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Home My WebLink AboutR09-Redevelopment Agency - --- -- ~~ () () ~ REDEVELOPMENT AGENCY -REQUEST FOR COMMISSION/COUNCIL ACTION ~'om: Glenda Saul, Executive Director ......... It: Redevelopment Agency Subject: SIMA DEVELOPMENT, MILL AND "G" Date: November 12, 1986 Synopsis of Previous Commission/Council action: 3/3/86 Exempted SIMA Partnership from MC-50l (the l2D-day moratorium of building permits in CCS), 3/3/86 Authorized vacation of "F" Street, 3/3/86 Resolution 4858 authorized acquisition of property for the realignment of "F" Street and "G" Street. Recommended motion: (Comllnmity Development ColIIIDbsion) , \f'.,.\ Move to approve in concept and set a joint public hearing for 12/22/86 at 11:00 a,m" to consider the sale of land on the north side of Mill Street at the corner of Mill and "G" Streets, (Kayor and ColIIIDon Council) Move to approve in concept and set a joint public hearing for 12/22/86 at 11:00 a,m,. to consider the sale of land on the north side of Mill Street at the corner of Mill and "G" Streets. G i----,----.c L_~./ --4, ,,-I 1 I, Signature Contact person: Glenda Saul and Sandy Lowder Supporting data attached: YES Phone: 383-5081 1st Ward: FUNDING REQUIREMENTS: Amount: $ CCS Project: 11/17/86 Date: No adverse Impact on City: .. ncil Notes: ........ JH:2548K Agenda Item No, f.--c; -- CI{:{ OF SAN BERNARDI~O - REQUI.~T FOR COUNCIL ACi.:ON STAFF REPORT ..." Staff and the Redevelopment Committee are recommending that the Commission approve, in concept, a Disposition and Joint Development Agreement for the revised Sima development at the northeast corner of Mill and "G" Streets and that the Common Council and the Commission set a joint public hearing to consider the sale of land to Sima. BACKGROUND In February of 1986 Sima was asked to stop and accomodate a redesign of the alignment of "G" Street through their project. They had an approved Parcel Map (ready to record), a grading permit, and approved building plans (ready to pull permits). The grading permit had been issued and they were grading the site. Since this redesign would require the acquistion of the Hajoca building it would also make additional land available, if they wished to purchase it, for their project. 'v Sima agreed to stop it's project and cooperate in the delays as long as they were "financially made whole", Meanwhile the process of developing and adopting the CCS Study Area Overlay Zone went forward and Sima's project was redesigned to accomodate the new standards that were created. Appraisals were obtained for the new land parcels that would be created by the realignment of "G" Street and staff met with the developers to redesign the Parcel Map. By the time construction is resumed it will be nearly a full year that the project was delayed, . ; . Staff met with the developers to determine the losses that occured so that they could be evaluated by Keyser Marston, Dick Botti at Keyser Marston then obtained additional information from the architects, engineers, and other vendors. He modified and corrected the amounts that were submitted to arrive at a recommended reimbursement, The final letter from Keyser Marston is attached. It recommends full reimbursement of items that totaled $237,669 but questioning two items -- the carrying costs of the land at $75 000 and the loss of a beneficial construction contract valued ~177,000. A response from Chase Development Company is also attached which summarizes their views, Dick Botti from Keyser Marston, Agency staff, and the developers met on November 4, 1986 to discuss these issues, Mr, Botti agreed that a compromise was indicated and staff is recommending that the loss on the contract be reduced by 75% but that the carry costs be allowed at full value. These two items would then total $139,250, In addition to these items there are three losses whose exact amounts are not known today. They are a deposit paid to Edison, part of which may be transferable to the new project; some landscape design work which may be partly transferable; and the grading for the original project ~- Js..0264 2548K -2- r " el'r'" OF SAN BERNARDh..D " ,..,. - REQUE......T FOR COUNCIL ACl...!;)N STAFF REPORT .. - which will not have to be entirely redone for the new project, These items originally cost a total of 596,815. The loss is not known but staff is using 75% of that or 572,611 as an estimate for the purposes of analysis. Also involved in the new project are the land purchases (and dedications by Sima) that result from the realignment of "G" Sima will give up land that has been appraised at 5128,000, buy two parcels of land whose value is 5197,000 and 5251,500 respectively. These values are arrived at by subtracting from the appraised projected values the engineer's estimates of the improvement costs that will be required to create the parcels. additional Street, They will PROPOSED AGREEMENT Project-Location ..