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HomeMy WebLinkAbout10 - Land Use Entitlement Applications for the Residences at 4400 Von Karman Project (PA2020-061) - Correspondence - Picerne GroupReceived After Agenda Printed January 12, 2021 Item No. 10 THE PICERNE GROUP January 11, 2021 Via E-mail City Council of Newport Beach City of Newport Beach 100 Civic Center Drive Newport Beach, CA 92660 To Mayor Brad Avery and Members of the City Council: In advance of our meeting tomorrow, we would like to take this opportunity to eliminate confusion by briefly responding to some of the arguments raised by a few neighboring office owners to our Residences at 4400 Von Kaiman project. However, to provide context to these comments, it must be noted that owners representing approximately 70% of the leasable space within this area of the Koll Center have either already expressed their support or confirmed that they have no issue with the proposed project. 1. The Proiect Fully Complies with the Covenants, Conditions and Restrictions (CC&Rs) for the Koll Center. A few neighbors have questioned whether residential development is permitted per the Koll CC&Rs on this surface parking lot location, and whether Koll has the right to replace surface parking spaces with covered parking spaces in nearby but different locations. These issues were previously raised in an unsuccessful legal challenge filed by one of the Koll Center owners against the prior residential project applicant. This lawsuit was settled in 2016 and all parties agreed that that residential construction was permissible if in compliance with the applicable City development standards. Additionally, it was agreed that common area surface parking lots could in fact be sold by Koll for residential redevelopment in compliance with CC&R requirements. 2. California Environmental Quality Act Objectives. Neighboring property owners have raised concerns about potential "impacts" based on changes to nearby surface parking lots and replacement parking, and changes to private office views. With respect to parking, as a condition of our project, we are required to replace every single surface parking space eliminated by the project. Further, parking is not an "environmental impact" under CEQA. The project also exceeds the City's parking standards for residential projects. Regardless, the City required a parking study to be conducted for this project which confirmed that substantial numbers (over 40%) of parking stalls remained empty even during peak occupancy periods (study was completed in 2019, pre-COVID). Finally, no neighbor has challenged the fact that all displaced surface parking stalls will, in fact, be replaced. With respect to changes to private views, as is the case with parking, these are not "environmental impacts" under CEQA. Per CEQA regulation Appendix G. I (c)), in urbanized areas, aesthetic impacts are significant only to the extent a project conflicts with "applicable City Council of Newport Beach January 11, 2021 Page 2 zoning and other regulations protecting public resources.". This project complies with all applicable zoning standards. 3. Neighbor Pursuit of Private Economic Issues. During our community outreach, we have heard some concerns associated with the potential negative economic consequences associated with this project. A few of these concerns have also been articulated to the Council in writing and include issues such as business interruption due to construction, and the degrading of Koll Center building owner's property values. Associated with these concerns, we have received demands for various compensation in the form of. • new contractual and property interest rights to the replacement parking; • guarantees that common area fees for the CC&R's would not increase; and • monetary compensation for business interruption. We believe these requests to be without merit and are wrongful if delivered under the threat of a CEQA challenge. Temporary construction activities are a routine, foreseeable, and completely lawful condition in urban areas. With respect to the impact of this project to neighboring property values, this project represents an over $250M investment in the City of Newport Beach and the Koll Center. In comparison, 5000 Birch Street, by far the largest building in the area by square footage, was purchased by John Hancock in 2015 for $104.5M. It is reasonable to infer that a substantial investment in Class A housing will only have positive financial effects on the surrounding properties. In any event, all owner commenters were on notice both, as to their rights under the private CC&Rs and, in almost all cases, when they purchased their property after the City's adoption of the 2010 ICDP which contemplated residential in the Koll Center Area. Finally, all these issues have been brought to the attention of the owner of the Koll Center and found to be without merit in a letter from Koll to these owners dated January 4, 2021 (see Attachment 1). Notwithstanding, we have met extensively with these property owners to address their concerns. Understandably, it has been an ongoing process. The lack of resolution, however, cannot be used