HomeMy WebLinkAboutStaff Correspondence - #26
Alcala, Abigail
From:Thai, Minh
Sent:Tuesday, September 24, 2024 5:40 PM
To:Thai, Minh
Cc:Nunez, Alvaro; sonia.carvalho@bbklaw.com; Mendoza, Steven; Vazquez, Sylvia;
Pezeshkpour, Ali; Crosthwaite, Melissa; Hall, Jennifer
Subject:For your information: Excerpt from the October 1st City Council Staff Report
regarding the Continued Public Hearing on the Related Bristol Project
Attachments:image001.png; image002.jpg; image003.jpg; Exhibit 21 - Applicant Responses to City
Council September 17 Questions.pdf; Exhibit 22 - City Responses to City Council
September 17 Questions.pdf
Mayor Amezcua and Members of the City Council (bcc),
st
To streamline the review process for the upcoming October 1 Staff Report regarding the Related Bristol Specific Plan
Project, staff is providing the excerpt below. This highlights only the new supplemental information added, leaving out
the rest of the report which contains information previously provided as part of the September Staff Report.
“At its regular meeting on September 17, 2024, the City Council received a staff presentation, opened
the public hearing, and took public comments on the item. A total of 37 individuals spoke on the
item, including three individuals representing the applicant and two representing onsite land
ownership. Comments ranged from those in support, those without a clear position, and those
opposed. The nature of the comments in support focused on opportunities to develop the site with a
new, mixed-use village that would generate positive impacts for the City and surrounding
communities, while those with no clear position or in opposition focused on concerns surrounding
traffic, increases in rent, and the lack of project labor agreements.
Following public comments, the public hearing was closed and the item returned to the City Council
for discussion. City Council members posed nine (9) questions about the project for follow-up by the
applicant and staff, after which the City Council unanimously voted to continue the matter to the
regularly scheduled meeting of October 1, 2024”.
In addition to the above information, also attached for your reference are the new Exhibits 21 and 22 to the Report.
1. Exhibit 21 outlines the City Council questions to the applicant and their responses.
2. Exhibit 22 outlines the City Council questions for staff and contains staff responses.
Please let me know if I can further assist with your review of the information.
Best regards,
1
Minh Thai | Executive Director
City of Santa Ana | Planning & Building Agency
714.667.2706 | 20 Civic Center Plaza| Santa Ana, CA 92701
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2
Exhibit 21:City Council Questions to Applicant from September 17, 2024 Hearing
1. Why is only one hotel planned for the project?
Applicant’s Response: Related’s professional assessment of the market is that
the Project can only reasonably support one hotel. Our assessment is informed
by our company’s extensive experience developing hotels throughout the
country, including The Conrad in Los Angeles, which we completed in 2022,
comprehensive market data on the South Coast Metro and John Wayne Airport
hospitality submarket, input from various hotel operating partners, and the
current state of the hospitality industry and capital markets. While we are excited
to be pursuing a hotel at Related Bristol, it will be the most ambitious and
challenging component of the project to realize. This can be attributed to a
combination of factors including: the increasing cost of construction, escalating
cost of hotel operations, softening in business travel demand as the economy
continues to shift to a hybrid work environment that promotes online versus in-
person meetings, and a backdrop of a highly competitive and well supplied
hospitality submarket that already has 12,000 hotel rooms. Related is very
concerned that the inclusion of a second hotel will render the first hotel financially
infeasible as investors and lenders on the first hotel will perceive the second
hotel as unacceptable competition that will take business away from the first
hotel and jeopardize their investment. The average daily room rate of full-service
hotels in this submarket is approximately $220/night whereas new construction
would require rates approaching $400/night for feasibility. The addition of a
second hotel would only further soften the market and add downward pressure
on the rates achievable at the first hotel. Segmentation and differentiation of two
hotels on the same property would be difficult to accomplish and we believe the
second hotel would cannibalize business from the first hotel.
It is worthwhile noting, however, that Related Bristol’s specific plan does contain
flexibility to convert uses that could potentially facilitate a second hotel should the
economic fundamentals and market conditions significantly improve. However,
our professional assessment is that a second hotel is infeasible for the
foreseeable future and should not be included in order to protect the feasibility of
the first.
