Council Approves Civic Center Village Changes

A set of last-minute changes to an agreement to build an ambitious new housing and retail complex in Santa Monica were approved by the Santa Monica City Council at its meeting Tuesday night. However, the council demanded more local jobs from the developer, titan Related Real Estate, first.

For the last few years, the city, in partnership with Related, has been planning the development of the complex, which would contain 324 condos—160 of which would be designated for affordable housing—and 20,000 square feet of retail space. As part of their deal, the city—which has committed $12.5 million of its own redevelopment finds for the project—and Related agreed that the city would grant the land to the developer through a long-term ground lease, rather than a flat-out sale of the land.

At issue during Tuesday night’s council meeting was the term length of that ground lease. Originally, the length of the lease was to be 99 years. Up for discussion at the meeting was an option for a 50-year extension of that lease, proposed by Related, which could be exercised by the developer toward the end of its original term.

The council ultimately approved the option narrowly, by a vote of 4-3, but only after Related sweetened the deal for the city by including a component favoring Santa Monica residents for the permanent jobs the complex creates.

Councilman Bobby Shriver contended that granting the option flat out, without asking for anything in return from the developer, or at least taking more time to analyze the financial impacts of an extension, would be irresponsible.

“Any extension of this lease creates a significant value. Fifty years is a significant value to the development, that it may be a good idea to do,” Shriver said. “But if they want something of significant value that they want to come back to us on, they need to give us something, it seems to me.”

But William Witte, president of Related California, personally appealed for the extension option at the meeting, pointing out that failing to include it in the deal would put the project’s financing, which is already risky, in further jeopardy.

“This is not an attempt to add value, it’s an attempt to get financing,” Witte said. “I don’t know if we can get [the project] through our credit committee if we don’t do something like this.”

Witte added that time is a significant issue in terms of the affordable housing financing component, pointing out that if the deal isn’t finished immediately, crucial tax credits will no longer be available.

Mayor Pro Tem expressed support for approving the extension option, saying that it would be unwise to risk the financing viability of the affordable housing attached to the project by making it any more difficult for the lender, Wells Fargo Bank, to justify financing it.

“The whole reason we’re here tonight doing this is because for Related to get financing, they need this extra 50 years,” Davis said. “That suggests to me, with all due respect to Mr. Witte and Related, which is a wonderful company, that they’re not sitting in the captain’s seat in negotiations with Wells Fargo. If we try to impose additional costs on this project, we’re going to kill the project.”

But Shriver reiterated his point, saying that the city should take more time for analysis, and expect further compensation for granting the option.

“This developer is a smart guy, and if we don’t approve this tonight, the first thing he’s going to do is make a list of things that they could do for relatively low cost to them, which might be extremely valuable to the city, that they would put on the table,” he said. “That’s what I’d do if I were him, and I bet he has it right now in his pocket.”

When Witte and his staff emerged from a private discussion, he announced that he would be willing to implement a first-source hiring program, whereby the developer would foster a set of training programs for Santa Monica workers, and give city residents first priority for permanent jobs created by the complex.

With the local jobs amendment added, the series of changes to the deal, including the lease extension option, passed the council.