BURBANK REDEVELOPMENT AGENCY

Tuesday, June 15, 2004

AGENDA

CITY COUNCIL CHAMBER - 275 EAST OLIVE AVENUE

 

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4:00 P.M. CLOSED SESSION IN CITY HALL BASEMENT LUNCH ROOM/CONFERENCE ROOM:

 

Conference with Real Property Negotiatior:

Pursuant to Govt. Code 54956.8

Agency Negotiator:  Assistant Executive Director/Susan M. Georgino.

Properties:  111-245 East Magnolia Boulevard, 401-761 North First Street, 200 East Cypress, 601-800, 801, 805, 851, 875, 877, 891 South San Fernando Boulevard, 228 East Burbank Boulevard.  The 41 acre site (excluding IKEA) generally bounded by Magnolia Boulevard, Third Street, Burbank, Boulevard, and Interstate 5 (Media City Center Mall).  Parcels 2460-023-045 through and including 2460-023-062.

Parties With Whom Agency is Negotiating:  Crown Realty and Development Inc.

Name of Contact Person:  Jack Lynch, Senior Redevelopment Project Manager.

Terms Under Negotiation:  Negotiation for the sale of the fee title in regards to the improvements on the above mentioned parcels.

 

When the Agency reconvenes in open session, the Agency may make any required disclosures regarding actions taken in Closed Session or adopt any appropriate resolutions concerning this matter.

 

 

 

6:30 P.M.

 

                                                                             

INVOCATION:                      

The Courts have concluded that sectarian prayer as part of City Council meetings is not permitted under the Constitution.

 

FLAG SALUTE:

 

ROLL CALL:

 

 

JOINT MEETING WITH THE CITY COUNCIL:

 

1.      Affordable Housing Agreement Between the Redevelopment Agency and the Burbank Housing Corporation and Relocation Plan for 2321 North Fairview Street And 2321-2323 North Catalina Street:

 

The purpose of this item is to request: Redevelopment Agency (Agency) Board approval of an Affordable Housing Agreement with the Burbank Housing Corporation (BHC) to finance the BHC�s acquisition and rehabilitation of rental units at 2321 North Fairview Street and 2321-2323 North Catalina Street (Properties) in the Golden State Focus Neighborhood as a mixed-income, affordable housing project inclusive of an activity center; and, City Council approval of a  Relocation Plan for the Properties.

 

Acquisition and rehabilitation of the Properties is predicated upon a proven strategy for upgrading a neighborhood in decline.   In each focus neighborhood, such as Elmwood and Peyton-Grismer, the approach is to assist the BHC acquire and rehabilitate deteriorated properties, operate them as mixed-income properties with an affordability component and to develop an activity center to provide services that will help integrate tenants into the community. 

 

Located in an R-4 medium density residential neighborhood in the Golden State Focus Neighborhood, the Properties are comprised of three parcels at two separate sites.   Combined, the two locations encompass 18 residential units; 14 one-bedroom units (two of which are studio units) and four two-bedroom units.   The property at 2321 North Fairview Street contains a two-story apartment building constructed in 1963 and includes six one-bedroom units on a 6,795 square foot lot.   The two parcels at 2321-2323 North Catalina Street include two one-bedroom detached single-family dwellings, a duplex comprised of studio units and an eight-unit apartment building with four one-bedroom and four two-bedroom units built in 1941 on a 13,595 square foot lot.

 

Under the terms of the Affordable Housing Agreement, the Agency would lend the BHC $3.143 million in Low and Moderate-Income Housing Funds.  The amount of the loan is tantamount to 95 percent of the $3.315 million development cost and comprises three major components:

  1. The purchase price of $2.494 million represents approximately 75 percent of the total cost of development and, when coupled with estimated relocation costs, totals $2.599 million or 78 percent of development costs;

  2. Direct costs for building rehabilitation of $701,000 or 21 percent of the total development cost composed of the following key elements:

  • Building rehabilitation of $373,000 or $26,600 per unit for 14 units;

  • Lead-based paint and asbestos remediation estimated at $114,000;

  • Demolition and site work costing $104,000; and,

  • Conversion and expansion of a single-family dwelling into an activity center at a cost of $110,000; and,

  1. Indirect costs are estimated at $15,000 for closing costs, permits and fees.

Financing for the acquisition of the Properties and any remaining funds to facilitate rehabilitation will be provided through a first trust deed with the Agency.  The Agency loan of up to $3.143 million will be amortized at three percent simple interest and repaid annually through residual receipts shared equally with the BHC from the Properties� net profits, beginning April 1, 2006.  Any remaining loan balance will be due and payable on April 1, 2061.    At the time of rehabilitation completion, any remaining loan balance will be applied towards reducing the Agency loan principal.

 

In addition to describing the terms of sale and subsequent rehabilitation of the Properties, the Affordable Housing Agreement also governs key conditions for the long-term operation of the Properties that extend into perpetuity defined as the useful life of the land use controls but not less than 55 years.

