SR-410-007-01 (3)
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Santa Monica,
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MAY 1 7 1988
C/ED: HD:JM: jt
City council: 5/17/88
California
TO: Mayor and city Council Members
FROM: City staff
SUBJECT: Recommendation to Approve Selection of Developer for
Main Street Mixed Use Development
INTRODUCTION
The report recommends that the City Council (1) approve the
selection of community Corporation of Santa Monica (CCSM) as the
Developer for the housing portion of the Main Street project; and
(2) direct the City Attorney to prepare resolutions authorizing
the transfer of the air rights for the housing to the Developer.
The report also describes the next steps to be taken by the city
council.
BACKGROUND
The City Council directed staff at its February 23, 1988 meeting
to prepare specific plans for a structure incorporating 460 park-
ing spaces, 49 units of low and moderate income rental housing,
and 3600 square feet of retail space. At the same time, the city
Council also directed staff to prepare appropriate environmental
analyses, investigate alternative construction-period parking
options, and refine financing plans for the development.
In order to implement Council direction, staff prepared a Request
for Proposals (RFP) to identify an Architecture and Engineering
team and a second RFP to identify a housing developer. Staff is
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proposing that the city sell the air-rights for the housing
units to a developer who will own, operate, and manage the units
for a minimum 40 year term, as Council has chosen to do on the
senior housing development on Third street. The city will work
closely with the Developer in every aspect of the development of
the housing component, and will retain responsibility for overall
project management during the development phase of the project.
DISCUSSION
Request for Proposals Selection criteria
Subsequent to Council direction to proceed, staff prepared a
Request for Proposals soliciting developers experienced with low
and moderate income housing development and management. The RFP
outlined the project description, the qualifications to be sub-
mitted, and the selection process to be utilized. The selection
criteria included:
1. Demonstrated ability and experience of the developer in
low and moderate income mUlti-family rental housing.
2. Financial capacity of the developer, including past
financial history and current outlook, developer's
ability to commit financial resources to the project,
and the scope of the proj ect in relationship to the
financial capacity of the developer.
3. Scope, extent, and quality of developer's experience in
managing low and moderate income multi-family rental
housing.
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4. Demonstrated ability of developer in serving the area
where the project is to be located, and ability to work
with and be responsive to local neighborhood groups,
low income tenants, and interested citizens.
5. The degree to which the developer has demonstrated the
ability to bring equity and/or other financing to the
proj ect to leverage Ci ty funds in a cost effective
manner.
6. The reasonableness of proposed development and manage-
ment fees in relationship to the overall development
program.
The RFP was issued on April 1, 1988. A notice was also published
in the Evening Outlook on April 1, 1988. Thirty-three (33) non-
profit and for-profit developers in the Southern California
region received copies of the RFP. Responses to the RFP were due
May 2, 1988. Four developers submitted proposals.
The following briefly outlines the qualifications of the
developers who submitted proposals.
1. Century-West-De Castro Enterprises is a Santa Monica
based joint venture organized for this project. Century
West Development is a developer of residential and com-
mercial properties, including multi-family projects
managed by Century West. Luis De Castro has been a
principal in several commercial projects in Santa Moni-
ca including the AMC Theatres project. The partnership
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did not submit detailed information regarding their
development experience, management experience, or fi-
nancial capacity. The Partnership proposed to develop
the project for fee equal to 12% of total development
costs.
2. Community Corporation of Santa Monica (CCSM) is a non-
profit 501 (c) (3) corporation which has developed and
manages 215 low and moderate income rental units in
Santa Monica. CCSM proposed development fees of 1.5%
plus $15,000, and management fees equal to $35 per door
per month.
3. Topa-Malzman Properties is a recently formed Los An-
geles based partnership comprised of Topa Development
Company and Mark Malzman. As a Director of Shapell
Government Housing, Mr. Malzman oversaw the development
of approximately 6,000 units of low income rental hous-
ing. Topa Management Company currently manages 3,500
low income rental units in California. The Partnership
proposed a development fee equal to 10% of development
costs, and a management fee of 5% of gross rents.
4. National Church Residences (NCR) is an Ohio based non-
profit 50l(c) (3) corporation which has developed and
manages some 6,000 units of low and moderate income
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elderly housing. They have developed three such proj-
ects in the Los Angeles area. NCR proposed a develop-
ment fee of $100,000, or about 3% of development costs,
and a management fee equal to 6% of gross rents.
