Loading...
12-20-2011 - Disposition and Development Agreement with CGM Dev - Item 19 (2).docCity of West Covina Memorandum A G E N D A ITEM NO. 19 DATE: December 20, 2011 DATE: December 20, 2011 TO: Andrew G. Pasmant, City Manager and the City Council FROM: Christopher J. Chung Community Development Commission Director SUBJECT: DISPOSITION AND DEVELOPMENT AGREEMENT WITH CGM DEVELOPMENT, INC. RECOMMENDATION: It is recommended that the City Council approve the Disposition and Development Agreement (“DDA”) with CGM Development, Inc. (“CGM”) and authorize the City Manager, or his designee, to execute all agreements necessary to implement the medical/professional office development project. DISCUSSION: CGM is proposing a four-story, 55,680 square foot medical/professional office development at the Civic Center property. The office building would be located on an approximately 28,192 square foot pad at the corner of West Covina Parkway and Garvey Avenue. The site is currently zoned “P-B” (Public Building) and under the proposed “N-C” (Neighborhood Commercial) zoning, a variety of professional services, medical and retail uses would be permitted. The proposed building will be comprised of 39-condominium units allowing for private ownership of the individual units. CGM is pursuing the medical/professional office condominium project as they believe there is a strong market demand from small business professionals wishing to own their own property instead of leasing, and because CGM has demonstrated its ability to successfully develop similar condominium project in West Covina (i.e., Nogales Medical Plaza, a Class-A building). The medical/professional office development will be supported by a new 218-space parking lot (“Office Parking Lot”), which will be constructed by CGM. The City will retain ownership of the land and will grant CGM a parking easement. CGM will be responsible for the full cost to construct and maintain the Office Parking Lot, and will install a paid parking system similar to the system already install at the Civic Center. The revenue collected from the paid parking system will be collected by the City. Tenants of the building will be issued a parking pass, and visitors may be provided free parking by the use of a validation system or temporary parking passes. It is important to note that this parking arrangement may be amended or adjusted to improve parking for the tenants, visitors and City. Although the Office Parking Lot would be dedicated for the office development, library patrons would also be able to utilize the lot after business hours and weekends free of charge. The three handicap parking spaces adjacent to the library building will be available to the library patrons at no fee. The project will be a high-quality medical/professional office development. However, in the process of marketing the site several medical users indicated a desire to purchase the units. This resulted in an issue of how to limit which units could and could not be used for medical use, because medical use has a higher parking requirement under the City’s Zoning Code. In order to allow the flexibility of tenant mix and also to study the “worst-case” scenario, a parking study was performed analyzing the project as a 100% medical use. In doing so, this accidentally created an incorrect project description that the entire project was dedicated to 100% medical use and further created a perceived parking shortage by Code. The parking demand study found that a 100% medical use of the building would generate a parking demand of 177-spaces during peak hour, which is less than the 218-spaces proposed to be constructed. In addition, the Civic Center has ample over-flow parking, if necessary. The City conducted a parking survey of the Civic Center’s 625-parking spaces (surface and parking structure). The survey concluded that at peak hour, 79% of the Civic Center parking was utilized resulting in 137-parking excess spaces available for over-flow parking, if necessary. One of the primary reasons that the land for the Office Parking Lot is not being sold to CGM is to allow flexibility for the City to develop the site in the future, if so desired. The parking easement provides for a condition that the City may terminate the parking easement and take possession of the Office Parking Lot land by replacing the office parking spaces in the future development. Such a condition ensures that if in the future the City envisions redeveloping or upgrading the Civic Center, the City maintains control of a significant amount of the Civic Center property. Library Parking The proposed project is located in an area where the County of Los Angeles currently leases 100-parking spaces (Lot “A”) from the City (see Attachment No. 1 – Site Plan). The parking lease agreement with the County is set to expire in 2023 and poses a future parking loss for the County library, should the City not renew the lease. As a remedy to resolve a potential future problem now, CGM has proposed to consolidate all County library parking onto a County-owned parking lot which currently has 42-parking spaces (referred to as Lot “D”) located between the County Health Services and the library. CGM will build a new 129-space parking lot on County land at no cost to the City or the County. The City believes that the County is supportive of consolidating the library parking lot as it secures