Community Redevelopment Agency /\ ~~ £~~~~~'"~'"-,( of the CITY OF \ /

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354 South Spring Street I Suite 800 T 213 977 1600 I F 213 977 1665 Los Angeles I 90013-1258 www.crala.org

CRA File No. 5i Council District: 10 Contact Person: John Perfitt (213) 977-1715 Honorable Council of the City of Los Angeles Council Chamber 200 N. Spring Street Room 340, City Hall Los Angeles, CA. 90012

Attention: Alan Alietti, Office of the City Clerk

COUNCIL TRANSMITTAL: Transmitted herewith, is a Board Memorandum adopted by the Agency Board on December 21, 2006, for City Council review and approval in accordance with the "Community Redevelopment Agency Oversight Ordinance" entitled:

VARIOUS ACTIONS RELATED TO: AUTHORIZATION TO EXECUTE AN OWNER PARTICIPATION AGREEMENT AND A PROMISSORY NOTE WITH CIM/PICO, LP AND ADOPTION OF A JOINT 33445 AND 33421.1 RESOLUTION FINDING THAT THE PROVISION OF OFFSITE PUBLIC IMPROVEMENTS FOR THE MIDTOWN CROSSINGS PROJECT IS OF BENEFIT TO THE MID CITY RECOVERY REDEVELOPMENT PROJECT AREA MID CITY RECOVERY REDEVELOPMENT PROJECT AREA HOLLYWOOD/CENTRAL REGION (CD 10)

RECOMMENDATION That City Council approve(s) recommendation(s) on the attached Board Memorandum.

ENVIRONMENTAL REVIEW The City of Los Angeles was the lead agency for the proposed project purposes of the California Environmental Quality Act (CEQA). The City Planning Department adopted a Mitigated Negative Declaration ("MND"), MND-2000-2497-CUZ - (CCR) (CUB) (ZV) (SUB) (HV) for the proposed Project. Subsequently, on May 3, 2001, the Agency adopted a Resolution certifying that the Agency had reviewed and considered the information in MND-2000-2497-CUZ - (CCR) (CUB) (ZV) (SUB) (HV). The proposed project plans were revised and Agency staff prepared an Addendum to the MND, which was approved by the Agency on March 4, 2004. The proposed project is physically the same as that analyzed in the MND and the Addendum; therefore, no additional environmental documentation is needed.

FISCAL IMPACT STATEMENT There is no fiscal impact to the City's General Fund, as a result of this action.

ecilia V. Estolano, Chief Executive Officer \/--\ / ~~ ~~~~!:~"~'"~"' .

cc: Alan Alietti, Office of the City Clerk (Original & 3 Copies on 3-hole punch) Annemarie Sauer, Nancy Duong, Office of the CAO Paul Smith, Ivania Sobalvarro, Office of the CLA Adriana Martinez, Office of the Mayor Noreen Vincent, Office of the City Attorney Councilmember Herb J. Wesson, Jr., Council District 10

~ " / THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA

MEMORANDUM 20

DATE: DECEMBER 21, 2006 MD2020

TO: AGENCY COMMISSIONERS

FROM: CECILIA V. ESTOLANO, CHIEF EXECUTIVE OFFICER

RESPONSIBLE HELMI HISSERICH, REGIONAL ADMINISTRATOR PARTIES: JOHN PERFITT, SENIOR REAL ESTATE DEVELOPMENT AGENT

SUBJECT: AUTHORIZATION TO EXECUTE AN OWNER PARTICIPATION AGREEMENT AND 'A PROMISSORY NOTE WITH CIM/PICO, LP AND ADOPTION OF A JOINT 33445 RESOLUTION FINDING THAT THE PROVISION OF OFFSITE PUBLIC IMPROVEMENTS FOR THE - MIDTOWN CROSSINGS PROJECT IS OF BENEFIT TO THE MID CITY RECOVERY REDEVELOPMENT PROJECT AREA

MID CITY RECOVERY REDEVELOPMENT PROJECT AREA HOLL YWOOD/CENTRAL REGION (CD 10)

