THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA M E M O R A N D U M DATE: APRIL 3, 2008 VM2040

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1 THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA M E M O R A N D U M 1 DATE: APRIL 3, 2008 VM2040 TO: CRA/LA BOARD OF COMMISSIONERS FROM: RESPONSIBLE PARTIES: SUBJECT: CECILIA V. ESTOLANO, CHIEF EXECUTIVE OFFICER CAROLYN HULL, REGIONAL ADMINISTRATOR JENNIFER JONES BARRERA, ASSISTANT PROJECT MANAGER W. ONO UJOR, CITY PLANNER CERTIFICATION OF THE FINAL ENVIRONMENTAL IMPACT REPORT, AND A PUBLIC HEARING ON RESOLUTIONS OF NECESSITY TO INITIATE CONDEMNATION PROCEEDINGS TO ACQUIRE PARCELS WITH APNs THROUGH 006, AND THROUGH 008, LOCATED ON THE 8400 AND 8500 BLOCKS OF SOUTH VERMONT AVENUE IN THE VERMONT/MANCHESTER RECOVERY REDEVELOPMENT PROJECT AREA SOUTH LOS ANGELES REGION (CD8) RECOMMENDATIONS That the CRA/LA Board of Commissioners: 1. Adopt a Resolution certifying that the Final Environmental Impact Report (EIR) for the proposed Vermont Manchester shopping center project (Project): a. Has been completed in compliance with the California Environmental Quality Act (CEQA) and with the State and CRA/LA CEQA Guidelines; b. Has been reviewed and considered by CRA/LA Board of Commissioners; and c. Represents the CRA/LA s independent judgment and analysis; and 2. Hold a public hearing and adopt two Resolutions of Necessity (RONs) to initiate condemnation proceedings to acquire parcels with APNs through 006 and APNs through 008, including all tenant interests in these parcels (collectively, subject Parcels).

2 RESOLUTION OF NECESSITY VERMONT MANCHESTER 2 SUMMARY The Resolutions of Necessity The recommendations request that the CRA/LA Board of Commissioners (Board) adopt the RONs to acquire by condemnation the subject Parcels (and any tenants interests therein) in order to eliminate blight consistent with the Vermont/Manchester Recovery Redevelopment Plan (Redevelopment Plan). (See proposed RONs for these Parcels on Attachments B and C hereto.) Adoption of the RONs will permit staff to actively proceed with development of the proposed Project which aims to bring a long needed supermarket, sit-down restaurant, and drugstore to the community. The subject Parcels lie within the 8400 and 8500 blocks of South Vermont Avenue (on the east side of the street) in the Vermont/Manchester Recovery Redevelopment Project Area (Project Area). (See Project Area map on Attachment D hereto.) The Redevelopment Plan was adopted by the City Council under Ordinance No on May 14, Its adoption conclusively established the findings of blight in the entire Project Area as required by California Redevelopment Law. A shopping center on said blocks of South Vermont Avenue is included in the current Five Year Implementation Plan for the Project Area adopted on April 6, The Four Required Findings The proposed RONs set forth four findings to be made by the Board: 1) that the public interest and necessity require the Project; 2) that the Project is planned or located in a manner that will be most compatible with the greatest public good and the least private injury; 3) that the subject Parcels are necessary for the Project; and 4) that the offer required to be made by Government Code Section has been made to the owners of record of these Parcels, or that the offer has not been made because the owners cannot be located with reasonable diligence. A twothirds vote of the Board is required to adopt the RONs. Staff recommends that the Board make these four findings based on the following: First, the Project implements several objectives of the Redevelopment Plan. These objectives, set forth in Section 105 of the Plan, include: (i) promote establishment of a full service shopping center in the Project Area (which will be achieved by the Project s construction of such shopping center on the subject Parcels); (ii) create an atmosphere for economic opportunity through business development activities (which will be achieved by the Project s development of new and needed retail space for local and other businesses on the subject Parcels); (iii) develop employment opportunities for the community by attracting new employers (which will be achieved if the Project locates a supermarket, sit-down restaurant, and drugstore on the subject Parcels); and (iv) develop informed community