library parking now and for the future. The proposed parking lot will also include the County requested parkng gate and validation system to deter non-library patrons from parking in the lot. The parking study conducted verifies that non-library patrons (i.e. park and ride, other County departments and visitors to the courthouse) are currently impacting library parking areas. The library’s hours of operation are from 10 a.m. to 8:00 p.m., Tuesday, Wednesday, Thursday, and Saturday between 8:00 to 6:00 p.m. The library has approximately 29 full- and part-time employees and 15 employees working together at any given time. The library’s regional office located in the library building employees 11 persons and the bookmobile operation employ additional 4 people, for a total of 30 people at any given time. The parking survey revealed that as early as 7:00 a.m., when the library was closed and no library employees or visitors would be present, 30 parking spaces were occupied. More parking spaces filled up each half hour and at 9:30 a.m., approximately 73-spaces were occupied. Assuming that library employees utilized 30-parking spaces, 43 of the 73-parking spaces were most likely used by non-library users. At peak hour of 11:00 a.m., 131-parking spaces were utilized, of which approximately 43 to 62-spaces were most likely utilized by non-library patrons. The County is of the opinion that by installing gates and parking validation system, the library will be able to provide better parking amenities for library patrons and discourage non-patrons from parking in the lot. As such, 129-parking spaces would be sufficient for library employees and patrons by deterring parking by non-library patrons. The County has agreed to concept of consolidating all library parking into the new 129-parking space lot, and construction drawings are being finalized which are subject to approval by all County departments. The County has also selected the parking validation system to be installed by Developer. In addition, negotiations on the County agreements to approve the project have been completed and are being presented for the City Council consideration. Trees As part of CGM’s proposed project, CGM originally attempted to save as many trees as possible but learned that the site is comprised of undocumented fill that would not support the load of the structural improvements. CGM must excavate all undocumented fill to bedrock and recompact the entire site. Unfortunately, this requires a majority of trees to be removed. Although the trees are not protected or required to be replaced by City’s Municipal Code, the development will result in the installation of a greater number of trees than are being removed by the proposed project. According to the Developer, the project will remove a total of 114 trees on the City land and 19 trees on the County property (133 total trees). Of the 114 trees, 58 are large trees of 20 inches to 36 inches in trunk diameter, 34 trees are medium size of 7 inch to 18 inch in trunk diameter, and 22 are small trees and shrubs. The project will install 150 trees on-site (office development area and County Lot D parking area) and additional 50 trees will be installed at City parks or other public locations as desired by the City, for a total of 200 new trees. Thirty of the 150 trees to be installed on-site will be 36-inch box size and will be planted adjacent to the new medical/professional office building. CGM’s Landscape Architect indicates that the trees being removed are mature and could create significant issues in the future, including disease, infestation and fallen trees and limbs. The overcrowded landscape creates trees with significant loss of natural canopies and significant debris. Many trees exhibit uneven and poor shape and form, a shallow root systems and an unfavorable tree tilt in several trees could cause such trees to topple. It is also important to note that even if the proposed project does not move forward, the City may lose several trees along West Garvey Avenue due to the Caltrans HOV expansion project. Caltrans will be installing a five-foot side sidewalk and retaining wall along West Garvey Avenue from West Covina Parkway to Crazy Horse restaurant. As the landscape berm is undocumented fill, Caltrans may have to over-excavate and recompact the soil removing trees and landscaping in the process. The current zoning for the area is “P-B” (Public-Building), which is the same zoning as the Civic Center and the City yard, and is not designated open space or park. As a result, the landscaping within the area is not designated for park or open space, and is considered to be landscaped area for P-B zoning designation. Disposition and Development Agreement Salient Terms The DDA will provide for the authorization of the sale and development of the project in conjunction with the agreements with the County of Los Angeles (“County”). The following is a summary of the project deal points: Proposed Development: CGM is proposing to develop a 4-story, approximately 55,680 square foot medical/professional office that will also allow professional offices, medical, commercial retail and restaurants. Parking for the project will be supported by 218-spaces parking lot on 89,644 square foot of land. In order to construct the new office parking lot, the existing 100-space City-owned parking lot (Lot A) leased to the County