RECOMMENDATIONS

1) That the Agency, subject to City Council review and approval: a) Authorize the Chief Executive Officer or designee to execute an Owner Participation Agreement with CIM/Pico, LP for the Midtown Crossings commercial redevelopment project (formerly known as the Midtown Plaza Project);

b) Authorize the Chief Executive Officer or designee to execute a Promissory Note with CIM/Pico, LP for the reimbursement of offsite public improvements at the Midtown Crossings commercial redevelopment project;

c) Adopt the attached joint 33445 and 33421.1 resolution finding that the funding of the MT A bus transfer station relocation and offsite public improvements is of benefit to the Mid City Recovery Redevelopment Project Area.

2) That the Agency request the to also adopt the attached joint 33445 and 33421.1 resolution finding that the funding of the MTA bus transfer station relocation and offsite. public improvements is of benefit to the Mid City Recovery. Redevelopment Project Area.

SUMMARY

The recommended action will approve an Owner Participation Agreement ("OPA") with CIM/Pico, LP ("CIM") to complete the Midtown Crossings Project, an approximately 330,000- MIDTOWN CROSSINljS OPA . PAGE 2

square foot commercial/retail redevelopment project that includes a 160,000-square foot

Lowe's home improvement and garden center and approximately 170,000-square feet of other commercial/retail space.

RE

December 29,2005 - Approval of an OPA with CIM/Pico, LP.

March 4, 2004 - Agency approval of an environmental action, OPA, tax allocation bonds, and schematic drawings. -

July 19, 2004 - City Council approval of March 4, 2004 Agency actions (CF 01-0951)

SOURCE OF FUNDS

Future Mid City Recovery Project Area tax increment not to exceed $465,000 per year beginning after completion of the Midtown Crossings Project.

PROGRAM AND BUDGET IMPACT

Funds for the proposed action are not budgeted and would not be available to be added to the Agency Budget until the proposed project is complete and the associated propert tax assessment is recorded. Thereafter, the, impact will be 100% of propert tax increment, net of all housing and statutorily required payments, that is generated by the project in an amount not to exceed $465,000 annually until 2042. This project will not affect other work objectives and may generate programmatic tax increment for the Mid City Recovery Redevelopment Project Area.

ENVIRONMENTAL REVIEW The City of Los Angeles was the lead agency for the proposed project for purposes of the California Environmental Quality Act (CEQA). The City Planning Department adopted a Mitigated Negative Declaration ("MND"), MND-2000-2497-CUZ - (CCR) (CUB) (ZV) (SUB) (HV) for the proposed Project. Subsequently, on May 3, 2001, the Agency adopted a Resolution certifying that the Agency had reviewed and considered the information in MND-2000-2497- CUZ - (CCR) (CUB) (ZV) (SUB) (HV). The proposed project plans were revised and Agency staff prepared an Addendum to the MND, which was approved by the Agency on March 4, 2004. The proposed project is physically the same as that analyzed in the MND and the Addendum; therefore, no additional environmental documentation is needed.

BACKGROUND

The Midtown Crossings Project is located at the intersection of Pico and San Vicente Boulevards in the Mid City Recovery Redevelopment Project Area (refer to Attachment A, Location Map). The Midtown Crossings Project has been considered and approved by the Agency two times previously. Because the financial structure for the project has evolved and changed several times since both approvals, both the previous iterations of the project and current development program are discussed in more detail below. - \ " ..' MIDTOWN CROSSINGS OPA PAGE 3