involvement in redevelopment of the Project Area (which is achieved by the continued use of the Vermont Manchester Community Advisory Committee s [CAC s] input on the siting, configuration, and tenant mix of a shopping center on the subject Parcels). Equally important, the Project will generate substantial revenues for CRA/LA in the form of tax increment and possible ground lease income; and for the City in the form of sales tax, property tax, utility tax, and business license fees. Additionally, the Project will eliminate the current blight on the subject Parcels. The ownership of the subject Parcels is divided into two groups: (i) APNs through 006 and APNs through 008 (collectively, Eli Sasson Parcels); and (ii) APN (Joe & Rosalae Sasson Parcel). All of these Parcels are vacant and weed or trash covered with the exception of APNs and which each contain a building owned by Eli Sasson. (See photographs of the Parcels on Attachments E and F hereto.) Further, both the

3 RESOLUTION OF NECESSITY VERMONT MANCHESTER 3 Eli Sasson Parcels and the Joe & Rosalae Sasson Parcel have recently received multiple citations from the City Department of Building and Safety for overgrown vegetation, trash and debris, unapproved auto storage, and deteriorated fencing. (See Orders To Comply on Attachment G hereto.) Second, the Project will be a complementary use to the newly opened Los Angeles County Building which houses the Department of Public Social Services with 1,200 employees (County Building). It is located just north of the subject Parcels. The Project will transform the subject Parcels and the two adjoining CRA/LA-owned parcels (collectively, Project Site) into a thriving retail center which will serve the retail needs of the County Building employees as well as area residents. (See Project Site map showing location of Project Site and County Building Site on Attachment H hereto.) Equally important, the Project Site is a key part of CRA/LA s development strategy for the Project Area. This strategy focuses investment on a prominent corner where it can be seen and catalyze additional investment in both directions along the Vermont Avenue and Manchester Avenue thoroughfares. Also, the built Project will provide an attractive buffer between the major traffic corridor (at Vermont and Manchester Avenues) and the surrounding residential, daycare and school uses. All four corners of the Vermont Manchester intersection are well served by public transit which makes the Project accessible to the large, underserved residential population without private transportation and an ideal location for a shopping center. Although the subject Parcels currently have an optometrist office, nutrition shop, nail salon, and Payless Shoes store, they do not fulfill the surrounding community s most urgent needs. The top four needs are a supermarket, drug store, fitness center, and sit-down restaurant which were documented in a 1999 survey of the local community. Third, the subject Parcels constitute 14 of the 16 parcels needed to develop the Project and represent approximately 75% of the Project Site. The CRA/LA-owned parcels constitute the remainder of the Project Site. Without that 75% portion, there is neither a Project Site nor a feasible Project that can be developed. Additionally, the subject Parcels are necessary for the Project because of their proximity to a major intersection and public transit as well as their central location within the area of high market demand for a new commercial retail center. Fourth, staff provided the owner of the Eli Sasson Parcels numerous opportunities over the last ten years to submit viable proposals for development of a shopping center project involving these Parcels. In October 1998, CRA/LA issued Statements of Interest (SOIs) inviting Eli Sasson and other owners to state their interest in developing a neighborhood shopping center project on land consisting of the Project Site, the adjoining County Building Site, and several adjoining residential parcels (collectively, Initial Project Site). In March 1999, CRA/LA issued a Request for Proposal (RFP) to the seven SOI respondents, including Eli Sasson. None of the proposals submitted in response to the RFP (including that of Eli Sasson) were deemed adequate. In May 2000, therefore, CRA/LA issued another RFP for a shopping center project on