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O2653City Council Meeting: October 13, 2020 Santa Monica, California ORDINANCE NUMBER 2653 (CCS) (City Council Series) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA APPROVING THE DEVELOPMENT AGREEMENT BETWEEN THE CITY OF SANTA MONICA, A MUNICIPAL CORPORATION, AND OCEAN AVENUE LLC, A DELAWARE LIMITED LIABILITY COMPANY WHEREAS, pursuant to California Government Code Section 65864 et seq., and Chapter 9.60 of the Santa Monica Municipal Code (collectively, the “Development Agreement Statutes”), the City is authorized to enter into binding development agreements with persons or entities having a legal or equitable interest in real property for the development of such real property; and WHEREAS, Ocean Avenue, LLC, a Delaware limited liability company (the “Developer”) is the owner of approximately 192,063 square feet of land located in the City of Santa Monica, State of California, commonly known as 1133 Ocean Avenue (the “Property”), which is currently improved with a 301-room hotel (the “Hotel”) comprised of the following: (1) the six-story City- designated Landmark Palisades Building, constructed in 1924, which runs along the northern portion of Second Street and the eastern portion of California Avenue (the “Palisades Building”), (2) the ten-story Ocean Tower that lies in the middle portion of the Property, with an elevator tower rising to approximately twelve stories (the “Existing Ocean Tower”), (3) the two-story Administration Building that includes meeting and back of house space and is located on the southern portion of the Property near Second Street (the “Existing Administration Building”), (4) a one-story building that houses The Bungalow lounge/bar located between the parking lot on 1 of 15 DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 2 of 15 Wilshire Boulevard and Ocean Avenue and the Ocean Tower, (5) several single-story and two- story buildings on the northwestern portion of the Property along Ocean Avenue and California Avenue (the “Existing Bungalows”), (6) 103 parking spaces in two surface parking lots located adjacent to Wilshire Boulevard, (7) and extensive perimeter walls that limit pedestrian and visual access to/from the Property; and WHEREAS, the Moreton Bay Fig Tree, planted in 1879 and landmarked by the City on August 17, 1976 (the “Moreton Bay Fig Tree”) is also located on the Property; and WHEREAS, Developer is also the owner of approximately 15,000 square feet of land located in the City of Santa Monica, State of California, commonly known as 1127-1129 Second Street (the “Second Street Property”), which is currently improved with a surface parking lot with 64 parking spaces that is utilized by the Hotel’s valet parking operation; and WHEREAS, the City has included the Property within the Downtown Core land use designation under the City’s 2010 Land Use and Circulation Element of its General Plan (the “LUCE”), and LUCE Policy D1.5 designates the Property as one of seven sites in the Downtown District to focus new investment given its accessibility to transit and ability to accommodate mixed-use development, contribute to the pedestrian-oriented environment, and support substantial community benefits; and WHEREAS, the LUCE did not establish maximum building height limits, floor area ratios (“FAR”), or other specific development standards (e.g., setbacks and step backs) for new buildings within the Downtown Core designation; instead, the LUCE deferred such standards to a future Downtown specific plan; and WHEREAS, on April 27, 2011, Developer filed an application for a Development Agreement, pursuant to Santa Monica Municipal Code (“SMMC”) Section 9.60.020 DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 3 of 15 (the “Development Application”), which was designated by the City as Application No. 011DEV- 003 and which proposes a mixed-use hotel/residential project with ground floor retail and subterranean parking; the originally-filed plans (the “2011 Plans”) proposed, among other things, 265 hotel rooms, 120 residential condominiums units, a maximum height of 135 feet, and a 2.9 FAR; and WHEREAS, as further described below, the Development Application was revised and refined since the initial filing but has always included hotel and pedestrian-oriented retail/restaurant uses, residential uses, and subterranean parking, as is more fully described in the proposed Development Agreement attached as Exhibit A (the “Development Agreement”); and WHEREAS, the Property is located in the California Coastal Zone. The City has a 1992 Coastal Land Use Plan that is partially certified by the California Coastal Commission (“1992 LUP”). In October 2018, the City adopted the Local Coastal Program Update, Land Use Plan, Final Draft, October 2018 (“2018 Draft LUP”) to replace the 1992 LUP. The 2018 Draft LUP has been submitted to the California Coastal Commission for certification but has not been certified as of this Agreement’s Effective Date; and WHEREAS, on April 27, 2011, Developer filed an application seeking an amendment to the 1992 LUP (the “1992 LUP Amendment”) and on September 27, 2019 modified the application to be consistent with the Downtown Community Plan (“DCP”) and 2018 Draft LUP policies. The 1992 LUP Amendment, as modified, would: 1) Revise 1992 LUP Policy #67 to allow a maximum height of 130 feet and FAR of 2.6 for the Property; DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 4 of 15 2) Revise 1992 LUP Policy #68 to clarify the allowed uses at the Second Street Property include a 100% Affordable Housing Project developed at the maximum development standards in 1992 LUP Policy #69; and 3) Revise 1992 LUP Policy #69 to allow a maximum height of 60 feet, 2.75 FAR on the Second Street Property and confirm that the development standards for medium- density multiple family residential areas do not apply to the Second Street Property; and WHEREAS, on February 8, 2012, the Planning Commission held a public hearing to preliminarily review and provide feedback on the 2011 Plans; and WHEREAS, in March 2012, Developer filed a Landmark application to augment the 1976 Landmark designation of the Moreton Bay Fig Tree. The Landmarks Commission held public hearings on the proposed amendment application (12LM-002) and on January 14, 2013 designated the Palisades Building as a City Landmark and the Property as a Landmark Parcel. In addition, the Landmarks Commission issued a Statement of Official Action documenting the following: (i) the Moreton Bay Fig Tree remains a City Landmark; (ii) the Palisades Building is a City Landmark under Landmarks Ordinance Criteria 1 and 4; (iii) the Property was described as a Landmark Parcel for its long-standing association with tourism and leisure, as well as with historic persons including one of Santa Monica’s founding fathers; (iv) the other existing buildings on the Main Property were expressly excluded from the Landmark designation given their significant past alterations; and (v) no individual elements of the Property’s landscape (other than the Moreton Bay Fig Tree) are historically significant, however the verdant landscape character was identified as significant under Criterion 6; and WHEREAS, on April 24, 2012, the City Council held a public hearing to preliminarily review and provide feedback on the 2011 Plans; and DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 5 of 15 WHEREAS, in 2013, the 2011 Plans were revised in response to feedback from the Planning Commission, City Council and members of the public. The revised 2013 plans (the “2013 Plans“), as compared with the 2011 Plans, included, among other things, reduced density (2.8 FAR), increased height (maximum height of 262 feet), increased hotel rooms (280 rooms), and the same maximum number of residential condominiums (120 units); and WHEREAS, in August 2017, the City adopted the DCP, a specific plan governing the Downtown including the Property. The Property is located within both the DCP’s Ocean Transition District and the Established Large Site (“ELS”) Overlay designations. The ELS Overlay is provided for three sites in the Downtown that the DCP indicated have the potential to accommodate significant new development and provide significant community benefits. The ELS Overlay designation allows any project on the Property to request approval for development up to 130 feet in height and a 3.0 FAR subject to the project being processed through a development agreement, as well as compliance with other specified requirements. Table 2A.4 of the DCP lists three “preferred” community benefits for a project on the Property: affordable housing, public open space, and historic preservation, all of which are components of the current proposed project that would be the subject of the Development Agreement; and WHEREAS, after adoption of the DCP, the 2013 Plans were revised to conform with the DCP. Revised plans filed in 2018 (the “2018 Plans”), as compared with the 2011 and 2013 Plans, included, among other things, reduced density (2.6 FAR), reduced height (maximum height of 130 feet), reduced number of condominium units (up to 60 units), and an increased number of hotel rooms (312 rooms); and WHEREAS, on March 11, 2019, the Landmarks Commission held a public hearing to preliminarily review and provide feedback on the 2018 Plans; and DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 6 of 15 WHEREAS, on April 15, 2019, the Architectural Review Board held a public hearing to preliminarily review and provide feedback on the 2018 Plans; and WHEREAS, the current proposed project (the “Project”) now includes, among other things, (1) retention and celebration of the Moreton Bay Fig Tree, (2) preservation and adaptive reuse of the Palisades Building for hotel uses, (3) a new terraced two to ten-story building designed around the Moreton Bay Fig Tree with hotel, residential and ground floor retail/café uses and an above-grade six-floor physical connection to the six-floor Palisades Building (the “Ocean Building”), (4) a new seven-story building with hotel uses near the corner of Ocean Avenue and California Avenue with an above-grade six-floor physical connection to the Palisades Building (the “California Building”), (5) substantial open space, including publicly- accessible open space, (6) subterranean space including for parking, and (7) substantial other project features and community benefits; and WHEREAS, the Property is located within Subarea 3B (Ocean Avenue North of the Pier) in the 1992 LUP. The 2018 Draft LUP reflects the LUCE and DCP policies with respect to the Property’s development standards. The Property is located within Subarea 5, Downtown District of the 2018 Draft LUP; and WHEREAS, to aid in the redevelopment of the Property, the City and Developer desire to allow Developer to demolish the existing improvements except for the Palisades Building and the Moreton Bay Fig Tree and construct a new mixed-use hotel and residential