ORIGINAL DEVELOPMENT SCENARIO On March 4, 2004, the Agency approved an OPA between CIM ("Developer") and the Agency to develop the entire 11.75-acre Midtown Crossings site and create a new 376,720 square-foot retail center then known as Midtown Plaza. City Council subsequently approved the OPA on July 19, 2004. However, this OPA was never fully executed by both parties. The intent of the Midtown Crossings Project was to redevelop a blighted and underutilized site, create over 800 jobs, and provide badly needed retail services to the Mid City community. The Developer owned the site and was in advanced negotiations with two anchor tenants, Target and Home Depot, for long-term leases. The development concept was to build an approximately 150,000 square-foot Target store on top of an approximately 100,000 square-foot Home Depot store, and additional inline retail and public storage facilties. The Project would also include a 1,060-car parking structure with delivery truck access. The Midtown Crossings Project, which at the time, of previous approval had approximately a $10 million feasibility gap, was to be primarily financed with equity funds from CIM's equity partners CALPERS and CALSTERS, conventional construction financing, Agency assistance, CIM equity funds, and a U.S. Department of Housing and Urban Development ("HUD") Section 1 08 loan. The Section 1 08 loan was to be secured with real propert and debt-serviced by a portion of the future site-specific sales, utilty, and business license tax revenues emanating from the to-be-constructed retail center. HUD and the City of Los Angeles Community Development Department ("CDD"), the local government administrator of the Section 1 08 loan program, previously approved an $8.8 milion Section 108 loan for the Project. The Section 108 loan was secured by a lien on the entire 11.75-acre site. The Agency assistance for the project at the time was reimbursement of up to . $4.275 millon for the relocation of an MTA bus transfer facility, from the north side of the site to the south side, and for various pre-approved offsite public improvements (refer to Attachment B, Pre-Approved Offsite Public Improvements). The Agency intended to fund its assistance by issuing future junior-lien tax allocation bonds and then using these bond proceeds to reimburse CIM for the MTA relocation and the public improvement expenditures. Further, CIM agreed to advance~purchase these future bonds, and the Agency structured this transaction such that the maximum amount of annual debt service required to be paid by the Agency would never exceed $365,000 per year.

.SALE TO TARGET/HOME DEPOT SCENARIO In May of 2005, CIM informed Agency staff that the Midtown Crossings Project had incurred tremendous construction cost increases between 2004 and 2005 and the anchor tenants' rents used to underwrite the project in 2004 were no longer sufficient to make the project feasible. Further, despite protracted negotiations, Target and Home Depot would not agree to lease terms that would offset these construction cost increases. Because of this, CIM did not have signed leases with the anchor tenants and could not draw down or utilze its construction financing. Instead, all demolition, remediation, and related site work to date was financed with CALPERS/CALSTERS equity partner funds. These funds have a preferred and required rate of return, and consequently the project incurred high carrying costs. In mid 2005, Target and Home Depot, rather than agreeing to pay significantly higher lease rates, offered to jointly purchase a large portion of the site from CIM. Under this scenario, CIM would subdivide the Midtown Crossings site and sell 9.52 acres of it to Target/Home Depot, and develop 18,200 of inline retail on the remaining 2.23-acre parcel immediately adjacent to the proposed Target/Home Depot parceL. At the time, this sales transaction structure would allow CIM to recoup its carrying costs, and still allow the development of Target and Home Depot stores to go forward. Target/Home Depot conditioned its acquisition of the 9.52-acre portion of the site upon the approval of a new OPA between the Agency and CIM that set forth the terms of a sale MIDTOWN CROSSINljS OPA PAGE 4

from CIM to Target/Home Depot. The Agency, pursuant to this request and wanting to assure that the project be completed, approved a second OPA with CIM on December 29, 2005. This OPA contemplated both the aforementioned Section 108 financing and reimbursement of $4.275 million in offsite public improvements using the site-specific tax increment/advance purchase bond financing. In March of 2006, negotiations between Target/Home Depot and CIM ended without an agreement on terms for a sales transaction. At that time, CIM, working with CD 10 staff and Agency staff, began aggressively pursuing a lease transaction with Lowe's to locate a Lowe's home improvement store at Midtown Crossings.