Evaluation Process
The evaluation process consisted of an extensive review of the
proposals submitted and interview of the top three developers.
The submittals were reviewed by the Housing Division staff and
ranked based upon the selection criteria described in the RFP.
The interviews with the top three developers focused on organiza-
tional capacity, qualifications of staff to be assigned to the
project, development and management procedures, and community
responsiveness.
Developer Selection
Based upon this extensive evaluation process, staff found Com-
munity Corporation of Santa Monica to be the Proposer most
qualified to be selected to develop the housing portion of the
Main street Mixed Use Development. The following describes the
qualifications of this developer in comparison to the criteria
established in the RFP.
1. Development Capacity
CCSM has developed 215 units of housing within the City of Santa
Monica, and has an additional 140 units currently under construc-
tion. CCSM has consistently demonstrated its ability to develop
mUlti-family housing projects comparable in complexity to the
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Main street Mixed Use Development, and will bring to this project
a level of expertise not offered by any other Proposer.
2. Management Capacity
CCSM manages all of the housing it develops. This housing serves
a broad range of socioeconomic interests with differing needs and
expectations, and the organization has compiled a track record
characterized by both operating efficiency and attention to resi-
dent concerns. The organization has clearly demonstrated the
capacity to manage the proposed project.
3. Financial Capacity
CCSM Financial statements indicate the corporation has assets of
approximately $8 million, with cash on hand of approximately $.2
million. As a locally based non-prOfit the organization does not
have the kind of liquid capital available to it that other Pro-
posers possess, but CCSM does have sufficient financial capacity
given the scope of the proposed project.
4. Community Responsiveness
CCSM has demonstrated an ability to work with and be responsive
to local communi ty groups, low income tenants and interested
citizens which is unmatched by any Proposer. This ability will
make an invaluable contribution to the success of the Main street
Mixed Use Development.
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5. Leveraging and Cost Effectiveness
In leveraging $l2 million dollars in private funds to supplement
City funds for CCSM projects, CCSM has demonstrated the ability
to bring financing to the proposed project in a cost-effective
manner.
6. Fees
Development and management fees proposed by CCSM are reasonable
in relationship to the overall development program. CCSM's fees
are lower than those requested by any other Proposer.
Based upon these criteria staff recommends the selection of CCSM
to develop the housing portion of the Main street project.
Next steps
Once the selection of the Developer has been made, the Developer
will participate with staff in the selection of an Architect and
Engineering team for the Main street Mixed Use Development.
Staff will return in June with a recommendation to approve the
selection of the Architect and Engineering team.
An Option Agreement between the City and the Developer will give
the Developer the exclusive right to purchase the air-rights for
the housing development. Prior to the execution of this option
Agreement, the City Council will be required to hold a publ ic
hearing regarding the sale of air-rights to the Developer. This
report recommends that the City Council direct the city Attorney
to prepare the required resolutions and public notice of sale.
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Transfer of the air-rights will be subj ect to execution of a
Sales Agreement outlining the conditions of the sale to the
Developer. Following execution of an option Agreement, Staff
will return with the proposed terms of the Sales Agreement.
staff will also return to Council for approval of specific
financing plans for the project, certification of environmental
review documentation, and approval of construction period parking
plans.
FINANCIAL/BUDGETARY IMPACT
There are no financial or budgetary impacts as a result of the
recommendations in this report. The housing component of the
project will be financed by a mix of private debt financing,
developer equity obtained through syndication, and the $2,652,909
in in-lieu fee payments from Southmark Corporation for the
Colorado Place Phase II project. Staff will return with a
specific financing proposal for council approval. No specific
expenditure authorization is required at this time.
RECOMMENDATIONS
It is recommended that the City Council:
1. Approve the selection of Community Corporation of Santa
Monica as Developer of the Main Street Mixed-Use
Development.
2. Direct the City Attorney to prepared the necessary City
Council Resolution and notice of intent to sell the
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air-rights for the housing development contingent upon
execution of a Sales Agreement with the Developer.
Prepared by: Jeff Mudrick, Senior Development Analyst
Candy Rupp, Housing Program Manager
Department of Community and Economic Development
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