as a cause for delaying approval of the project as has been requested. As was discussed at our Planning Commission hearing on the project, the United States Supreme Court has definitively ruled that it is an unconstitutional delegation of regulatory power for a city to require neighbor approval before approving a project that is otherwise eligible for approval. To that end, we are presenting a project that meets that threshold. This project implements the ICDP, which was approved nearly a decade ago and informed by a full Environmental Impact Report (EIR). In compliance with CEQA, the City required updated studies for the project confirming compliance with applicable City standards and that it caused no significant new or exacerbated impacts. In conclusion, there are no claims raised by commenters that warran t delaying the Council's consideration of the project, and claims raised alleging CEQA or land use objections are without merit. This project is a critical addition towards meeting the City's housing goals and 2 City Council of Newport Beach January 11, 2021 Page 3 help address a significant housing shortfall mine region. The project also includes critically needed housing for very low-income households, which will be managed by a respected affordable housing management company, in full compliance with City requirements and the state Density Bonus Law. We very much appreciate and look forward to your consideration of the project. Sincerely, Timothyanley President, Picerne Development Attachment 1 -January 4, 2021, letter from S. Meserve to D. Ostensen and J. Ault 3 City Council of Newport Beach January 11, 2021 Page 4 Attachment 1 0 January 4, 2021 Derek Ostensen Julie A. Ault Olen Properties 7 Corporate Plaza Newport Beach, CA 92660 RE: Letter dated December 8, 2020 with respect to Proposed Residences at 4400 Von Karman Apartment Project at Koll Center Newport Dear Mr. Ostensen & Ms. Ault, This letter is in response to the December 8, 2020 letter we received from Olen Properties, Meyer Properties, Von Karman Condo Association and COMAC American Corporation (collectively "Owners"), all owners of property within the complex know as Koll Center Newport ("KCN"). The letter was sent to KCN A as the Declarant under the CC&R's which govern the property (the "CC&Rs). As I stated in my December 16, 20201etter to you, we have been in communication with the current applicant , Picerne, and have incorporated the information it has provided in this letter. The Owners' December 8 letter raises a variety of issues and concerns. Before we address them, we note that KCN A is in full compliance with the CC&Rs, including as to KCN A's sale of the residential property and the development of that property by Picerne. Any claims by the Owners to the contrary are meritless and disputed. Our response to the issues and concerns below quotes each item and then gives our response in in bold. 1. Common Area Parking and Proposed Construction Activities. a) "It is our understanding that a large area of Common Area parking has been sold to an entity controlled by The Shopoff Group (Shopoff). Please provide the legal document that guarantees and protects our Common Area parking rights, given that such parking is now on private property. Further, please advise as to how the proceeds Koll derived from the sale of the Common Area were apportioned against the Common Area expenses given the proportional ownership of such land by each of the Owners." The Owners' parking rights are provided in the CC&Rs. All of the common area land is privately owned, and the sale proceeds go to the common area owner just as they did when every other owner's parcel was sold and developed. The sale of this parcel does not change your common area parking rights, as each parking space displaced by the new residential project is to be replaced by a Derek Ostensen Julie A. Ault Olen Properties January 4, 2021 Page 2 combination of parking spaces within a new freestanding parking structure (to be built in the initial phase) and a dedicated office parking area within the new residential project. We understand that access to this office parking within the new residential project will be from two locations, the first being a separate access for KCN users on the north side of the new residential project and second from the main KCN drive on the south side of the new residential project. This project also includes the required parking for new residents and their guests once all construction is completed. The CC&Rs do not create any right by existing owners or tenants to proceeds from the sale of common areas. b) "During Phase 2 construction of the Picerne project, there would be a large deficiency of 260+ parking stalls, creating a non-compliant allocation of parking rights per the CC&R's and City code. As you are aware, the ability of an existing property owner to sell or finance their building depends on compliance with parking requirements. Accordingly, such a deficiency would potentially preclude them from doing so. Please describe how you intend to address this issue." There is always some parking disruption during construction, which is contemplated and permitted