Following receipt of the Applicant’s response, the City has added the
following additional information for the City Council’s consideration:
During the Ad Hoc Committee negotiations, Related discussed the challenges
associated with developing a financially feasible a hotel at the site as reflect in
their response above. The Ad Hoc Committee considered the information and
focused on the Applicant committing to pursuing an upscale high-quality hotel
that is not currently available in Santa Ana. As reflected in the Development
Agreement Section 4.2.4, the Applicant is committing to pursuing and securing a
minimum of four-star class hotel. Similar hotels in area with a four-star rating
include the Westin South Coast Plaza, Avenue of the Arts, the Hilton Orange
County, and the Marriott. Four-star hotels are large, upscale establishments,
fully staffed and offer special services and amenities, including concierge
Page 1 of 3
Exhibit 21:City Council Questions to Applicant from September 17, 2024 Hearing
services, 24-hour reception, fine dining and onsite restaurants, room service,
multiple pools and hot tubs, high-class fitness centers, bellhops, valet parking
and transportation, day spas, meeting and conference facilities, business
centers, and an array of special suites.The Specific Plan has also been
structured with the flexibility of allowing for additional hotels to be constructed on
the site without requiring additional analysis subject to approval by the Planning
Commission.
2. How many units will be for sale, if any, and why?
Applicant’s response: Related Bristol is situated on land that has been owned
since 1903 by one of the original pioneering farming families of Orange County,
the Callens Family (“The Family”). Their stake in this community and in this City
goes back to the beginnings of the City of Santa Ana and Orange County. The
Callens family have been the stewards of the land for over a century, the land is
a family heirloom which, they intend to own for perpetuity and do not want to sell
any part of the property, whether to Related or to future homeowners.
As such, the Related Bristol project is subject to a 99-year ground lease with The
Family. For-sale housing on a ground lease with on-going ground lease payment
obligations causes for-sale housing to be financially infeasible. While ground
lease for-sale housing has been done on a limited scale in the past, that product
and financing was produced decades ago in a different financial market which
does not exist today. Financing and investor interest is not available for for-sale
housing on a ground lease in this location.
Related Bristol’s ground lease would obligate a home buyer to make annual
ground lease payments in addition to their annual cost of home ownership.
Historically, the value of homes on ground leases underperform the market in
relation to homes on fee simple land. The value of ground lease homes declines
over time as the remaining ground lease term shortens and the home ages,
eventually reaching zero at the end of the lease unless extended. These fact
patterns significantly diminish the marketability and appeal of such homes given
buyers have other choices (i.e., homes on fee simple land), and subsequently,
lenders, buyers, and investors elect to not invest. Due to the declining nature of
the value of these homes over time, for sale homes on a ground lease are not an
effective tool for creating generational wealth.
The City of Santa Ana approved the South Bristol Corridor General Plan
Amendment and did not differentiate between for-sale or for-rent residential units.
From a legal perspective, the applicant has presented a General Plan complaint
project, which is why a General Plan Amendment is not required to implement
the project.
Page 2 of 3
Exhibit 21:City Council Questions to Applicant from September 17, 2024 Hearing
While Related would consider a for-sale component on the project were Related
purchasing the project site in fee simple, for the salient reasons described above,
Related Bristol has not proposed any for-sale homes at this time.
Following receipt of the Applicant’s response, the City has added the
following additional information for the City Council’s consideration: The
Ad Hoc Committee discussed the challenges that the project presented because
the property will continue to be owned by the underlying owners, not Related.
These challenges impacted negotiations related to the open space, the value of
the land and ultimately the amount of the community benefit payment and
recordation of the DA against the property.
3. Will the new grocery store be a Vons store or one of similar quality that is
associated with union labor?
Applicant’s response: Pursuant to the Development Agreement, Related has
committed to include a full-scale grocer of at least 35,000 square feet within the
first two phases of the project. Related understands that the full-scale grocer is
important to the immediate community and we are committed to including one in
the Project. We are prepared and committed to engage with Vons, the existing
onsite grocer, to extend their existing lease as soon as the project is approved.