project with ground floor retail and subterranean parking; and WHEREAS, the City prepared and circulated for public review and comment a Draft Environmental Impact Report (the “DEIR”) pursuant to the California Environmental Quality Act (“CEQA”) and designated SCH No. 2013047091 to evaluate the Project’s potential DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 7 of 15 environmental impacts. Following close of the comment period, the City prepared a Final Environmental Impact Report pursuant to CEQA (the “EIR”); and WHEREAS, the primary purpose of the Project is to redevelop the Property, which has been in hotel use for over 100 years, with a new mixed-use hotel/residential project that preserves and features the Palisades Building and Moreton Bay Fig Tree, is pedestrian-friendly, includes sufficient on-site parking, retains and creates union jobs, and includes substantial open space, affordable housing and other benefits to the community consistent with the LUCE, DCP and 2018 Draft LUP; and WHEREAS, the City Council has determined that a development agreement substantially in the form of the Development Agreement is appropriate for the proposed development of the Project on the Property; and WHEREAS, the Development Agreement will (1) eliminate uncertainty in planning for the Project and result in the orderly development of the Project, (2) assure installation of necessary improvements on the Property, (3) provide for public infrastructure and services appropriate to development of the Project, (4) preserve substantial City discretion in reviewing the Project’s design in accordance with Article 6 of the Development Agreement, (5) secure for the City improvements that benefit the public, (6) ensure the provision of community benefits as envisioned in the LUCE and DCP, and (7) otherwise achieve the goals and purposes for which the Development Agreement Statutes were enacted; and WHEREAS, the Development Agreement is consistent with the public health, safety, and welfare needs of the residents of the City and the surrounding region. The City has specifically considered and approved the impact and benefits of the development of the Project on the Property in accordance with the Development Agreement. Consistent with the DCP, the Project DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 8 of 15 will provide a number of significant project features and community benefits as set forth in Sections 2.7 and 2.8 of the Development Agreement; and WHEREAS, the City Council has found that the provisions of the Development Agreement are consistent with the relevant provisions of the City’s General Plan, including the LUCE, the DCP, the 1992 LUP as amended by the 1992 LUP Amendment, and the 2018 Draft LUP; and WHEREAS, on June 9, 2020, Developer filed a vesting tentative tract map application for the Project (Application No. 20ENT-0153) for airspace and condominium purposes, to among other things, create a subdivision consisting of Lot 1 for the hotel (“Lot 1”) and Lot 2 for the residential condominiums (“Lot 2”). The subdivision application will both (a) allow the residential and commercial components of the Project to be separately leased, financed and/or sold (potentially in bulk) and (b) allow the residential condominiums to be separately sold. The tract map submitted with the application (the “Tract Map”) was designated as VTTM No. 82906; and WHEREAS, on September 2 and 9, 2020 the City's Planning Commission held a duly noticed public hearing on the Development Application (as it has been modified), the EIR, the 1992 LUP Amendment, the Tract Map, and the Development Agreement, and at such hearing, subject to certain suggested modifications, the Planning Commission recommended that the City Council certify the EIR and approve the 1992 LUP Amendment, the Project including the Development Agreement, and the Tract Map; and WHEREAS, on September 29, 2020, the City Council held a duly noticed public hearing on the Development Application (as it has been modified), the EIR, the 1992 LUP Amendment, the Tract Map, and the Development Agreement, and at such hearing the City certified the EIR and adopted a Statement of Overriding Considerations and Mitigation Monitoring Plan, adopted DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 9 of 15 Resolution 11292 approving the 1992 LUP Amendment, approved the Tract Map, and introduced for first reading this Ordinance approving the Development Agreement; WHEREAS, the City Council finds that the proposed Development Agreement is consistent with the objectives, policies, general land uses and programs specified in the LUCE and DCP, as described below and as detailed in the accompanying City Council staff report prepared for this Project and exhibits thereto, including but not limited to the following specific findings ("Findings"): 1. The proposed Development Agreement is consistent with the objectives, policies, general land uses and programs specified in the general plan and any applicable specific plan. The LUCE and DCP are the City’s applicable general and specific plans. LUCE Goal D1 (Downtown Districts Goal and Policies) seeks to maintain Downtown’s competitive advantage as a premier local and regional shopping, dining, and entertainment destination, and support its evolution in order to respond to changing market conditions. DCP Goal LU1 states that the Downtown Community Plan area is a high quality, mixed-use district offering opportunities for housing for