the Initial Project Site, and ultimately executed an Exclusive Negotiation Agreement (ENA) in August 2001 for such project with respondent Majestic Realty. Those ENA negotiations ended on or about August 2002 without finalization of a Disposition and Development Agreement (DDA) for a shopping center on the Initial Project Site. In November 2005, CRA/LA issued a second SOI to Eli Sasson and three other owners seeking their interest to develop a mixed-use (commercial and potentially residential) project on the Project Site. This SOI process resulted in the selection of Eli Sasson for an ENA with CRA/LA which was executed in May 2006 and extended in September In January 2007, that ENA expired after eight months of fruitless negotiations. Despite this expiration, staff continued to

4 RESOLUTION OF NECESSITY VERMONT MANCHESTER 4 negotiate exclusively with Eli Sasson until July During these 14 months of exclusive negotiations, Eli Sasson submitted several different plans for a development on the Project Site. These plans either changed uses (e.g., removed the residential component), altered the tenant mix, increased the scope of the development, or sought an infeasible public subsidy far in excess of the amount CRA/LA could make available. Ultimately, Eli Sasson failed to propose a feasible project to staff, thus ending the possibility of a DDA for the Project Site. On July 19, 2007, staff terminated further negotiations with Eli Sasson for the reasons stated in the BACKGROUND section (below) titled The Second CRA/LA Effort To Develop A Commercial Project. Staff has determined, therefore, that other options for development of the proposed Project must now be initiated in accordance with the Redevelopment Plan. Similarly, staff provided the owners of the Joe and Rosalae Sasson Parcel with the same development opportunities (in 1998 and 2005) as provided Eli Sasson. As stated above, the first opportunity resulted in the selection of Majestic Realty (in 1998). Joe and Rosalae Sasson responded but were not selected for the second opportunity (in 2005). Accordingly, a first set of written offers to acquire the subject Parcel(s) were sent to Joe and Rosalae Sasson on August 30, 2007 and to Eli Sasson on December 21, A second written offer was sent to Joe and Rosalae Sasson on February 1, The first offer was resent to the Eli Sasson affiliates who appeared on a title report as the owners of the Eli Sasson Parcels on February 11, Subsequently, staff met with both parties to discuss acquisition of their Parcels. Although staff will continue to offer to negotiate a mutually agreeable purchase of the subject Parcels, it is staffs opinion that efforts to acquire them through negotiations will continue to be unfruitful, have reached an impasse, and that a voluntary acquisition is unlikely. Accordingly, in compliance with the California Code of Civil Procedure, notice of this Public Hearing was sent to Eli Sasson, and to Joe and Rosalae Sasson on March 10, The building tenants on the Eli Sasson Parcels were sent these Notices on March 14, The Recommendation Staff believes that this Project is a critical component in redeveloping the Project Area, and that acquiring the subject Parcels is supported by the findings presented (above) and contained in the RONs. Based on the prior actions of the Board, City Council and Mayor on a commercialretail project involving the subject Parcels, and the years of unfruitful staff efforts to commence or conclude development negotiations with these Parcels owners, staff recommends adoption of the RONs to acquire these Parcels for CRA/LA s development of the Project thereon. RE March 6, 2008 Authorization to Expend up to $4,400,000 from CRA/LA Land Acquisition Fund for Acquisition of Parcels through 006, and Parcels through 008, located on 8400 and 8500 Blocks of South Vermont Avenue. January 17, 2008 Public Hearing on the Draft Environmental Impact Report/Environmental Assessment for the proposed Vermont Manchester Shopping Center Project, located at the 8400 and 8500 Blocks of South Vermont Avenue. May 16, City Council Approval of CRA/LA Board of Commissioners Authorization To Enter Exclusive Negotiation Agreement (ENA) with 8300 South Vermont Avenue, LP For Development of a Mixed-Use Project on East Side of South Vermont Avenue between 84 th Street and Manchester Avenue.

