Council to choose K Street developers
The Sacramento City Council is set to vote Tuesday night on the developers who will tackle the blighted K Street Mall.
The question before the council is whether to support the recommendation of Mayor Kevin Johnson’s ad hoc committee to go with the biggest proposal, which has a "Boqueria" public market as its centerpiece, or to back two other proposals to redevelop the troubled 700 and 800 blocks of K Street on $40 million in city-owned land.
Only one selection committee had been identified in the city’s request for qualifications. Last month, that committee recommended the 700 block be redeveloped by D & S Development and CFY Development, with their Promenade on K project estimated at $35.5 million. The committee also recommended the 800 block be redeveloped for an estimated $46 million by Sacramento developer David Taylor and Z Gallerie owner Joe Zeiden. Downtown Sacramento Partnership endorsed those selections.
Johnson’s committee, which included City Council members Steve Cohn, Rob Fong and Ray Tretheway, on Thursday announced its preference for the $210 million project by the Sacramento Alliance Team, led by Rubicon Partners, St. Anton Partners and Preferred Capital Advisors. The ad hoc committee was formed to study the proposals in more depth and bring the council members more detail than what they would get at a council meeting, Cohn said.
"The ad hoc commitee of the council went with the more exciting proposal that seemed to have more promise to turn around not just that portion of K Street, but also to rejuvenate downtown with a unique concept," Cohn said. "I think the screening committee was going for the safety of what they thought could get done."
The council will have a challenge making a selection and providing direction to staff and developers Tuesday night, he said.
"It’s going to be incumbent on the council to give guidance on tight time frames, and if this thing’s not financeable, that we don’t let too much time go by before figuring out if it can’t be done," he said. "If it can’t, then we’ll need to fall back to one of the other two that were recommended."
The City Council was initially scheduled to make its selection in May.
The nine-member council must choose between three out of four teams that submitted proposals in March. At least two of those teams have been intensely lobbying the City Council, city staff and the community in the days and weeks prior to the vote.
The D & S and CFY development team — led by D & S partners David Miry and Steve Lebastchi, Miry’s son Bay, CFY owner Cyrus Youssefi and his son Ali Youssefi — has sent more than 500 e-mailed petition signatures to the City Council.
On Saturday, they held an online petition drive at Shady Lady, at 1409 R St. So many signatures flooded City Council e-mail boxes that they closed down their project’s website Monday at the city’s request, Miry said.
Representatives from the Sacramento Old City Association, the Environmental Council of Sacramento and local construction trade unions have thrown their support behind the project and are expected at the council meeting. At least eight local business owners with ideas for the 700 block’s spaces have voiced support as well, he said.
The D&S team is requesting $16 million in existing city Redevelopment Assistance funds and would invest $1.5 million in cash equity and $18 million in conventional debt to develop the 700 block, Miry said.
That team was "surprised" when the mayor appointed an ad hoc committee to take a second look at the proposals, said D & S official Bay Miry.
"It certainly caught us off guard," he said. "We thought it was a slam dunk once we received the recommendation of the selection committee."
The Mayor’s office did not return a phone call seeking comment.
The Rubicon team — the same developers behind the creation of the Citizen Hotel — on Monday provided last-minute information to council members and city staff on numbers contained in the city staff report posted Thursday. Two weeks ago, they held a reception to present the community with more details about their proposal. Representatives from organizations including the California State Board of Food and Agriculture and the California Travel and Tourism Commission have thrown their support behind the team, and individuals have e-mailed through the team’s website.
That team’s proposal would require $99 million in public subsidies, according to the city staff report, which also identified an $80 million funding gap.
However, the team said the funding gap is $50 million, but sources to fill that gap have been identified as coming from private investment by the food and agriculture industry, state funds and federal funds, and a $13.5 million parking bond. No money would come from the city’s general fund, said Project Director J-E Paino of Rubicon Partners.
"The size of the gap is smaller than it appears," he said. "Funding has not been obtained, but funding sources have been identified. We know where we’re going to go to get them. But we can’t go get them until we get control of the land."
The team would invest more than $122 million in private debt and equity into the project, which calls for $19.6 million in RDA funds. Paino said they expect another $19.5 million to come from project-generated tax increment funds, permits and fees, according to information provided to the city.
The team also proposed a $25 million parking bond, according to the city staff report, which said the city can’t undertake that debt. Paino said Monday the team withdrew a request for a $12 million parking bond for the 700 block.
Taylor could not be reached for comment.
Supporters of the development teams are expected to turn out at Tuesday night’s council meeting.
SOCA supports the selection committee’s recommendations partly because the teams would preserve the historic buildings on the 700 and 800 blocks, including Bel-Vue Apartments, rather than just their facades, said SOCA Board Member Kay Knepprath, past president.
"Both of those proposals are realistic and can happen soon," she said. "We are concerned that the city choose developers who have adequate financing and can make it happen."
The council’s dilemma really stems from the existence of such strong proposals, Cohn said.
"What’s reflected that you have three out of the four teams being recommended is that we really had excellent proposals," Cohn said. "It’s a good problem to have in that it’s a tough choice."
Suzanne Hurt is a staff reporter covering business and development for The Sacramento Press.