under the CC&Rs. The developer is responsible for accommodating that parking, and to replace all impacted parking spaces as described above. See also response to g) below. c) "Who would own the standalone parking structure? Please provide the legal document that would guarantee and protect our Common Area parking rights in the standalone parking structure." KCN A would own that structure for the benefit of the common area just as the parking structure behind 4000 MacArthur is owned by KCN A. The CC&Rs would apply. d) "Clearly, Picerne would own the parking structure beneath its apart ment project, of which a portion is proposed to be used to fulfill Common Area parking needs. Please provide the legal document (easement or other) that indicates how our Common Area parking rights would be maintained and protected, and which details how matters such as insurance are handled." No documents have been drafted at this time. To the extent the apartment structure will have common area parking rights, those rights will be further documented (e.g. by a perpetual access and use agreement) and managed as part of the common area under the CC&Rs. This additional documentation will be finalized as part of the project implementation process once the entitlement process is completed and include customary operating and maintenance covenants and insurance requirements. e) "Parking Structures can entail additional risks associated with theft, transients and other safety issues. Would there be security cameras installed in the office parking areas to address these risks? Would Picerne be solely responsible for their cost and maintenance given that the proposed development fundamentally changes the existing common areas?" KCN A intends to review and comment on the developers parking plans as affecting the common -2- Derek Ostensen Julie A. Ault Olen Properties January 4, 2021 Page 3 area, and will discuss with the developer the security camera concept. Additionally, KCN security will patrol this parking as part of the common area. Picerne will simply become an additional building owner within KCN, with the square footage of its building being added to the denominator in determining the percentage allocations of the KCN, and thereby lowering the overall common area costs for all of the existing KCN owners. f) "The Parking Exhibit Picerne provided to the Planning Commission (see enclosed) claims to address the Required Office Stalls Per Code for the existing buildings adjacent to the project whose parking would be impacted. Yet the largest and most parking - intensive affected building, 5000 Birch, is not included in the exhibit's analysis. This shortcoming should be explained and fixed so we can have an accurate understanding of the project's parking implications." The developer's parking plans call for each impacted parking space to be replaced through a combination of the freestanding parking garage and the designated office spaces in the apartment podium; hence, there is no resulting change to the existing parking ratios. g) "It seems highly doubtful that all construction workers and vehicles will be parking solely on-site, as Picerne claims. Numerous construction projects promise this and then fail to abide by it, resulting in severe parking constraints to existing businesses such as ours. Please provide a construction plan that clearly indicates on-site parking locations and layouts. Please also provide an explanation of how construction workers and vehicles will be prevented from parking in office stalls, given that your current proposal does not indicate any mechanism to do so besides an honor code (which rarely works with construction workers)." This is the developer's responsibility, and it has provided the following response: "As you are aware, it is within the general charge of the City to ensure the public safety and welfare of its residents and to utilize applicable laws, rules and regulations to protect the same while also promoting economic prosperity and respecting private owners' property rights. Of course. as with any situation where development and construction is being completed, there will be some resulting temporary inconveniences. In this case, the promulgated conditions of approval require, prior to the issuance of a building permit, a City -approved construction management plan addressing many topics, including project phasing, staging areas, construction parking, haul routes and emergency access. A draft of the construction management plan was attached to the November 5, 2020, Planning Commission Staff Report as Attachment No. PC 5." h) "Please provide an exhibit that shows where each of our buildings would park during construction, including the number of stalls allocated to each building per its square footage. Indicate how our respective parking allocations are fulfilled by each parking location during each phase of construction." See response to g) above. This should or can be ascertained from the developer's City -approved construction management plan, as it may -3- Derek Ostensen Julie A. Ault Olen Properties January 4, 2021 Page 4 be updated. Also, as was the case with prior construction, some inconvenience