~\ The project as shown on the attached map is located on the northeast corner of Mill and G Streets. It will also include the remainder of land from the vacation of the present alignment of G Street shown as Parcel C. ....... Agency Obligations The Agency will reimburse Sima for 5376,920 of losses. When this is netted against the amount Sima will pay for the land it produces a net outlay of 556,419 to the developer. The total of the three items whose amounts are not known at this time will be added when they can be determined. For the purposes of analysis we are estimating that the total outlay to Sima will be 5109,031. This will be paid over time from tax increments generated by the project. Total 5 356,920 72,611 020,500) $ 109,031 Current Reimbursements Estimated Future Reimbursements Land Swap In a related transaction the Agency will acquire the Hajoca site and relocate their business. The appraised value, relocation costs, and demolition costs total 5845,000, This will be paid 50% down with the balance due in 10 years at 6% interest (adding 5162,750 in interest costs) , ........ 75-0264 2548K -3- - - Cle, OF SAN BERNARDI:O - REQU(~T FOR COUNCIL AC"l:ON STAFF REPORT - Developer's Obligations The developers will be required to construct 30,500 SF of retail buildings and 19 industrial/office buildings totaling 60,856 SF in Phase I to create 53.0 million in new improvements by August of 1987. They will construct 5500,000 in a second phase to be completed in 5 years or less, Ph I Ph II Sq Ft 60,856 10,000 Value Complete Totals 70,B56 5 3,000,000 500,000 5 3,500,000 Aug 1987 Dec 1992 They will construct sll the improvements for the realignment of "G" Street and will meet the development standards required by the new Overlay Zone. Sima will also pay 5320,500 for the land they acquire in the land swap. ANTICIPATED BENEFITS FOR AGENCY AND CITY "'-'. ~ In addition to the improved alignment of "G" Street, the implementation of the Overlay Zone standards, and the installation of a portion of the major intersection of "G" at the planned alignment of "F" Street, the Agency and City will expect to receive the following estimated benefits: Item Estimate Agency: Tax Increment (@ 1% x 70%) $ 24,500 per year City: Sales Tax $ 64,350 per year 5 36,475 per year $ 70,000 once 136 new jobs Utility Tax City Fees Employment This project will provide the major southern entry for the interior of the CCS Overlay Zone, '- 7~64 2548K -4- ~ - ,. '- - o ..) "" ~-. \...,. 0 0 0 0 0 0 0 0 0 0 on on M <Xl 0 0 0 .... .... 0 .... on 0 0 N .... <7- 00 .... 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'-" REQUIRED IMPROVEMENTS (per Brown & Mullins) PARCEL A (Cedra) 1/4 of Item 1 @ $7,120 $ 1,780 1/2 of Item 2 @ $8,043 4,021 1/2 of Item 3 @ $53,416 26,708 Total $ 32,509 or say $ 32 500 PARCEL C (Remainder) 1/2 of Item 2 @ $8,043 $ 4,021 1/2 of Item 3 @ $53,416 26,708 40% of Item 4 @ $76,832 30,733 Tota 1 $ 62,462 or say $ 62 500 ADJUSTED APPRAISAL VALUES PARCEL A (Cedra) I \;:t':t Value per appraisal less Improvement costs Total $ 229,500 <32,500) $ 197,000 PARCEL B (Sima dedication) Value (no adjustment) Total $ 128,000 PARCEL C (Remainder) Value per appraisal less Improvement Costs Total $ 313,000 (62,500) $ 251,500 LAND SWAP WITH SIMA Parcel B <Dedicated by Sima) Parcel A <Portion of CEDRA) Parcel C <Remainder parcel) Net Land Purchase by Sima $ (128,000) 197,000 251,500 $ 320,500 '- JH:jbh:0059j .... ....... A ~ ...... . ,Ie" ,-.. \..J - v ,J K~rMarstonAssociatesInc. 5SO South Hill Street. Suite 980 Los Angeles, CIlilomia 90013 213/622-8095 Richard L Botti Calvin E. Hollis. II .~ , ,~" ~,.;: ~)j ~'\ / ;,J fiiJiffJ, ~, ~OCT Ie. ,~ ,16198850 ~ ; ~ k ~Or .~~ os ROUTYffJ SL ~ SAN DIEGO bI9!942"()380 Heinz A. Schilling SAN FR ANCISCO 4i5/)98.,X)S{) Timothy C. Kelly A,Jerry Keyser Michael Marston Kate Earle Funk Robert J.Weunore Michael Conlon . October 14, 1986 ME </ BL.....:$ LV a MW CC TO"'#. MS. Glenda Saul Executive Director Redevelopment Agency of the City of San Bernardino Ci ty Ball 300 North WD" Street San Bernardino, California 92401 ~......_.. ~ C, i-:L IOUTE aJPT 7 Dear Glenda: As you recall, in our meeting of September 16, with the SIMA partnership, they indicated that they would update their numbers with respect to the cost incurred as a result of the revision of their project. We are now in receipt of their update costs estimate. In a letter dated September 26, Ir Chase indicated a total cost of $4B9,669.63 not including additional potential cost items such as grading modifications to conform to the new plans, Southern California Edison fees and landscaping design costs. We are in concurrence with the itemized costs with two exceptions. The first is the $177,000 of the loss of a beneficial construction contract lost and the second is the $75,000 carry costs on the land. SIMA has calculated the costs associated with the construc- tion contract costs on the basis of a 6% increase in costs and the land carryon the basis of a 10% interest rate on $750,000, The problem here is twofold. First, we are not sure of the magnitude of the construction cost increase. While individual costs items will vary, our cost estimator has indicated a 3% increase in con- struction costs over the last year. Second, to the degree there are additional costs due to a one year delay, these costs should be offset by increased rental rates, Le. the project should produce higher rents when opened offsetting the higher construction costs, Real Estate PredeveloP.!ll.nt & E,a1uation 5o,,;c., ~ .