CURRENT DEVELOPMENT SCENARIO CIM has completed construction of 18,200 square feet of retail space on the smaller 2.23-acre westernmost portion of the Midtown- Crossings site and has signed leases with Starbucks, Panda Express, and Wells Fargo; all of these retailers wil be opening soon at this location. CIM has completed the relocation of the MT A bus transfer facility and constructed the offsite public improvements pursuant to the OPA as approved by the Agency on March 4, 2004 and again on December 29, 2005. CIM has now signed Lowe's to a long-term lease for a 170,000 square foot home improvement store with a garden center. Lowe's will be the anchortenant at Midtown Crossings and CIM is aggressively marketing the remaining 160,000 square feet of retail space, anchormost of which will be subdivided intotenant. sizes suitable for national retailers complimentary. to the Because the financial structure of the Midtown Crossings Project has changed more than once, CIM and CDD amended the Section 108 loan for the Midtown Crossings Project. CDD transmitted the Section 108 amendment to the Housing, Community, and Economic Development Committee on October 17, 2006 and this item is pending in Committee until the companion OPA with the Agency for Midtown Crossings meets up with it. Consistent with CDD's action and pursuant to direction from City Council District 10, CIM seeks approval of a new OPA with the Agency that now reflects the current development program and lease transaction with Lowe's. Specifically, the new OPA wil set forth the terms for reimbursementof $5,000,000 in offsite public improvements already constructed by CIM. Additionally, pursuant to Section 33445 and 33421.1 of the California Health and Safety Code, the Agency must adopt a resolution finding that these offsite public improvements are a benefit to the Mid City Recovery Redevelopment Project Area (refer to Attachment C, 33445/33421.1 Resolution). The new Midtown Crossings OPA between the Agency and CIM wil be different than the previous approved agreements because not only will it reflect the Lowe's transaction, but it also will not include the advance-purchase/bond financing structure for reimbursement of the approved offsite public improvements. Instead, the current OPA will provide that the Agency execute a promissory note with CIM that requires the Agency to pay 100% of the available site-specific tax increment from the Midtown Crossings site, up to an amount not to exceed $465,000 per year, or until the $5 milion principal balance is paid off. Available site-specific tax increment is defined as the amount of propert tax increment generated by construction of the Midtown Crossings Project, less all required housing set-aside payments and all statutorily required payments to other taxing entities. This structure is preferred because it has less transaction costs and, more importantly, the Agency is obligated to pay only the net tax increment generated at the site by the completed Midtown Crossings Project, whereas the bond structure created an debt obligation for the entire Mid City Project Area, which had to be paid regardless of whether the new tax increment was generated by the project or not. Because of the tax implications of the promissory note structure versus the bond structure, CIM, based on the MIDTOWN CROSSINGS OPA PAGE 5 current promissory note and OPA, would be allowed to receive up to a maximum of $465,000 of site-specific revenues per year, if this amount were to be actually generated and available from site-specific property tax revenues. Based on CIM acquiring the land for $26 milion in 2003, and the current construction budget of more than $88 million for improvements at Midtown Crossings, Agency staff estimate that Midtown Crossings will generate, once completed and all new assessed value recorded, more than $550,000 annually in new tax increment. This would allow the Mid City Proj~ct Area to receive some of the net tax increment generated by Midtown' Crossings. Further, the promissory note contains a prepayment incentive whereby the Agency can payoff only 85% of the current outstanding balance of the promissory note for Midtown Crossings in years one to five, provide CIM still owns the promissory note. This provides the Agency. with the flexibility to issue tax allocation bonds in the first five years after the project is built, and payoff the Midtown Crossings promissory note with funds that carry a lower interest rate than the promissory note.

PROJECT SUPPORT City Councilmember Herb Wesson strongly supports the Midtown Crossings Project and considers it to be very high priority project that should be completed as soon as possible. The Project Area Committee ("PAC") for the Mid City Recovery Redevelopment Project Area has voted to fully support the Midtown Crossings Project.