comes with construction, which the plan is designed to minimize. i) Please explain how the parking stall allocation Koll has provided for existing businesses is compliant with City Code for office space, which appears to require a higher number of stalls than is allocated to us by Koll. The KCN A parking ratio is compliant with the City -approved Planned Community Text, which allows for a lower parking ratio than the general parking requirements set forth in the City Code. j) "Please provide the agreement between Koll and Picerne which would guarantee parking shuttle service for affected building owners, if the project is built." Currently, there is no such agreement. However, KCN A intends to review and comment on the developer's parking plans as affecting the common area, including shuttle. See responses to d) and g) above. k) "If the project proceeds, hundreds of thousands of cubic yards of soil would be exported from the site. Thousands of new vehicle trips from construction workers, heavy equipment and material deliveries would occur. You appear to have given little thought to how significantly such activities would congest and impair Koll Center circulation. What is your plan for minimizing impacts of such activities to existing businesses, whose financial viability depends on their workers being able to access their offices?" Construction activities are directly regulated by the City as part of the entitlement approval process, and are covered by the developer's construction management plan. See g) above. 2. Common Areas Expenses A) "We firmly object to any increase in our Common Area expenses from the proposed project and its numerous related impacts. Please confirm that our Common Area expenses would not increase as a result of this project, if it is built." The common area expenses will be charged in accordance with the CC&Rs. We note that the last budget for the Shopoff plan showed a decrease for existing owners due to the decrease in maintenance requirements and increase of the number of owners paying into the common area. The updated budget based on the Picerne plan will be prepared once all the details of the Picerne plan are finalized. b) "Has Shopoff been paying into the pro rata share of the KCN Expenses for their new parcel? If not, please indicate why and how that is allowable under the CC&Rs." No, our practice has been to not start charging until construction starts, because until then nothing has changed in the common area. -4- Derelc Ostensen Julie A. Ault Olen Properties January 4, 2021 Page 5 c) "If Picerne proceeds with constructing thea project, what would their pro rata share of KCN expenses be? Please confirm that Picerne would be a fully paying participant in overall KCN expenses and would not be excluded from sharing such expenses." Yes, Picerne would be paying their pro rata share of common area expenses. d) "For the proposed 1 -acre park, would Picerne be solely responsible for all public park costs, including all equipment replacement and maintenance. Existing KCN property owners should not be responsible for any of these costs." Yes, Picerne will be responsible for the park maintenance. e) "Would Picerne be solely responsible for the costs of maintaining the Office Lobby elevator that provides office parking service from the proposed subterranean structure?" Yes, Picerne will be responsible for maintaining the elevator, and will be reimbursed by the common area in accordance the CC&Rs. f) "Would the new proposed "internal street" be a public street whose maintenance and liability costs are borne by the City? If not, how do you intend to deal with the significant associated costs and liability of this street? Being that it would primarily serve the apartment building, its substantial maintenance and liability costs should not be shouldered by the existing office buildings." This open drive will operate the same as the other open (non -gated) drives in KCN i.e., the road between MacArthurNon KarmanBirch adjacent to the Renaissance hotel and the surrounding office buildings and the road which connects MacArthur and Jamboree in front of 4000 MacArthur). It will be a common drive and the expenses will continue to be shared as a portion of the common area. OF) "Structured parking oft en entails higher costs for maintenance and management. Would Koll be guaranteeing that existing properties will not have their parking rates or shared maintenance costs increase above what is currently paid, excepting routine CPI increases? The proposed structured parking would be imposed on us, and our tenants generally prefer the convenience of surface parking, hence we should not be forced to pay higher costs." The common area expenses will be charged in accordance with the CC&Rs. The new standalone structure will be maintained by the common area. We note that as a standalone, non -ventilated, concrete structure, it may be less costly in the long run to the common area than the existing asphalt surface parking and landscaped areas. h) "Large-scale construction will clearly damage and degrade Common Area drive aisles, planters and other items. Following major construction, drive aisles typically