5 RESOLUTION OF NECESSITY VERMONT MANCHESTER 5 April 6, 2006 Authorization to Enter Exclusive Negotiation Agreement (ENA) with 8300 South Vermont Avenue, LP for period of four (4) months (with two 60-day Options to Extend) for Development of a Mixed-Use Project on East Side of South Vermont Avenue between 84 th Street and Manchester Avenue. January 19, 2006 Public Hearing for Approval of Sale of two Agency-Owned Parcels (942 W. 84 th Street and 947 W. 85 th Street) to 8300 South Vermont Avenue LP, the Proposed Developer of Vermont Manchester Mixed-Use Project. November 3, 2005 Report to CRA/LA Board of Commissioners on Issuance of a Request for Statements of Interest to Property Owners and Business Occupants for Redevelopment of East Side of Vermont Avenue between 84 th Street and Manchester Avenue. February 21, 2002 Authorization to Extend Negotiating Period of ENA with Development Team of Majestic Realty and Vermont Village Community Development Corporation for a 90 Day Period For Development of Community Shopping Center. February 15, 2001 Authorization to Enter into ENA with Development Team of Majestic Realty and Vermont Village Community Development Corporation for Development of Vermont/Manchester Community Shopping Center. SOURCE OF FUNDS CRA/LA Land Acquisition Funds and Vermont Manchester Bond Proceeds Series B. PROGRAM AND BUDGET IMPACT The recommended actions are consistent with approved FY08 Vermont Manchester Budget and Work Program. ENVIRONMENTAL REVIEW The first action to be considered by CRA/LA is adoption of the Resolution (Attachment A hereto) which certifies that the Final EIR for the Project has been prepared in compliance with CEQA. Certification of the Final EIR does not imply approval of the Project. The Draft EIR for the Project was made available for public review and comment on December 17, A public hearing on the Draft EIR was held on January 17, 2008, and the 45-day public review period for that document ended on January 31, Notice stating that the Draft EIR was available for inspection was published in the Los Angeles Times during the week of December 17, 2007 and was placed on the CRA/LA website. The notice stated that members of the public could review the Draft EIR at CRA/LA s Records Department, the Los Angeles Public Library, and on CRA/LA s web site. It further stated that the document could be borrowed in accordance with CRA/LA s procedures at its Records Center. The Final EIR for the Project includes the environmental analysis from the Draft EIR (revised if necessary), all of the comments received during the public review process of the Draft EIR, and a transcript of the oral testimony at the public hearing and responses to the comments, where required. Comments on the Draft EIR related to adding another study intersection (from the County Los Angeles Department of Public Works); school bus access and school pedestrian/traffic safety access (Los Angeles Unified School District); and general comments on

6 RESOLUTION OF NECESSITY VERMONT MANCHESTER 6 the Project aesthetics, and general environmental conditions in the neighborhood that are not related to the proposed Project (the CAC). BACKGROUND The civil unrest of April 1992 devastated the commercial heart of the Vermont Manchester community. As a result, the thrust of redevelopment activities in this part of the City has focused on the rebirth of essential retail commerce necessary for a viable and thriving community. Key to the rebirth is development of a modern shopping center in this community. The First CRA/LA Effort To Develop A Commercial Project On May 14, 1996, the City Council adopted the Redevelopment Plan with a specific objective of delivering a full service community shopping center to this underserved community. To this end, there have been two CRA/LA efforts to develop a commercial node at the northeast corner of Vermont and Manchester Avenues in the Project Area. On October 30, 1998, staff sent Statements of Interest (SOIs) regarding a shopping center project to property owners within the Initial Project Site. Seven of them expressed an interest in developing a shopping center on that Site, but their proposals were found inadequate. Among the inadequate proposals were those submitted by Eli Sasson and Joe and Rosalae Sasson. In early May 2000, therefore, staff expanded its outreach for developers of such a project by advertising a pre-solicitation notice in the Los Angeles Times, and posting that notice on the City of Los Angeles website. On May 4, 2000, staff mailed RFP No to a total of 233 developers, firms, organizations (of which 44 were minority outreach organizations) for this project. The final mailing list was comprised of firms in CRA/LA s Business Directory, major regional developers, and those responding to the pre-solicitation notices. On July 5, 2000, staff received four proposals from Center Trust, Inc., Haagen Company, LLC, Majestic Realty/Capital Vision Equities, and Vermont Slauson Economic Development Corporation (VSEDC). The criteria (as specified in the RFP) used to evaluate the proposals were: (i) strength of proposed developer (qualifications, experience, record of completed projects); (ii) economic factors; and (iii) scope of project (schematic site plan). In September 2000, all respondents were invited to give an oral presentation before a CRA/LA review panel at which time Haagen and VSEDC advised that they had formed a joint venture for the proposed project. Subsequently, Majestic also advised that it had obtained a new partner for the project, the Vermont Village Community Development Corporation (VVCDC), a local nonprofit development group of the Crenshaw Christian Center. In December 2000, as a result of proposed changes by two of the developer teams, staff requested best and final offers from Center Trust, Haagen/VSEDC, and Majestic/VVCDC. In January 2001, these three developer teams were invited to give an oral presentation based on their best and final offers submitted. Based on such offers and presentations, staff recommended the Majestic/VVCDC team for an Exclusive Negotiation Agreement (ENA). On August 23, 2001, CRA/LA executed an ENA with Majestic which commenced a year long effort to assemble the Initial Project Site, evaluate financing and use options, and negotiate the terms of a DDA for the project. This effort failed to assemble the Initial Project Site because residential parcels that comprised a portion of the Initial Project Site could not be voluntarily acquired by Majestic, and CRA/LA lacked involuntary acquisition (eminent domain) powers over such property in the Project Area. A downsized Initial Project Site proved infeasible, and negotiations with Majestic ceased in August 2002.

