BREA : Developer Given Land-Sale Option

After spending $15 million buying up land from small-property owners for a proposed shopping center downtown, the City Council has decided to give the developer the option to buy the 22-acre site for $5 million.

By its unanimous vote Monday night, the council, acting as the Redevelopment Agency, hopes that the developer, Watt/Craig Joint Ventures, will be able to secure financing for the $16.3-million project, now almost a year behind schedule.

“We’ll fail in our duty if we don’t go forward with this project,” said Mayor Burnie Dunlap, who joined Councilmen Glenn G. Parker and Wayne D. Wedin in approving the proposal. Councilman Carrey J. Nelson abstained.

However, several residents have accused the city of “giving away land” to the rich after taking it away from small-property owners.

“This is reverse Robin Hood,” said Bill Vega when the council opened the issue for public comment last week.

Resident Bud Wiser talked at such length on the subject that he forced the council to adjourn and call for the special Monday meeting. Wiser said the project should be opened for new bids because the contractor has failed to perform under the original agreement.

The proposed shopping center, called the Gateway Center, is part of a 50-acre downtown redevelopment project that has been plagued by numerous delays, including one forced by a lawsuit brought by a coalition of small businesses displaced by the project.

Under the original agreement for the shopping center, the Redevelopment Agency agreed to lease the land to the developer for $500,000 a year for 55 years. In addition, the agency would get 25% of the income and 25% of refinancing proceeds.

With the option-to-buy agreement, the agency will allow the developer seven years to exercise the option. The purchase price is $5 million, but the agency retains the right to share in the net income and refinancing proceeds.

A study by a consultant, Keyser Marston Associates, estimates that if the developer exercises the option in the seventh year, total income for the Redevelopment Agency would be $17.8 million, which includes revenue from a share of the shopping center’s income, lease, land sale, earned interest and improvements.

Richard Botti of Keyser Marston said, however, that it’s likely the developer will exercise the option by the third year. If that happens, he said, the Redevelopment Agency will earn an estimated $14.2 million.

The key thing, officials said, is that the shopping center be built.

At last week’s public hearing, John W. Hunter Jr. of Watt/Craig Associates said that despite the fact that the shopping center is 65% leased in advance, “there is very little lender interest in the project.” But Hunter said the option to buy the site would make financing easier to get.

To assure completion of the project, the council has required Watt/Craig to post a completion bond in the event the developer exercises the option to buy. Councilman Parker said that will protect the city and allow completion of other projects tied to the Gateway Center, including the Birch Street project.

“Ownership of the land is still the best protection,” Parker said. “But we must move on with this project. The potential damage to the community in moving backward is tremendous.”