979 the Agency entered into a DDA with
Developer. The property was never developed and on January 3,
1983 the Commission adopted a motion that excused Developer from
all build out requirements on conditions that Developer
stipulate that the minimum assessed value on the old Penny
building would be $3,000,000. Developer has never so
stipulated. Counsel advises that the Agency cannot require
Developer to either develop the property or pave the parcel for
parking lot. The Agency's only remedy under the DDA is to give
Developer notice of default and if he does not cure the default
within three (3) months to re-enter and take possession of the
property.
* Reasons for Default or Technical Default: Construction is late.
*
Options: That staff attempt a negotiation of this issue together
with other outstanding matters that involve Mr. Dominguez
(current litigation on a parking lease in the five-story
structure and a lien that clouds the title on the Court and "E"
site). The principal alternative options would be to a) attempt
to revest the title to the property or b) to issue a certificate
of compliance based upon a hypothetical assumption that
$3,000,000 was essentially delivered although not stipulated to
the developer.
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ARROWHEAD HEALTH CARE SYSTEM
*
Description: A 75,000 SF professional medical office complex to
be built partly on land owned by Arrowhead (former school
property) and partly on land now owned by the Agency (former
park property) on the west side of Medical Center Drive south of
19th Street.
*
Developer: Arrowhead in joint venture with Dowdell Corporation,
a subsidiary of Xerox.
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Status: Although the Agency is in escrow with Arrowhead, an
amendment to the Disposition and Development Agreement is
required. The date for close of escrow must be extended, the
vesting must be changed, and Arrowhead has not yet performed on
certain improvement requirements of the City in connection with
the construction of the new hospital addition. Staff has
proposed a concept that meets the needs of Arrowhead and will
still provide for construction of the improvements. Although
Arrowhead has not responded, their staff (Cliff Daniels) expects
to respond by June 30.
* Estimated Development Value: $8,000,000
* Reason for Default or Technical Default: The escrow is late in
closing.
* Options: That the escrow not close until a satisfactory
amendment to the DDA is approved by the Commission. The
principal alternative option would be to declare a default and
terminate the escrow.
8) TEONG KAY (FORMERLY REFERRED TO AS T. J. BURRIS)
*
Description: Thirty-five acres of industrial property located
north of Brier Road and west of Tippecanoe Avenue.
* Owner: Teong Kay (who also owns significant additional acreage
to the south in Tri-City project area).
* Status: In violation of the Agency's deed restrictions, the
property was sold several times after disposition in 1979. The
current owner is negotiating with us to clear up the defaults
and substitute enforceable commitments for development.
* Estimated Development Value: $5,000,000
* Reason for Default or Technical Default: Unauthorized property
transfer and failure to develop Phase I.
*
Options: That staff negotiate an agreement with Mr. Kay for
development in-lieu of that expected from Mr. Burris. The
principal alternative option is to attempt to revest the
property and market it for development.
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9) PACE WAREHOUSE
* Description: A 150,000 SF discount retail center featuring Pace
Warehouse and Sportmart with additional retail shops and a
restaurant site located on Harriman near Hospitality. Agency
agreed to provide $1,200,000 in assistance.
* Developer: Alexander Haagen Company and Doug GOlding.
* Status: All development is complete with the exception of the
restaurant site. An amendment is required and the developer is
currently assembling information on the values of the completed
construction.
* Estimated Development Value: $6,000,000
* Reason for Default or Technical Default: The estimated value of
the development appears to be less than the $12,450,000 value
specified in the agreement and the restaurant site will be
constructed late. However, the Developer now reports that
negotiations have been completed with an operator for the
restaurant site (Beef Bowl). The Developer also is negotiating
a sale of the center in excess of $12.5 million.
*
Options: That the staff negotiate an amendment with the
developer for consideration by the Commission and that the staff
continue it's present position that no reimbursements can be
paid prior to the issuance of a Certificate of Completion. This
amendment could also redefine the Agency's participation as a
result of the reduced value of the development.
10) THE CLUB CENTER
*
Description: A large scale, discount retail, center in South
Valle located on Caroline Street between Hunts Lane and Waterman.
*
Developer: SP Investments.
*
Status: Construction is complete, except that the agreement will
require an amendment, which is currently being reviewed by
staff, before a certificate of completion can be issued. The
square footage was less than required by the agreement, but the
value has been exceeded. The project was also completed several
years ahead of schedule. On a related matter, the Department of
Public Works/City Engineer, on behalf of the Agency, is
completing the construction of a railroad crossing on Hunts Lane
in cooperation with Colton.
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Estimated Development Value: $10,000,000
* Reason for Default or Technical Default: Buildings were placed
in locations that varied from the original plan. Some buildings
were larger and some smaller than planned. The total actual
square footage is less than the total required in the agreement.
* Options: Staff continue to negotiate with the Developer for an
amendment to present to the Commission for consideration to
properly reflect the development. The principal alternative
options could be for the Commission to a) issue the certificate
of completion without amending the agreement in light of the
excess value created, or b) sue for performance for the change
in building locations and reduced square footage.
11) SAN BERNARDINO AUTO PLAZA
* Description: A regional auto plaza containing 11 new car
dealership sites added to 2 existing dealerships plus an auto
service center and ancillary retail buildings on Auto Plaza
Drive west of I-215.
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* Developer: Orange Show Plaza Associates.
*
Status: Master site improvements and six of the new car
dealerships have been completed. A seventh dealership (Acura)
is under construction. Number eight (Volvo) has recently closed
escrow as has Nissan who purchased a "two dealership" site. One
dealership site remains available. The developer is behind
schedule on the commercial parcels, but has entered escrow with
a substitute developer, B & M. We have negotiated an Amended
and Restated OPA to allow transfer to the new developer and set
development requirements.
* Estimated Development Value: $8,000,000
* Reason for Default or Technical Default: Development of the
commercial parcels is late.
*
Options: That the Amended and Restated OPA be approved so that
the project can proceed.
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12) UNIVERSITY VILLAGE APARTMENTS
* Description: A 197 unit apartment project on the NEC of
University Parkway and Kendall Drive on land assembled by the
developer and by the Agency. In addition to site assembly, the
Agency will reimburse a portion of the landscaping expenses
required to screen the development from the entrance to the
University.
* Developer: University Village Associates.
* Status: The apartment units are complete and have received
certificates of occupancy from the City. The developer has a
remaining obligation to complete landscaping in the median of
North Park Boulevard and on a one-acre park site adjacent to the
University. Developer has requested construction draws on the
balance of the Agency assistance available under his agreement,
but has not yet responded to recent Agency correspondence.
* Estimated Development Value: $7,500,000
*
Reason for Default or Technical Default: The final landscaping
was to be completed prior to issuance of certificates of
occupancy. After completion of the landscaping, the one-acre
park site is to be reconveyed to the Agency.
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Options: Because the developer has been processing his
landscaping's plans we believe staff should pursue completion of
the project. The principal alternative option would be to
declare a default and sue for performance.
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