~c.: - \..I - v .J Ms. Glenda Saul ~ October 14, 1986 '- Page 2 . We have checked with both Coldwell Banker and the Daum companies, They have indicated a rental rate increase over the last year of 2- 3 cents per square foot, per month. On a base rate of 31 cents per square foot lease rate, this amounts to a 6% to 9% increase in rents. This increase should be more than adequate to offset the increase in construction costs and land carry costs. Higher rents will also result from the improved site conditions created from the realignment of "G" Street. Thus, it is our opinion that the monies due SIMA is $237,669.63 ($489,669.63 less $252,0001 plus potential additional costs related to grading, Southern California Edison and landscaping design costs. We look forward to reviewing our findings with you at your earliest convenience. ~, V Sincerely, ~~'SSOCI"'S' Richard L. Botti INC. RLB:lp ".... \,., 8639B.SNB KeyserMarstonAssociateslnc, c - \",... r' '- f: ROUTING GS I St .;) ME 'I Bt ~J = t"( ;2_ '-'J _ .__ CCTO '_'5~ -- --- ;;Z~ , - - - "".. :> - '-' Chase Deyelopment Compan)' 8f1(' West Baker Street. Suite 20~ Costa Mesa California 9262, Telephone (i141 95i.181E October 27. 1986 t;)~ "HE CITr ~" 0.- iff ~. "'0.[;- ~ f.. . . " , ", lllf ,~; .' ..j 0: ... ... 'IE :;.0 u.J C:i:: - i;S5 ~ :& ~ '& ~ ;;> ~ .~, .~. .' ~~ ~ -, J~ '~"'. <\ Richard L. Botti Keyser Marston Associates. Inc, 550 South Hill Street Suite 980 Los Angeles, CA 90013 RE: SIMA Partnership Number One Dear Dick: Glenda Saul has proYided us ~ith a copy of your October 14. 1986 letter for comment, .e are in disagreement over two issues: compensation for the loss of our beneficial construction contract and reimbursement for cost associated ~ith the carry of the land. The loss 0: the beneficial construction contrac: has da~~ged us, The issue is as to what extent, As YOU naye indicated. it would be difficul: to deter~ine an exact loss because 0: thE varyip.~ costs 0: the trade's contracts today versus 1as: yea:. I: is fOT thl~ reason that ~e sough: your expert adYice. If yo" so desire. we can placf tn.. dc:lar amount loss of the beneficial construction contract upon biddln, of our new project. A mechanisffi could be established by which the different trade bids could be compared on a cost per square foot baS1S or any other agreeable means that would be fair to both the PartnershlP and the City. I leave it to you to establish some sort of mechanis~ for deter~ining ~hat is our loss, We are quite suprised by your response to our request for compensation for the cost of carrying the land. lour denial of the Seventy Five Thousand ($75,000) dollars is based on unfounded conclusions. You indicate that compensation should be denied because rents have increased by two to three cents per square foot per month and the product ultimately built will be more valuable, These conclusions are the opinion of t~o real estate brokerage companies and at best, speculative. ~hereas our payment of Seventy Five Thousand ($75.000) dollars for the carry is a true hard fact. Almost one year ago. we were asked by the Mayor to stop our project for one month. and in the spirit of cooperation we did so. We allowed ~ 'C c (.~ - c --.. \- ~ ,...--- - ~ - ~ . . ,.... ....., - '..., the one month to become ten months because ~e were always assured that we would be "fully" compensatec for our losses as a result of the delay. No~, it is being suggested that full compensation might not be forthcomiD~. Do not interpret our willingness to cooperate with the City as a willingness to accept anything less than actual loss. Let.e assure you that we are prepared to challenge your decision based on speculativeness with fact. Coincidently, our information indicates that rents have not increased but are, in fact, flat and in some situations have declined, We believe that the Partnership has acted in good faith throughout this transaction. We expect the City tv do the same, We expect the City to do what it said it would do when it halted our project almost a year ago -- compensate us fully for our losses, The Seventy Five Thousand ($75,000) dollars is undisputed, ~~at you have attempted to do is create a dispute with speculation. This is unacceptable to us, We look for~ard to a speedy conclusion to these negotiations as it is imperati "€ that '.e commence construction in 1986, Sincerely, sn;,; Fanne,-sr.i,. tiumber One - Project 11-'(' In'in. ~:. (:,ase, General Partner me: =r ..~:~- -- - J