library will be redesigned to support the project. CGM will also reconstruct the south County-owned parking lot (Lot D) to increase library parking spaces from 42-parking stalls to 129-parking stalls with a parking validation system at no cost to the County or the City. The construction of the new Lot D library parking lot will be completed before the existing Lot A parking lot is decommissioned to ensure minimal operational disturbance to the library. Site: The proposed development is located on the southeast corner of West Covina Parkway and Garvey Avenue of the Civic Center. The building pad will be on approximately 28,192 square feet of un-developed land for the development of a medical/professional office development that will also allow professional offices, medical, commercial retail and restaurants, and 89,644 square foot of land for the 218-space parking area. The City would maintain ownership of the City-owned parking area and would have the right or ability to develop it in the future, if desired. Purchase Price: CGM will purchase the 28,192 square foot building pad and have the right to park on the City-owned parking area. The purchase price is $700,000 (which is higher than the appraised fair market value) and includes full consideration for the value of the right to park on the City-owned parking area. Two separate appraisals have been prepared by two different MAI appraisers. Jay C. Fisher, MAI was retained by CGM and appraised the value of the office pad and right to park at $550,000. The City’s appraiser, Lidgard and Associates, appraised the office pad and right to park at $660,000. The City will carry a note for 80% of the Purchase Price for 180-days after the close of escrow at a fair market interest rate of 7% per annum. As a result, $140,000 would be received at the close of escrow and $579,600 (including principle and interest) would become due after 180-days (or $719,600 total). Escrow Period: Escrow will be opened within 15-days from approval of the DDA. The developer will deposit $50,000 an as good faith deposit. The term of the escrow period is 6-months or sooner. The City and the developer would each pay one-half (or equal share) of the escrow, recording, and notary fees. The City would provide the standard CLTA title insurance policy, and the developer may obtain extended ALTA coverage at its cost. Local Jobs: Prior to commencement of construction, the developer and its contractor will make reasonable efforts to first hire West Covina residents. The Developer and its contractor may work with local employment development department (e.g., EDD) or hold on-site job fairs. The project would also result in approximately 180 new permanent jobs and 114 construction jobs. Construction Start and Completion: The construction commencement date is within 180-days from the effective date of the DDA and issuance of permits from the County and the City. The new library parking Lot D will be completed before the existing Lot A parking lot is decommissioned. The completion term is 24-months from the construction commencement date. County Agreements: The County is in agreement with the new library parking lot design, and two (2) separate agreements are being finalized to allow for removal of the 100-space parking lot from the County’s lease and the ability to construct the new 129-space parking lot on the County property. The Developer will sublet the County Ground Lease Agreement to facilitate the improvements and will further provide all necessary insurance and indemnity for City and County. Project Benefits The proposed project would result in various benefits to the City, County and the library in many ways, including but not limited to the following: The project will provide a high-quality medical/professional office development with landscaping and water fountain features, and will become the gateway into the Civic Center. An entry monument signage would be constructed at the intersection of Garvey Avenue and West Covina Parkway to predominately identify the Civic Center facilities. The development does not impact the Civic Center’s grass area between City Hall and the library where City functions are held (i.e. Easter Egg Hunt). The development would create approximately 180-permanent jobs and 114-construction jobs. The development would generate approximately $183,000 in new annual property tax to the City. The project will create added synergy within the Civic Center by infusing and increasing the City’s professional work force and attracting more visitors into the City. The added draw of people working, shopping and dining would further result in economic spin-off benefits and revenues to the surrounding area. The project would provide medical/professional services to the community and would also promote West Covina as a business-friendly City. City would receive land sale proceed of $700,000, plus interest for carrying a note of 80% of the purchase price for 180-days at an annum interest rate of 7%. The project would result in West Covina businesses serving West Covina residents. CGM will construct a new 129-space library parking lot on the County’s property at no cost to the County or the City. This will benefit the County and the library in the following ways: The current 100-space library parking is leased to the County from the City and will expire in 2023. The new County 129-space parking lot would