 

Structured as a mixed-income project, the BHC is to restrict occupancy and rent one apartment unit at an affordable rate to a very low-income household, six apartment units to lower-income households and seven apartment units to moderate-income households.   

 

A Relocation Plan is required for the Properties because of the necessity to relocate tenants for the conversion of a renter-occupied, single-family unit into a new activity center and for the demolition of three other units. The Agency�s relocation consultants, Overland, Pacific and Cutler (Consultant), prepared a Draft Relocation Plan for the Properties, which was available for a 30-day public review period before initiating any relocation activities, including issuance of 90-day notices to vacate.  No public comment was received.  Staff requests that the Council approve the Relocation Plan following the end of the 30-day public review period.  

 

The Relocation Plan notes that "there are eight adults and three children occupying the four households�, and that these �households reported income levels that fall within the area�s extremely low, very low and median income categories.� 

 

The Relocation Plan notes that the Consultant is to provide the following relocation assistance: distribute a general information notice to all tenants; provide a minimum of three referrals to displacees of comparable replacement units; and, assist with the completion and filing of relocation claims, rental applications and, if necessary, appeals forms.  Relocation benefits will include payment for moving expenses, either a fixed payment allowance or actual moving expenses, as well as Rental Assistance Payments computed under State Relocation Law.

 

Recommendation:

 

Adoption of proposed Redevelopment Agency resolutions entitled:   

  1. A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF BURBANK AMENDING THE FISCAL YEAR 2003-2004 BUDGET TO APPROPRIATE FUNDS FROM THE 20% SET-ASIDE AFFORDABLE HOUSING ACCOUNT.

  2. A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF BURBANK APPROVING AN AFFORDABLE HOUSING AGREEMENT BETWEEN THE AGENCY AND THE BURBANK HOUSING CORPORATION (2321 NORTH FAIRVIEW STREET AND 2321-2323 NORTH CATALINA STREET).

Adoption of proposed City Council resolution entitled:

A RESOLUTION OF THE COUNCIL OF THE CITY OF BURBANK APPROVING A RELOCATION PLAN FOR THE RELOCATION OF RESIDENTS AND OCCUPANTS DISPLACED AT 2321 NORTH FAIRVIEW STREET AND 2321-2323 NORTH CATALINA STREET.

 

 

REPORT TO THE AGENCY:

 

2.      Former Newberry Building � 328-330 North San Fernando Boulevard:

 

Part of the Redevelopment Agency�s (Agency) comprehensive strategy to revitalize downtown emphasizes the importance of attracting quality tenants to fill existing vacancies.  The Downtown Tenant Assistance Program (DTAP) was developed to help meet this need and was approved by the Agency Board on September 24, 2002. The DTAP provides forgivable market rate loans as financial incentives to attract quality retail tenants to the downtown.  This loan program is made available to retail tenants interested in locating downtown or property owners interested in attracting retail tenants to the downtown area.   To date, the only loan under the DTAP was provided for the former Newberry building.

 

The former Newberry building is located at 328-330 North San Fernando Boulevard in the Village District of the downtown.  The building is approximately 20,000 square feet including a 5,000 square foot mezzanine.  The property, formerly owned by Shadrall Associates, remained vacant for over six years and was in need of major repairs.

 

On December 17, 2002, the Agency Board approved a proposal from Tucker Investment Group for $675,000 in financial assistance for building and tenant improvements under the DTAP to help attract Urban Outfitters, a national retailer.  Tucker Investment Group subsequently purchased the former Newberry building and entered in to a 10-year lease agreement with Urban Outfitters to occupy approximately 15,000 square feet of the building and a Commercial Rehabilitation Loan Agreement with the Agency.  Approximately 5,000 square feet of the building remains vacant and is in need of improvements.  This portion of the building is subdivided from the Urban Outfitters space with a separate entrance. 

 

Since entering into a 10-year lease with Urban Outfitters in 2002, Tucker Investment Group has been in the process of securing a quality retail tenant to fill the remaining 5,000 square foot portion of the building (the tenant is also subject to approval by Urban Outfitters).  To that end, Tucker Investment Group is currently in lease negotiations with Active Ride Shop, a trendy retailer, which is currently the largest surf, snow and skate dealer in Southern California.  In addition, Active Ride Shop has submitted a Letter of Intent to the owners.  Active Ride Shop specializes in selling snowboards, surfboards, skates and related �cutting edge fashion�.  The company is family-owned and debt free with sales volumes in excess of $45 million per year.

