Thursday, July 16, 2009

More on the Bel-Vue/8th & K project

City plans to demolish the Bel-Vue and adjacent buildings were mentioned in my previous blog post, also posted as a Sacramento Press article on July 3 but at the time the developer and financing organization behind the project were not identified. Since then, both have appeared, along with an additional partner. The financier, Consus Asset Management, is a new player in Sacramento. The developer, Bob Leach, just completed another Sacramento project, the Le Rivage Hotel. The other player in this project is a well-known name in K Street real estate, Mohammed “Mo” Mohanna. All three are asking the city for $18.6 million in free real estate and several years of tax forgiveness once the project is complete, and they want this done immediately, before public input and analysis by city staff and commissions can be completed.

Since my earlier article saw print, these parties were mentioned by articles in the Sacramento Bee, in Bob Shallit’s columns:

In this column, Shallit mentions South Korea based Consus Asset Management ( ) as the primary financier, willing to put up $91 million for construction. Lead developer Bob Leach, builder of Le Rivage Hotel, made contact with Consus through local hotel builder Parkcrest Development. Also on the project team is Mohammed “Mo” Mohanna, who recently owned the land until the city paid him $18.6 million for it, after a lengthy series of negotiations, complex legal maneuvering, and the demolition of the buildings on the corner of 8th & K Street. The article mentioned that the developers were hoping for some tax breaks on this project.

Shallit followed this up with a second column:

Here, the developers have urged the city to move quickly or risk losing financing. They have asked the city to give them the land, currently city-owned, for free, and to forgive taxes on the hotel for the first few years of its operation. Transferring the land quickly would also mean that there would be no time for an Environmental Impact Report to be completed, and before issues like the demolition of the Bel-Vue have had an opportunity to be fully reviewed by city staff, Preservation Commission or Planning Commission.

This issue will go before the Sacramento City Council on August 4. The city of Sacramento has held an Exclusive Right to Negotiate (ERN) with Bob Leach and Parkcrest, extended for 45 days on June 9, but that ERN expires on Friday, July 24.

The unspoken irony in the developers’ demand is that the city of Sacramento just paid nearly $20 million to wrest the property out of Mohanna’s hands, and are now being asked to give the property back to him. They are also asking for a free hand to demolish a Sacramento landmark, and forgiveness of future taxes, which means that it will be many years before the city of Sacramento sees any economic benefit or return on their investment of $20 million, their donation of a half-block of prime downtown real estate (by the city’s own valuation, worth the $18.6 million paid to Mohanna) and their sacrifice of irreplaceable historic buildings. This free giveaway would also add up to far more than the taxpayer-funded donation provided to developer David Taylor to rehabilitate three existing buildings on the 1000 block of K Street, a move that sparked widespread public criticism.

Why is there a need for such urgency? One possible answer is that there is another hotel project planned for K Street, only two blocks away. Unlike the project at 8th and K, this alternate project would require no historic buildings to be demolished. This project does not require the full Environmental Impact Report, instead using a far simpler process called a Mitigated Negative Declaration (MND.) The MND identifies the developer behind the project as "10th & K Developers, LLC" and mentions that it will include 180 rooms in a 12-story building with ground floor retail. Could this simpler, less complex project be the competition that worries the developers behind 8th and K, and enough of a problem to make them demand a massive public subsidy from the city of Sacramento for a project that will not have to pay taxes for many years, and action fast enough to short-circuit public debate and review by city staff?

Meanwhile, the deadline for public comment on the Notice of Preparation is approaching. According to Jennifer Hageman of the city of Sacramento’s Economic Development Department, part of the process will include a public scoping meeting to present this issue to the public, but as of this writing no date has been identified for such a meeting.

To give public comment about this issue, contact Jennifer Hageman of the City of Sacramento’s Community Development Department at or (916)808-5538. Written comments should be sent to Jennifer Hageman, City of Sacramento Community Development Department, 300 Richards Boulevard, Sacramento, CA 95811. Comments are due before 4:00 PM on July 27, 2009.


Anonymous said...

"Unlike the project at 8th and K, this alternate project would require no historic buildings to be demolished."

Also "unlike the project at 8th and K, the alternate project" doesn't have $91 million in financing in hand and probably won't get built.

wburg said...

anonymous: Not what I heard at City Council last night. The 10th & K project has an equity partner, so they could get funding for the far less expensive project they want to build (and require less city subsidy) and Consus hasn't actually signed a formal agreement to lend the money, so no, 8th & K doesn't have money "in hand" either.