alleviate the future parking shortage and the potential impact to the library operation when the 100-space parking lot reverts back to the City. At the request of the County library, a gate and parking validation system will be installed in the new 129-space County parking lot. This will allow for the library to have better control of the parking lot usage for its patrons and will be a deterrent for non-library users such as park and ride, other County facilities and Municipal Court parking. The County has approved the concept of consolidating library parking to a new 129-space parking lot on County land and has approved the initial design of the new County library parking lot. The parking lot is subject to the County’s final approval and the construction drawings are currently in the County’s plancheck process. The County believes that the parking validation system will discourage non-library users, resulting in adequate parking for library patrons. The office development will also allow the three handicap parking spaces adjacent to the library to be available for library patrons and the entire office parking lot will be available to library patrons after business hours and during weekends. The 218-space Office Parking Lot would also be available to library patrons during non-business hours and weekends at no charge. This parking lot will be owned by the City and easement granted to the office development project. As such, the City will maintain certain rights to the land, including the ability to develop the land for a larger Civic Center project in the future, subject to constructing replacement parking for the office development. 11. The project will replace more trees than it is removing (200 trees replaced to 133 trees lost). 150 trees will be replaced on-site (office development area and County Lot D parking area) of which 30 trees will be a 36-inch box trees and will be planted adjacent to the medical/professional office development. Additional 50 trees will be installed at City parks or other public locations as desired by the City, for a total of 200 new trees. The proposed project has a higher landscaping coverage (15.34%) than required by Code (8%) and the project will become a prominent gateway into the Civic Center. The proposed is consistent with the established goals and objectives of the City of West Covina General Plan as follows: The General Plan states that the City’s vision of establishing West Covina as “the Headquarters City of the East San Gabriel Valley” dates back over 25 years (1986) when the Civic Center property was identified as part of the City’s Central Business District Core boundary in the City’s General Plan. In order to achieve this goal, the General Plan adopted goals and objectives and implementation measures within the Economic Development Element of the General Plan to, “actively encourage appropriate development of vacant land within core areas” and that the “Redevelopment Agency shall actively market sites currently owned by the City or the Agency.” In the General Plan’s Land Use Element, it states that the City should provide for a range of non-residential uses that will ensure a strong economic base for the City. The Land Use Element designated two major commercial cores for intense regional commercial activity. One core is the Central Business District in which the General Plan states that has opportunities for development that are almost unlimited and the Civic Center and proposed project is located within that Central Business District Core. The General Plan identified the Civic Center to be an area for intense regional commercial activity and further stated that rezoning land use may be necessary to achieve such goals. As such, the proposed medical/professional office development at the Civic Center is consistent with the Land Use Element and the General Plan. c. In the General Plan’s Economic Development Element, it states that sound local economy is essential to the City’s future vitality. It provides jobs for the labor force, increase disposable incomes of residents, and assures the City the revenues, which finance its wide range of responsibilities. The Economic Development Element stated goals and objectives as follows: In the 1986 General Plan, the City recognized that the City can no longer rely upon new construction on vacant land and a growing population to generate funds to provide the high level of public services familiar to West Covina residents. As a result, the Economic Development Element states that through effective economic development, West Covina must secure additional sources of revenue to maintain its standard for quality of life. Develop and expand the local economy in order to create new employment opportunities, attract new investment and strengthen the tax base of the City. It is the economic goal of West Covina to attract employment opportunities into West Covina to create a larger daytime population for the City. Implementation of the Economic Development Elements Goals and Objectives are: The City shall actively encourage appropriate development of vacant land within core areas (Central Business District Core that project falls within). The Redevelopment Agency shall actively market the sites currently owned by the City or the Agency. The City shall identify and assemble development sites to accommodate major corporate and industrial users. As