people across the income spectrum, jobs, arts and culture, local-serving retail and community/visitor gathering places. The proposed project is consistent with these policies because the proposed mixed-use hotel would create high quality new lodging, retail, and dining; create new publicly-accessible open space with a significant work of art and a historic interpretative feature; and also create new affordable and market-rate housing. Consistent with DCP Goal D7 and DCP Policy D7.1 that seek to create a balanced mix of uses in the Downtown that reinforces its role as the greatest concentration of activity in the City, the project proposes a variety of uses that support this policy, including new lodging, retail, restaurants, and market-rate and deed-restricted affordable housing. More specifically, the project proposes a new 312 room hotel and 102 residential units of which a minimum of 42 units will be deed-restricted affordable units with a diverse range of affordable housing unit DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 10 of 15 types for households of all sizes within the Downtown, consistent with DCP Policy D7.7. The implementation of a Transportation Demand Management (TDM) Program to reduce vehicle trips in the area and associated parking demand is consistent with LUCE Circulation Policy T19.2 which seeks appropriate TDM requirements for new development. Furthermore, the project is consistent with the LUCE’s overall land use policies by providing community benefits for the area, including but not limited to, affordable housing, mobility, sustainable water infrastructure programs, affordable lodging, open space, historic preservation, and expanding economic equity and opportunity initiatives in the City. Moreover, the proposed project is consistent with the policies applicable to the site as set forth in the both the Local Coastal Land Use Plan that was adopted by the City Council on October 9, 2018 that is pending certification by the California Coastal Commission and which is applicable to Downtown District development including the subject property, and, as amended, the partially-certified 1992 Local Coastal Program Land Use Plan. 2. The proposed Development Agreement is compatible with the uses authorized in the district in which the real property is located, in that the subject property is located in the Downtown District that allows multi-family residential uses and a wide range of commercial uses. The proposed Development Agreement is consistent with LUCE Goal D7, Policy D7.1, and DCP Goal LU1.2 which all seek to create a balanced mix of uses in the Downtown that reinforces the area’s role as having the greatest concentration of activity in the City. DCP Policy LU1.2 supports accommodating the development of uses that support a 17 hours a day/7 days a week environment that meets the needs of businesses and residents; such uses include retail goods and services, food stores, restaurants and cafés, hotels, health clubs, entertainment and comparable uses. The project proposes full service lodging, food and beverage outlets, spa/fitness, meeting/banquet facilities, and associated commercial retail and restaurant uses. Further, the project proposes 102 residential units with a diverse unit mix, of which a minimum DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 11 of 15 of 42 units will be deed-restricted affordable housing units for households of all sizes within the Downtown, consistent with LUCE Policy D7.7. 3. The proposed Development Agreement is in conformity with the public necessity, public convenience, general welfare, and good land use practices, in that it allows for the redevelopment of an existing, aging hotel property that would benefit from reinvestment to increase employment, increase transient occupancy taxes paid to the City, and create a mixed-use hotel project that is consistent with the LUCE and DCP vision for the area. The proposed project would replace an existing hotel and surface parking lots, preserve historic features on the property, and provide new lodging that will feature retail, spa/fitness, and food and beverage uses in different areas of the hotel that are open to the public. Moreover, the project will provide community benefits including affordable housing, publicly-accessible open space, and monetary contributions that would support mobility, construction of affordable housing, parks and recreation, early childhood initiatives, historic preservation, and water infrastructure programs in the City. Further, the project seeks to be consistent with the City’s sustainability goals by committing to LEED® Platinum certification with a building designed to achieve 15% less energy than required by California Energy Code, 20% less water use than the existing hotel on the parcel, the use of renewable sources for heating the roof-top pool, using non-potable water sources for landscape irrigation, and committing to indoor water use of 30% below CALGreen baseline standards. 