7 RESOLUTION OF NECESSITY VERMONT MANCHESTER 7 The CRA/LA Assistance With The Adjacent County Project On November 30, 2004, the County Board of Supervisors (in response to a County RFP for a Department of Social Services facility) selected ICO Vermont LLC (ICO) to develop a four-story office building on a portion of the Initial Project Site. That County Building would provide 220,000 gross square feet for use by that Department and 1,200 of its employees. The County Building has been constructed and is now operational on Vermont Avenue between 83 rd and 84 th Streets in the northern portion of the former Initial Project Site. CRA/LA conveyed two of its parking lots in this block to ICO for the construction of a 900-space parking garage for the County Building. Additionally, Eli Sasson sold parcels in this block to ICO to assemble land for the County Building. The Second CRA/LA Effort To Develop A Commercial Project In November 2005, CRA/LA staff issued SOIs to four private property owners seeking their interest in developing a mixed-use (commercial and residential) project on the Project Site. On May 10, 2006, CRA/LA entered into an ENA with the owner of the Eli Sasson Parcels which constitute 75% of the Project Site. The ENA called for a mixed-use commercial development with the possibility of condominiums on the Site. After over a year of negotiations and many different plans submitted, the development of a shopping center alone with up to 150,000 square feet of gross leasable area proved to be infeasible with Eli Sasson due to several factors, including, but not limited to: CRA/LA s economic consultant s (Keyser Marston Associates) conclusion that Eli Sasson s project as designed was infeasible without an infusion of public dollars substantially in excess of that supported by the anticipated project revenues. The requested subsidy was necessitated by the extraordinary construction costs associated with the building type, density, and parking solutions. Eli Sasson requested an infeasible sum ($32 million) in subsidy to construct his project. CRA/LA s economic consultant offered alternative, cost effective project configurations, which Eli Sasson refused to pursue. As a result, CRA/LA never entered into a DDA with Eli Sasson and the ENA with him expired in January In good faith, CRA/LA staff continued to negotiate exclusively with Eli Sasson following the ENA s expiration, but terminated those negotiations on July 19, The Proposed Project Benefits In addition to creating retail uses serving nearby residents, other tangible benefits of the proposed Project include increased sales tax revenues and improved employment opportunities for residents in the surrounding neighborhood. The Project will facilitate cleanup of a currently blighted site, create a safe, modern and attractive community-serving shopping center in place of the current dilapidated uses. As a result of the Project, the current physical blighting conditions will be eliminated. Additionally, the Project will stabilize local businesses, provide local shopping opportunities for residents and County employees, and provide new employment opportunities.

8 RESOLUTION OF NECESSITY VERMONT MANCHESTER 8 Upon selection of a developer for the Project, CRA/LA will require that all applicable CRA/LA Policies be included in the DDA with that developer. The proposed actions implement a critical component of CRA/LA s strategy for the revitalization of the Vermont Manchester Commercial Corridor. This Corridor is one of the most heavily traveled corridors and most visible in the City. Revitalization of this particular commercial node is the primary redevelopment strategy for the Project Area. This Corridor is located in a State Enterprise Zone and a federal Empowerment Zone, making tax incentives and other benefits available to area businesses. Cecilia V. Estolano Chief Executive Officer By Glenn F. Wasserman Chief Operating Officer There is no conflict of interest known to me that exists with regard to any CRA/LA officer or employee concerning this action. Attachments - Attachment A CEQA Resolution Attachment B Resolution of Necessity (Eli Sasson) Attachment C Resolution of Necessity (Joe and Rosalae Sasson) Attachment D Project Area Map Attachment E Photographs of Eli Sasson Parcels Attachment F Photograph of Joe and Rosalae Sasson Parcel Attachment G Orders To Comply Attachment H Project Site Map