such, the City’s General Plan recognized the need to diversify land use and employment base in which the proposed project would achieve. The CDC has been pursuing a redevelopment project at the Civic Center for the past 17 years and the proposed development is consistent with the Goals and Objectives of the West Covina’s Redevelopment Plan and CDC’s Implementation Plans as follows: The 1994 Redevelopment Plan called for the development of the Cameron Avenue/Civic Center area as an “office and business district.” The Redevelopment Plan that was amended in 1996, further clarified the goals of the West Covina Redevelopment Project Area to “Encourage expansion of local commercial and industrial opportunities which will create jobs and an expanded sales and property tax base” and to “Introduce comprehensive planning, redesign, replanning, reconstruction, and rehabilitation of uses to facilitate a higher and better utilization of land. The reference of “higher and better utilization of land” means to develop high-rise office towers consistent with the City’s General Plan goals of attracting corporations and being the “Headquarters City of the East San Gabriel Valley.” The Civic Center site has been specifically identified as a potential redevelopment site in the 2005-2009 and 2010-2014 Redevelopment Implementation Plans, which states that “[T]he City owned 7.8-acre site, with excellent freeway access and visibility, is located at the southeast corner of West Covina Parkway and Garvey Avenue South. Possible developments could include a hotel, offices, commercial retail and/or restaurants.” Summary In summary, the City has been pursuing a project following the goals and Objectives of the City’s General Plan, the West Covina Redevelopment Plan and the Community Development Commission’s 5-Year Implementation Plan. The goals and objectives of the plans date back to over 25 years (1986). In considering all the goals and objectives, it is believed that the vision of the City is to attract the “corporate” and “headquarters” which can only be done by intensifying land use within the Central Business District core and developing high rise office buildings. The City has already embarked on developing high-rise developments and a 4-story medical/professional office development would be consistent with the efforts and visions already bestowed by the forefathers of West Covina. It is not an easy process to create a General Plan and develop the overall goals and objectives of where the City is to be in the future. It takes numerous community meetings and significant community input to set the vision of the City. As such, City has been following the goals and objectives currently set for the City’s General Plan. The proposed project is consistent with the General Plan, Redevelopment Plan and Implementation Plan. The proposed project will also have long-term benefits to the County, County library and library patrons. The City parking lease to the County is set expire in 2023 and should the City not renew the lease, the library will stand to lose 100-parking spaces. The County would need to resolve the loss of parking at that time and City would have the right to utilize the 100-parking space area (Lot A) as desired. In addition, the County would need to resolve the current parking impacts of non-library users (i.e. park and ride, other County departments and utilizing library parking). CGM is proposing to resolve the County’s future parking problem now by constructing a new 129-space parking lot on County owned land with a gate and parking validation system at no cost to the City or County. The proposed project will not only generate land sale proceeds of $700,000 (plus interest as stated above), it will also create new diverse employment opportunities and result in West Covina businesses serving and employing West Covina residents. ALTERNATIVES: The CDC Board has the following alternatives: Approve the Disposition and Development Agreement (“DDA”) with CGM Development, Inc. and authorize the City Manager, or his designee, to execute all agreements necessary to implement the medical/professional office development project; Deny the DDA; Direct Staff to renegotiate the DDA under different terms and conditions; or Provide staff with an alternative direction. FISCAL IMPACT: The City will realize $700,000 (plus interest) in land sale and parking easement proceeds. The City will also receive new property tax revenue of approximately $183,000 (annual) and any incremental sales tax generated by the project. In addition, 180 new employment opportunities with increased trips to city will result in spin-off revenues to the City. Prepared by: Benjamin Kim Reviewed by: Mike Lee Redevelopment Manager Assistant CDC Director Reviewed/ Arnold M. Alvarez-Glasman Approved by: Christopher J. Chung Approved by: City Attorney CDC Director Attachments: No. 1 – Site map and elevation plans No. 2 – Disposition and Development Agreement (“DDA”) No. 3 – County of Los Angeles Construction Lease for Parking Lot D No. 4 – County of Los Angeles Parking Lease Amendment No. 3 Attachment No. 1 Site Map and Elevation    Rear View  North View  South View  East View  West View Attachment No. 2 Disposition and Development Agreement (“DDA”) Attachment No. 3 County of Los Angeles Construction Lease for Parking Lot D Attachment No. 4 County of Los Angeles Parking Lease Amendment No. 3