need to be repaved, curbs repaired and planters replanted, among numerous other cost items. What agreement with Koll requires Picerne to pay for such repairs, given they would be directly caused by their construction?" Picerne will be responsible for any damage done as a result of its construction. -5- Derek Ostensen Julie A. Ault Olen Properties January 4, 2021 Page 6 3. Financial Viability of Our Properties During and after Construction "Each of our companies has invested millions of dollars into our buildings with the understanding that Koll Center Newport is an office park and would not be undergoing an enormous residential construction project in the middle of our jointly owned Common Area that will fundamentally degrade our properties' value, marketability and quality of life for several years." We disagree. We also note that mixed-use parks that feature residential typically out perform their market competition. In fact, many mixed-use developments within the surrounding areai.e., Newport Beach, Irvine and Costa Mesa) have been adding residential units and those properties have seen resulting increased occupancies and office rental values. "Koll has profited from its sale of our Common Area parking for a massive development and, through the proposed construction and also its subsequent view blockages and other negative property value impacts, Koll will impose substantial financial damages on our properties, including proposed removal of on -grade parking as required by the CC&Rs, which reduces the value and marketability of our buildings. Yet Koll has done little or nothing to address these damages or even carefully coordinate with existing property owners to mitigate such impacts." Your claim is not reasonable or correct. The concept of infill development within KCN is nothing new, it has been going on since the project was started several decades ago. All of the buildings built in KCN were added over time with many of the buildings being built on the (privately owned) common area. The most recent being the 4450 MacArthur building which was built on an existing common area parking lot and the development included an office building, below grade parking and new parking spaces built on a common area landscape area. The common area owner has the right to sell off and adjust boundaries of the common area. The long term concept after this potential development will still provide all existing owners in the immediate area to have access to both exposed surface parking and covered structured parking. Section 7.02 of the CC&Rs clarifies that owner with Declarant can alter existing parking and drives to accommodate the development. The precedent of this altering of parking and drives is obvious by the number of existing parking structures and revised drive aisles present within KCN. "Consider for a moment that during the extremely noisy, congested and disruptive proposed construction, we will not be able to lease vacant space in our buildings and will likely face rent reduction and/or early lease termination requests from tenants. Brokers and their tenant clients can lease space in numerous other Airport Area properties that will not be undergoing years of noisy construction, parking deficiencies and circulation congestion — and they will surely do so, materially impairing the financial viability of our properties as a direct result of Koll's conduct." We question whether your claim is correct. In any event, we understand that there will be -6- Derek Ostensen Julie A. Ault Olen Properties January 4, 2021 Page 7 some short-term construction to work through, but that is to be expected from the development permitted under the CC&Rs. Moreover, we believe that the value created from an enhanced mixed-use park will be long term. It should also be noted that many of the owners, including COMAC (4350 Von Karman) and Von Karman Condo Association (4340 Von Karman) purchased their buildings with full knowledge that a residential project was planned for this site. "As existing property owners in Koll Center Newport, we deserve better —beginning with your prompt response to the concerns detailed above, appointment of counsel to represent the owners' interests in negotiations with Picerne as well as continuing with additional discussion on how you intend to mitigate the financial damages you are imposing on our properties through the proposed construction. Please be advised that this correspondence is an urgent attempt to prompt action on behalf of the owners and does not constitute a full recitation of all opposition to the proposed project." We decline your request to appoint counsel for the Owners. There is no such obligation under the CC&Rs. we are willing to discuss any reasonable mitigation measures you may desire. However, we strongly disagree that the development will cause financial damages to the Owners, to the contrary as noted above we believe that the development and the associated improvements to the property will enhance the value of all properties within KCN. Let me know if you have any questions. Regards, Scott M. Meserve The Koll Company cc: Dana Haynes, VKOA Jim Hasty, Meyer Properties John Zhang, COMAC -7-