Oh, City Walk. I had such high hopes for you. I used to daydream about how nice you would look when you were all done as I gazed at your construction crane from the window by my cube in 555 12th St. I really thought your two hundred and fifty two units could go a long way towards livening up the West DTO. I dreamed that all your residents would come to my restaurant at night to eat. You had such pretty signs. There were rumors that you were going to house the world’s largest Starbucks. And you were supposed to be finished in December 2007.
But you weren’t. Instead, three years later, every time I go to AAMLO, I am forced to stare at this tremendous ugliness:
You guys know where I’m talking about, right? It’s the half-finished condo project between the Federal Building and Preservation Park, and it’s a giant freaking eyesore.
City Walk: Abandoned since 2007
City Walk suddenly halted constructed in July of 2007 when the developer, Olson Co., ran into, like, all sorts of problems. Olson insisted they were going to be able to get it together and finish, and in December of 2007, the City Council gave them an extension on their completion deadline. They were supposed to restart construction by the end of January 2008 and finish by July 2009.
Obviously, that didn’t happen. Then, like nine months later, Olson was all “Oh yeah, we will restart construction – in November!.” Hahaha. Finally, in February of 2009, Olson admitted defeat and asked the City to amend the DDA so the project would no longer be in default and they could sell it to a rental housing developer, which they said at the time was like, totally about to happen any day now. Construction was going to restart in May, and be finished by December 2010.
Big surprise, that plan didn’t work out either. So then, last summer, someone else decided they wanted to buy the building and finish it up as rental units, so the City once again extended the DDA, this time promising completion by the end of 2011. If you’re wondering at this point why we even bother having these construction deadlines, well, it’s a good question. I don’t have an answer for you.
New City Walk owners need help
Anyway, this time, the sale actually did go through. So that’s something. Unfortunately, this new company that owns it now and wants to finish the building off as a 264 apartment project (instead of the originally planned 252 condos) can’t get the all financing to finish construction. Or, I guess more precisely, they can’t get enough financing that they think it’s worth their while to finish construction.
So in order to just get the damn thing finished already and give the poor pedestrians of downtown Oakland their sidewalks back, Redevelopment Agency staff is now proposing that we just loan them $5 million of redevelopment money (PDF), which will be enough, apparently, to fill in the financing gaps that are preventing the project from getting restarted. I’ll let the report explain it to you:
The loan is required to decrease the equity and investor profit requirements in order to make the project financially feasible. Without this reduction in equity the investor does not meet its minimum return and is therefore unwilling to finance the project. Providing the loan will help complete the project and transform the blighted site into beautiful new rental housing.
I don’t know how “beautiful” the finished building it going to be, but “blighted” is definitely an accurate way to describe the site as it sits now. Here are the loan deets, also from the agenda report (PDF):
The loan terms will be at least as favorable as the other debt financing Wood Partners obtains for the project. The interest rate will be set after negotiations are completed with the other construction lender. The negotiations were under way at the time this report was being written. The interest rate will be at least 8%, but no less than one percentage point higher than the interest rate on other debt; the higher rate on the Agency loan is appropriate given that the loan will be in second priority position. Wood Partners’ latest offer from a construction lender is a loan at 7.5% interest, with a term of up to 7 years, a 1% origination fee and a 1% early termination fee, which would set the Agency loan interest rate at 8.5% assuming similar fees. The Agency loan would be interest-only until stabilized occupancy and then converted to a 25 year amortization schedule with a balloon payment (i.e. loan due in full) in 2015, five years from execution of the loan documents. The Agency could be repaid sooner if conditions are favorable for refinancing with a long term permanent loan. There will not be a prepayment penalty. Given 1) that this is a market rate loan, and 2) the troubled status of the housing market, no additional project development conditions are being proposed in return for the loan.
As far as I’m concerned, this is excellent. It is just like, downright shameful that the City could let that freaking eyesore just sit there unfinished, sometimes shrink-wrapped, sometimes not, for years and years, right in the middle of downtown! It’s blight, and it makes the City look like crap. It just needs to be finished, I don’t care what it takes.
The City Walk loan will be considered by the City Council’s Community and Economic Development Committee on Tuesday. The meeting starts at 2, but this is last on the agenda (PDF) and the first item is going to take like a year.