We are grateful that Vons has expressed early interest in the new project and
has supported our project in writing and verbally in the past, most recently at the
th
City Council hearing on September 17.
As construction of the full-scale grocer retail space nears completion, Related will
solicit interest from various grocer operators, including the Albertsons
Corporation which owns Vons. Related welcomes a Vons, Albertson, Ralphs, or
a similar operator, and will solicit their respective interests once there is an actual
space and design for them to consider.
While Related welcomes the interest of union grocers, Related, as the Ground
Lessor, is not involved nor can we dictate whether or not such grocer operator is
union or non-union, or which grocer brand they wish to operate. If the project’s
grocer was required to be union, and such a union grocer wasn’t interested or we
were unable to reach a mutually agreeable lease, the Project would not be able
to fulfill our obligation to the Community to include a full-scale grocer and the
Project would risk being in legal default of the Development Agreement. This
exact scenario occurred on another project in San Francisco more than twenty
years ago and the developer ultimately sued the City and won. We want to
structure Related Bristol for success and avoid repeating the mistakes of the
past. The build-out of this project will occur over a decade and no one can
predict what the state of the rapidly-changing grocery landscape will look like
when the new store is ready to be occupied.
Page 3 of 3
Exhibit 22: City Council Questions to Staff from September 17, 2024 Hearing
1. How will the truck construction routes be established? Do we know where
they will be? Will there be time restrictions on truck travel? How will
residents be notified of the restrictions?
The Mitigation Monitoring Reporting Program (MMRP) of the project’s
Supplemental Environmental Impact Report (SEIR) authorizes to the City’s
Public Works Agency to define the allowable truck routes for the project. The
precise route is generally determined during the implementation phase of
development. Responsive to the Council direction and to address public
concerns expressed during the public hearing, Staff is recommending that the
City Council consider specifying the following restrictions to be added to the draft
Specific Plan in Chapter 6.0 – Implementation, as follows:
Trucking and Construction Hauling During Project Construction:
Travel Restrictions: Trucks can only use truck routes designated in the General
Plan Mobility Element that are located directly along the project site to travel to
and away from the site.
Direct Path Requirement: Trucks must take the shortest and most direct route
to and away from the site to nearest freeway on- and off-ramps.
Residential Proximity Limits: Trucks are prohibited from using those routes to
travel to and away from the site if there are residential uses fronting the street or
are located within 300 feet of the street.
Noise Restrictions: All noise sources associated with construction and truck
hauling activities shall not take place between the hours of 8:00 p.m. and 7:00
a.m. on weekdays, including Saturday, or any time on Sunday or a federal
holiday.
Site Posting & Notification Requirements: Applicant shall notify in writing to
all contractors requiring compliance with the above restrictions and shall post the
name and 24-hour contact phone number for reporting of issues consistent with
the requirements of Section 6.2.10(5) of the Specific Plan. An advance notice
providing the 24-hour contact information for this site shall be mailed to all
tenants and property owner within a 1,000-foot radius at least 30 days prior to the
start of each of the three major construction phases of the project as identified in
the Specific Plan.
2. Does the City have an equitable plan or idea on how the $22 million
community benefit revenue will be used?
The budgeting and spending of the $22 million community benefit payment will
be implemented through the City Council’s annual budget adoption process.
Page 1 of 4
Exhibit 22: City Council Questions to Staff from September 17, 2024 Hearing
During its public hearing and consideration of the item on August 12, 2024, the
Planning Commission recommended formation of a citizen oversight committee
to make recommendations to the City Council on the budgeting and spending of
the $22 million community benefit payment; this recommendation is documented
in the September 17, 2024 City Council staff report prepared for the item.
3. Can staff include establishment of an oversight committee for the project?
A revision can be made to Staff Report Exhibit 4 (Ordinance approving the
Development Agreement) to establish a citizen oversight committee. The
necessary revision would be implemented by modifying Section 3 with a new
sentence to read:
The spending of the Community Benefit Payment or similar payment to the City
for public benefits referenced by the Development Agreement shall be overseen
through a Citizen Oversight Committee, whose formation, structure, purpose, and
membership shall be established by Resolution of the City Council, and who shall
make recommendations to the City Council prior to budgeting and spending of
the first Community Benefit Payment or similar payment by the City, and through
subsequent recommendations thereafter prior to the budgeting and spending of
the Community Benefit Payments.