 

The execution of a ten-year lease with Active Ride Shop is subject to the owners making basic improvements to the space and providing a contribution towards tenant improvements.  The base building improvements proposed by Tucker Investment Group are estimated to range between $100,000 to $120,000 in costs.  Proposed improvements would include a new storefront, standard building shell improvements, a new HVAC system and two restrooms.  These improvements are projected to be completed within 30 to 40 days following the issuance of a building permit.  In addition to the base building improvement costs of $120,000, Tucker Investment Group proposes to contribute approximately $120,000 towards tenant improvements. Active Ride Shop also proposes to contribute approximately $300,000 in private funds towards tenant improvements. Furthermore, Tucker Investment Group indicates it will cost approximately $80,000 in commissions to consummate a lease with Active Ride Shop.  In summary, Tucker Investment Group anticipates incurring the following project costs:

 

Base Building Improvements              $120,000

Tenant Improvements                          $120,000

Commissions                                       $  80,000

Total                                                       $320,000

 

Once the base building improvements are completed, Active Ride Shop anticipates completing the tenant improvement work within 35 days.  This would result in the completion of the proposed base building and tenant improvements within 60 to 75 days following the issuance of a building permit.

 

Under the terms of the Loan Agreement with the Agency, Tucker Investment Group cannot place a mortgage on the property in excess of the $3.02 million primary loan ahead of the Agency�s loan of $675,000. This provision precludes the owner from refinancing the primary loan in an amount larger than the $3.02 million limitation.  In order to finance the improvement costs necessary to consummate a lease with Active Ride Shop and proceed with base building and tenant improvement work, Tucker Investment Group originally proposed modifying the terms of the Loan Agreement to refinance the primary loan.  The proposal included the following terms:

  • The Agency removing its loan as an encumbrance from the property;

  • Tucker Investment Group paying the Agency $100,000; and,

  • Tucker Investment Group committing to paying a minimum of an additional $100,000 for tenant improvement work in a space controlled by Tucker Investment Group.

Keyser Marston Associates concluded that the proposal, as submitted by Tucker Investment Group, is inconsistent with the program goals. 

 

Following staff review of the proposed loan modifications, a series of discussions took place among staff, Keyser Marston Associates and Tucker Investment Group to consider various alternative options that would result in the Agency receipt of additional funds in excess of the $100,000 proposed as an up-front cash repayment to reduce the Agency�s loan.  These options included reducing the maximum refinance limit of the primary loan and increasing the amount of the up-front cash repayment on the Agency�s loan. After negotiation and further consideration, Tucker Investment Group proposes the following:

  • Paying the Agency a one-time up-front cash payment of $300,000 as a discounted prepayment of the outstanding loan balance; and,

  • Reserving $320,000 (as previously outlined) in refinancing proceeds for base building and tenant improvement costs and commissions to consummate a lease with Active Ride Shop for the remaining vacant portion of the building.  Agency staff input is required regarding how these funds will be reserved and utilized.

In response, Keyser Marston Associates compared the alternative proposal to pay the Agency a one-time cash payment of $300,000 to retire the Agency�s loan with the share of percentage rents the Agency could receive (assuming Urban Outfitters will remain in operation during the 10-year period) and how the percentage rents would affect the Agency�s loan balance.   Keyser Marston Associates concludes that if Urban Outfitters remains in operation until 2008, the proposed $300,000 payment exceeds the amount the Agency would receive in the payment of its note.  Based on Urban Outfitters current success and past track record, there is nothing to suggest that they would not stay in operation through 2008 and until the end of the 10-year lease term.

 

Staff believes that the alternative proposal suggested by Tucker Investment Group would provide the Agency with an unanticipated lump sum cash payment of $300,000 to pay off the Agency�s loan.  Under the current loan structure, the Agency�s loan would be forgiven for each year that Urban Outfitters remains in operation during the 10-year term.  Furthermore, the only actual cash repayment to the Agency would potentially come from excess percentage rents.  The note payments, including projected percentage rents, have a present value of approximately $90,000, which is about $210,000 less than the $300,000 loan repayment currently proposed by Tucker Investment Group.   

 

This option would also address the property owners� desire to raise capital to improve the remaining portion of the building in order to consummate a 10-year lease with Active Ride Shop without a need for further Agency assistance.  Staff recommends that the Agency require Tucker Investment Group to reserve about $320,000 in refinancing proceeds for building and tenant improvement costs and commissions if the Active Ride Shop lease is consummated.  Agency staff input would be required regarding how these funds would be reserved and utilized. Active Ride Shop projects annual retail sales volumes in excess of $3 million which would result in $30,000 in annual Sales Tax revenue generation for the City�s General Fund.

 

As stated earlier, Urban Outfitters has been very successful since opening in September 2003 and Tucker Investment Group has indicated that their lease remains in effect as originally described to the Agency.  Urban Outfitters has proven that they would act as a catalyst to help draw other quality retailers to the downtown and has been instrumental in attracting Active Ride Shop. 

 

Recommendation:

 

Adoption of proposed resolution entitled:

A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF BURBANK APPROVING MODIFICATION OF THE TERMS OF A COMMERCIAL REHABILITATION LOAN MADE TO TUCKER INVESTMENT GROUP, INC. UNDER THE DOWNTOWN TENANT ASSISTANCE PROGRAM (328-330 NORTH SAN FERNANDO BOULEVARD).

 

 

RECESS to continue City Council meeting.

 

ADJOURNMENT

 

 
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