City Council will hold a special meeting on Oct. 20 to hear updates on the proposed development known as the Santa Monica Plaza.
The project is a 12-story (148 feet), 420,000 square-foot mixed-use development including a 195 room hotels, 206,800 square feet of office space, 42,200 square feet of retail space, 48 affordable housing units, 12,000 square feet of cultural space, 51,000 square feet of public open space, and 1,143 parking spaces in a four-level underground parking lot.
The City of Santa Monica owns the property located along Arizona Ave between 4th and 5th Streets, giving the city unique leverage to control development on the parcel. The development team was tasked with creating a project that was economically viable while meeting several public objectives including ground-floor activation, exceptional architecture, project flexibility and public access to views.
The site currently contains surface parking lots and two banks (Bank of America and
Council has guided the concept for several years starting with choosing the development team in 2013 and selection of the proposed design in 2014. Developers have already presented the project to the Planning Commission and while the project was recommended for a Development Agreement (which is required of any proposed building taller than 32 feet) the Commission expressed concern over the quantity of office space proposed.
Staff has attempted to address that concern by providing an economic analysis comparing options for reducing office space.
According to an analysis prepared by consulting economist on the project, Keyser Marston & Associates (KMA), none of the alternatives would provide enough revenue to support the public objectives. Wholesale removal of the office space would create a shortfall of $26.5 million. Replacing office with housing would cost $42.2 million while substituting a hotel would cost $12.6 million. Losing half the office space to a hotel would cost $2.7 million and cutting the office space by half with no replacement would cost $7.6 million.
The report said some of those conclusions were surprising, particularly the shortfall associated with housing.
“The two primary reasons are: (1) the construction of the building is very expensive relative to the rents that housing can achieve and (2) the building does not lend itself easily to residential use, resulting in a significant loss of leasable space,” said the report.
Council is being asked to decide if they want to modify the project, and if so, to prioritize public benefits and decide which elements will be cut to make up for the loss in revenue.
According to the staff report, elements that could be eliminated include Programmed Open Space/Bike Center ($31.4 million cost), affordable housing ($10.9 million cost), public parking ($22.8 million cost), and the cultural space ($6.2 million cost).
The report also includes the costs associated with replacing the project with a park. According to staff, the space is most suited to an urban style park and would require programming to maintain its usefulness.
“Given the City’s recent experience with Tongva Park, in addition to the continuing increase in construction costs for public open spaces, costs to build a park at the site could range from $10 million to $25 million, depending on the features desired in the park. In addition, the leases of the current on-site banks would need to be addressed. Buying the banks out of their leases could cost between $5 million and $10 million. To avoid paying the buy-out costs, the park would need to be delayed until 2025, when both leases will have expired,” said the report. “If the proposed public parking were desired under the park, it would add an additional $17 million to $20 million to the cost of the park, though some of the costs would be offset by the capitalized value of the net parking revenue. On-going costs would include maintenance and programming of the park, estimated at $1 million to $3 million per year, depending on the design and desired level of programming.”
Council recently approved a plan to put most development downtown on hold pending adoption of the Downtown Specific Plan. The Plaza project is one of a handful of developments expected to continue in the process because of its status as a city owned property.