CIVIC CENTER — City Hall will receive more of the profits generated by the sale of condos built as part of the Village project here after elected officials earlier this week agreed to give the developer another two years to secure financing and begin construction.
The modified development agreement with mega-developer Related Companies and the Redevelopment Agency, which is comprised of members of the City Council, lowers the threshold when City Hall begins sharing in the profits from condo sales and creates a second threshold where City Hall would receive greater proceeds.
The Civic Center Village comprises approximately 3.7 acres and will provide up to 324 residences, including 160 that will be affordable to low-income households, including families and artists, city officials said. A park will be built adjacent to the project, which will sit on the site of the former RAND Corp. property. The City Council and Redevelopment Agency approved the development agreement with Related in June of 2008.
Since that time Related has had difficulty obtaining financing from banks to close escrow and begin construction. Representatives from Related said banks are scared to lend money during the worst economic recession since the Great Depression.
“Banks just aren’t lending at all right now,” said Gino Canori, vice president of development for Related. “It’s very hard to pontificate on what’s going to happen. We do think the lending market will be back in 2011. That’s why we are willing to proceed with the [Village] project at this time and we needed the city to extend our agreement for two years.”
Related plans to sell roughly 60 condos at market rate to help pay for the construction of the affordable units.
As part of the new profit sharing agreement, City Hall will receive 30 percent of the revenue generated when condo sales fall between $1,220 and $1,390 a square foot on one parcel, and 50 percent if the sales generate over $1,391 a square foot. On a second parcel that sits on Ocean Avenue near the Viceroy Hotel, City Hall will receive 30 percent of the profits when the condos sell for $1,241 to $1,403 per square foot, and 50 percent when they hit $1,404 a square foot.
Andy Agle, City Hall’s director of housing and economic development, said the lower threshold for when profits would be shared was sought after because of the change in costs shouldered by Related.
“We think prices [for the condos] will be lower because of the health of the real estate market, but we also think their construction costs will be lower because pricing is more competitive than when we originally executed the agreement,” Agle said.
Agle said two years felt like an appropriate extension to give seeing as other projects similar to the Village are also having a difficult time securing loans.
The extension gives Related, which is also trying to build housing in Downtown Los Angeles as part of the Grand Avenue project, up until August, 2012 to break ground on the Village.
Councilman Kevin McKeown, an advocate for affordable housing, said the council remains committed to the project but realized the challenges Related is facing in the financial world.