Cecilia V. Estolano Chief Executive Offcer

Gle F. Wasserman Chi f Operating Officer

Thereemployee is no conflict of interestconcerning known to me which existsthis with regard action. to any Agency offcer' or

ATTACHMENTS

A. Project Location Map B. Pre-Approved Offsite Public Improvements C. 33445/33421.1 Resolution D. Community Context .,. . .'. . . "d' ".'- '.'.. ,..,.,. .'. ,".- . .. ..\' Mid City BiG~v~ry Redevelopment Project.. ..-. .":'::~::t~:::.~. CRA/LA . ,. .... " . .. ,. .. '.-.- .'., -" ',' .. .'.' .' ...,:...~..,. ,", '. . , . ....-..,

ATTACHMENT A

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MIDTOWN PLAZ SITE

Bzziiary D.proi;ec. t:Äe.¡ G:n i: Shaded ::I'JI.ONiY...rø in the projecr JIrsa bo"i:óan=. . _.- -',

ATTACHMENT B - PRE APPROVED PUBLIC IMPROVEMENTS

Midtown Crossing Public Improvements

MT A site represents 32% of trangle or 29,000 sf Total land area is 11 acres or479,160 sf.

MTA Land Cost (28,100 sf(! $55.62/so- $ 1,562.922

MT A Construction Cost"" $ 2,439,256 As Built Cost

Off Site Work ComDlete to Date $ 338,700 Includes allocation of Fee, General Conditons, Insurance

Off Site Work Outstandinçç $ 1,800,000 Estimate

On Site Work (32% of $3,240,0001 $ 1,036,800 ProDortionate share

Soil Remediation (32% of $170,0001 $ 54,400 Based on 20% of cost allocated to trianççle

Site Demolition (32% of $100,0001 $ 32,000 Based on 20% of cost allocated to trianççle

Total Improvements $ 7,264,078

"Does not include BOO sf of land for MT A bathroom ""Does not include 800 sf of MTA bathroom constructon cost (g $100/sf Attachment C Resolution No.

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LOS ANGELES AND THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA PURSUANT TO SECTION 33445 AND 33421. i OF THE CALIFORNIA REDEVELOPMENT LAW DETERMINING THAT THE PROVISION OF PUBLIC IMPROVMENTS ON PICO BOULEVARD AND SAN VICENTE BOULEVARD, AND THE RELOCATION OF THE METROPOLITAN TRANSPORTATION AUTHORITY BUS TRANSFER STATION IN THE MID CITY RECOVERY REDEVELOPMENT PROJECT AREA IS OF BENEFIT TO THE MID CITY RECOVERY REDEVELOPMENT PROJECT AREA.

WHEREAS, the Community Redevelopment Agency of the City of Los Angeles, California (the "Agency") is engaged in redevelopment and revitalization of the Mid Ci ty area pursuant to the adopted Redevelopment Plan for the. Mid City Recovery Redevelopment Proj ect Area (the "Project Area"); and,

WHEREAS, the Redevelopment Plan for. the Proj ect Area provides for the repair or amelioration of public improvements whose. deficiencies adversely affect the recovery of the Proj ect Area; and, WHEREAS, the City Council approved an Owner Participation Agreement for the development of the Midtown Crossings which included the construction of offsi te public improvements and the relocation of the Metropoli tan Transportation Authority bus transfer facility (the "MTA Relocation"); and, WHEREAS, the relocation of the bus transfer facility and the construction of offsite public improvements is consistent with the Mid City Recovery Redevelopment Proj ect' s Five-Year Implementation Plan; and, WHEREAS, the. Agency intends to fund the MTA Relocation and offsite public improvements with future bond proceeds; and,

WHEREAS, there are no other. reasonable funding sources available to contribute to the cost of the MTA Relocation and the offsi te public improvements; and, WHEREAS, Section 33445 and 33421.1 of the California Health and Safety Code requires the Agency and the City to make certain findings before Agency funds may be used to pay for such public improvements; and,

WHEREAS, the Commissioners of the Agency and the Ci ty Council of the City of Los Angeles, have reviewed and considered the facts and inf9rmation with respect to the MTA Relocation and the offsite public improvements.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LOS ANGELES AND THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA, DO HEREBY RESOLVE AS FOLLOWS:

The City and Agency find, determine, and resolve that: . 1) Funding the MTA Relocation and offsi te public improvements, which includes, but is not limi ted to, land costs, construction costs,. indirect costs, curbs, gutters, and exit/entrance ramps, at the Midtown Crossings Proj ect in the Mid City area is of benefit to the Mid City Recovery Redevelopment Proj ect Area, and will assist in eliminating one or more blighting conditions in the Proj ect Area because it replaces a faulty and inadequate MTA facility with a modern MTA facility that includes modern public improvements. These acti vi ties are consistent with obj ecti ve #8 of the redevelopment plan which calls for the encouragement of a circulation system which will improve the quality of life in the Proj ect Area;

2) After pursuing investigation for other funding sources, no other reasonable means of financing the MTA relocation and offsite public improvements consistent wi th the purposeavailable; of the andRedevelopment . Plan is 3) The funding of the MTA Relocation and offsite public improvements is consistent with. the Fi ve-year Implementation Plan for the Mid City Recovery Redevelopment Proj ect Area in that it will support and facilitate the redevelopment of Midtown Crossings, a specific proj ect and expendi ture to be made during the next five years pursuant to the Five-year Implementation Plan for the Mid City Recovery Redevelopment Proj ect Area.

ADOPTED BY THE AGENCY:

ADOPTED BY THE CITY COUNCIL: /' "

ATTACHMENT D - COMMUNITY CONTEXT MIDTOWN CROSSINGS PICO BOULEVARD AT SAN VICENTE BOULEVARD LOS ANGELES, CA.

Redevelopment Area: Hollywood Redevelopment Project Area

Community Plan Area: West Adams-Baldwin Hills-Leimert Park-

Council District: Council District 10

Proiect Area Description: The 725-acre Mid City Recovery Redevelopment Project Area was adopted on May 10, 1996 and includes the non-contiguous commercial corridors of Pico, Adams, Washington, Jefferson, and Crenshaw Boulevards.

Conditions at Time of Adoption: The Mid City Recovery Redevelopment Project Area was found to contain the following conditions of blight:

Q Increasing density, including a low-income population that was growing at rates faster than the citywide average; in addition, conditions of high rates of unemployment, overcrowding, and substandard housing were present. Q Over-burdened circulation systems, inadequate public improvements and insuffcient open space. Q Irregular parcels which do not meet established planning and zoning standards or economic requirements for development existed throughout the area Q Fragmented land ownership. Q Lackcare of suffcient facilities. public classrooms and .day Q High levels of crime. PROPOSED PROJECT OVERVIEW

Physical Site and Setting Description A vacant and underutilzed 11.75-acre site (Source: CRA Staff) located at the crossroads of Pico, San Vicente, and Venice Boulevards in the Mid City Area of Los Angeles. Local community is Vàstly underserved with quality retail goods and services. Proposed Development Description Redevelopment of an underutilized and blighted (Source: CRA Staff) site into a two-story, urban infill commercial/retail center. Project to include 330,000 square feet of commercial/retail and a 1,262-car parking structure. . Proposed Type of Users Lowe's wil anchor Midtown Crossings and the (Source: Project Developer) commercial center wil feature other national retailers complimentary to the anchor tenant. Proposed Overall Project Cost and Total Project Sources of Funding Construction Loan $ 88,000,000 (Source: Project Developer and CRA Section 1 08 Loan $ 8,800,000 Staff) Tax Increment $ 5,000,000 Eauitv $ 40.200.000 Total: $142,000,000 Projected net contribution of tax increment to Project Area (minus site-specific dedicated to the project): $1,200,000

DEMOGRAPHICS (Source: US Census, 2000 and LA City Planning)

Census Tract LA City (2000 Census) , Population 3,950 3,719,310 Total Households 1,579 1 ,278,815 Percentage of 40% 59.5% Households Renting Percentage of 54% 40.5% Households Owninq Averaqe Household Size 2.50 2.91 Educational Level 75% 71% (HS Diploma or above) Median Household $39,141 $40,733 Income for an individual

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