Item 30 - 4th and Mortimer Mixed-Use Development Project Located at 409 and 509 East Fourth Street

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4th and Mortimer Mixed-Use Development Project Located at 409 and 509 East Fourth Street November 19, 2024 Page 2 4 6 3 0 the City Council denied Appeal No. 2020-02, upholding the determination of the Planning Commission to approve the subject entitlements. Pursuant to Section 41-647 of the Santa Ana Municipal Code (SAMC), entitlements such as variances automatically become void should the property owner fail to institute an action to comply with the provisions of the entitlements within two years of its approval. This section also allows the property owner to request an extension of the entitlement up to a period of three years from the date of the expiration. The subject entitlements were in effect until December 15, 2022. However, the applicant experienced delays in moving the project forward and constructing the development. During this time, a state of local emergency was declared stemming from the COVID-19 pandemic, which provided relief to residential developers by extending approvals of residential entitlements to December 31, 2022. By September of 2022, the applicant had not obtained the required building permits for development of the project. As a result, on September 9, 2022, the applicant submitted a request for a one-year extension to ensure the entitlements remain valid by the time permits were ready for issuance. On December 6, 2022, the City Council voted unanimously to extend the entitlements for the development for a period of one year to December 15, 2023. On August 1, 2023, the applicant obtained all required building permits for development of the project, including demolition permits for existing buildings at both project sites, and paid over $4.5 million in City permitting and impact fees. On September 27, 2023, the applicant filed a request for a second one-year extension through December 15, 2024. This was due to increased cost of materials, changes in construction loan interest rates, labor shortage, and market changes affecting the applicant’s ability to develop the project. Specifically, increases in interest rates impacted construction loans and land development costs, resulting in additional delays to the project’s ability to begin vertical construction by December 2023. On December 5, 2023, the City Council voted unanimously to extend the entitlements for the development for a period of one year to December 15, 2024. Lastly, although vertical construction of the project did not commence in 2023, the applicant did complete demolition of all existing onsite buildings, including the former Northgate market, so that the site will be ready for development once ready to proceed with construction. Analysis To date, the applicant has been unable to secure acceptable construction financing to start the project. Similar to 2023, this is due to high interest rates affecting construction loans and land development costs, resulting in additional delays to the project’s ability to begin vertical construction. Current loan interest rates have been 300-500 basis points above historical norms, which not only increases the cost of construction financing, but also constricts the flow of lender dollars for construction projects. However, given the drop