4. The proposed Development Agreement will not be detrimental to the health, safety and general welfare, in that the Development Agreement would allow for the redevelopment of an existing hotel property that is consistent with the LUCE and DCP vision for the area. The proposed project will be located in an urbanized area, is consistent with other similar improvements in the area, and does not have the potential to disrupt the urban environment or cause health or safety problems. The proposed project provides 102 new residential units, DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 12 of 15 of which a minimum of 42 will be deed restricted affordable units. The project will feature commercial uses on the ground floor, a variety of open spaces on the property, including a 14,000 SF publicly-accessible open space area with a requirement to program the space for community events, and will feature public art and a historic interpretive feature. The project will also provide community benefits including the aforementioned deed restricted affordable housing as well as monetary contributions that would support the City’s affordable housing development fund, mobility/transportation, water infrastructure programs, affordable lodging, and community economic equity/opportunity initiatives. 5. The proposed Development Agreement will not adversely affect the orderly development of the property, in that the Development Agreement is contingent upon the review and approval of a specific site plan consistent with recognized urban design principles that reflect the goals and policies of the City of Santa Monica which were established through a long range planning process and are reflected in the LUCE and DCP. Further, the project will be subject to a construction management plan that will be reviewed and approved prior to issuance of a building permit for the project. 6. It is estimated that the proposed Development Agreement’s net fiscal impact to the City’s General Fund will be approximately $15.4 Million ($8.1 Million net new) during the first year of stabilized operations. Across the 26-year cumulative period that includes 20 years of stabilized operations, it is estimated that the project’s net fiscal impact to the City’s General Fund will be approximately $444.4 Million ($218.3 Million net new). The estimated net fiscal impact associated with the revitalized hotel will primarily be a result of the new hotel generating substantial additional Transient Occupancy Tax for the City and commercial uses generating City business license taxes and sales tax. The project would also provide an estimated total of $4.645 Million in monetary contributions that would support the City’s DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 13 of 15 affordable housing development fund, mobility/transportation projects, water infrastructure programs, affordable lodging, parks and recreation, and community economic equity/opportunity initiatives. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. The above referenced recitals are true and correct and incorporated herein by reference. SECTION 2. Based upon Findings 1-6, the Development Agreement attached hereto as Exhibit A and incorporated herein by reference by and between the City of Santa Monica, a municipal corporation, and Ocean Avenue LLC, a Delaware limited liability company, is hereby approved. SECTION 3. Each and every term and condition of the Development Agreement approved in Section 2 of this Ordinance shall be and is made a part of the Santa Monica Municipal Code and any appendices thereto. The City Council of the City of Santa Monica finds that public necessity, public convenience, and general welfare require that any provision of the Santa Monica Municipal Code or appendices thereto inconsistent with the provisions of this Development Agreement, to the extent of such inconsistencies and no further, be repealed or modified to that extent necessary to make fully effective the provisions of this Development Agreement. SECTION 4. Any provision of the Santa Monica Municipal Code or appendices thereto, inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, are hereby repealed or modified to that extent necessary to effect the provisions of this Ordinance. DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 14 of 15 SECTION 5. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of any competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance, and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the Ordinance would be subsequently declared invalid or unconstitutional. SECTION 6. The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance. The City Clerk shall cause the same to be published once in the official newspaper within 15 days after its adoption. This Ordinance shall be effective 30 days from its adoption. APPROVED AS TO FORM: ______________________________ GEORGE S. CARDONA Interim City Attorney DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 15 of 15 EXHIBIT A DEVELOPMENT AGREEMENT [behind this page] DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D Approved and adopted this 13th day of October, 2020. _____________________________ K e v i n M c K e o w n , M a y o r State of California ) County of Los Angeles ) ss. City of Santa Monica ) I, Denise Anderson-Warren, City Clerk of the City of Santa Monica, do hereby certify that the foregoing Ordinance No. 2653 (CCS) had its introduction on September 8, 2020 and was adopted at the Santa Monica City Council meeting held on October 13, 2020, by the following vote: AYES: NOES: Councilmembers McCowan, Winterer, Jara, Mayor Pro Tem O’Day Councilmember Himmelrich, Mayor McKeown _________________ ABSENT: Councilmember Davis ATTEST: _____________________________________ Denise Anderson-Warren, City Clerk Date A summary of Ordinance No. 2653 (CCS) was duly published pursuant to California Government Code Section 40806. DocuSign Envelope ID: 8E09D1A9-6184-4D5B-92FE-DEC78332BF6D 10/15/2020