4. How will traffic signals be impacted by construction?
The traffic study identified the need for 7 traffic signal improvements which are to
be fully funded by the developer. Additionally, there are 6 other impacted
intersections where the developer is only responsible for a share of the cost of
improvements. The table below summarizes the requirements.
Location Improvement Developer’s
(New Signal or Cost Share
Upgrade of
existing)
Plaza & Callen New100%
Common
Plaza & MacArthur Upgrade 100%
Sunflower & Paseo New100%
Bristol & MacArthur Upgrade 100%
Bristol & Callens Upgrade 100%
Bristol & Driveway New100%
Bristol & Sunflower Upgrade 100%
Page 2 of 4
Exhibit 22: City Council Questions to Staff from September 17, 2024 Hearing
Location Improvement Developer’s
(New Signal or Cost Share
Upgrade of
existing)
Fairview & SegerstromUpgrade 2.51%
Bristol & SegerstromUpgrade 6.7%
Flower & Segerstrom Upgrade 4.1%
Flower & MacArthur Upgrade 17.99%
Main & MacArthur Upgrade 15.65%
Bear & SR-73 Upgrade 6.31%
5. What issues did the Council ad hoc address?
The Development Agreement (DA) addresses key terms of importance to the
community in accordance with California Government Code Section 65864et
seq. Specifically, the DA addresses the following priorities of the City Council Ad
Hoc committee that was formed in October2023 to address the DA’s deal points:
Recordation
Term (Duration of the DA) and Extension
Timing (Phasing of the project)
Community Benefits, including the $22 million community benefit payment
Hotel Economic Benefits
Open Space
Inclusionary Housing
Additional information and analysis of these deal points is contained within the
September 17, 2024 City Council staff report prepared for the item, including
Exhibits 4 and 7 to the staff report.
Throughout the duration of its ongoing meetings, the ad hoc committee evaluated
additional considerations for the DA. Ultimately, the following items were
discussed and were notincluded in the final recommended DA:
Two additional five-year term extensions
Local hire & active marketing
Business retention
Labor agreements
Multi-use community center or library
Police Department substation (ultimately included in the Specific Plan
document, Section 6.2.12)
Page 3 of 4
Exhibit 22: City Council Questions to Staff from September 17, 2024 Hearing
Public art and a public art fee(public art design and locations ultimately
addressed in the Specific Plan document, Section 5.11)
Contribution of funding towards making repairs and upgrades to existing
fire stations owned by the City
“Green” building and site design features, such as water conservation,
Leadership in Energy and Environmental Design (LEED) building designs,
electric vehicle parking, electric appliances, photovoltaic panels, ecology
and wellness, street improvements, utility enhancements, and traffic
improvements (ultimately included in the Specific Plan document, Sections
5.8 and 5.9)
Formation of an Enhanced Infrastructure Financing District (EIFD)
Multiple options to comply with the Affordable Housing Opportunity
Creation Ordinance (AHOCO)
The ad hoc committee originally stood firm in negotiations on the fact that it
encouraged Related to commit to entering into a Project Labor Agreement.
Ultimately, it was decided that requiring such an agreement would unfairly impact
discussions and negotiations between Related and the union representatives.
Related assured the ad hoc committee that it would work with the unions and that
upon presentation of the project to the City Council they would work to ensure
that the unions supported the project as being in the best interests of the
community and union workers.
6. Will the City’s CWA requirements apply to the project?
No; the City’s CWA requirements only apply to public improvement projects and
affordable housing projects that are built by the City or receive City funding. The
public improvements required of the development are being built by the
developer at the developer’s cost with no funding from the City.
However, the CWA does apply to City public improvement projects. As such, the
CWA would apply to the offsite public infrastructure work that the City will
generally construct, including work for which the Developer will pay a
proportionate share of the costs. Public infrastructure anticipated by the City
includes storm drain line extensions, street intersection improvements, water and
sewer improvements, etc. The value of such improvements was previously
estimated by DTA to be approximately $80 million.
Page 4 of 4