By John Earl
Surf City Voice
Pacific City has a new principal owner: Farallon Capital Management. Currently the project is in limbo, but it could be in for some plan changes, city officials say.
The limping, $850 million redevelopment project, approved by the Huntington Beach City Council in 2004, was supposed to be built by Makar Properties on 31.5 acres of downtown land bordered by Pacific Coast Highway, First Street and Atlanta Avenue.
Stalled mainly by financing problems that trickled down from the peak of the recent worldwide economic boom/bust, Pacific City could have been the proverbial City on the Hill—New Urbanism style—containing 512 condos on top of retail stores with a 165 room luxury boutique hotel and spa, plus a 12,000 square foot restaurant; in all, a model of smart local living for the economically advantaged and a Mecca for faithful tourists from around the world.
But the Pacific City property is currently a huge and unsightly pit, about half filled by the high walls of a giant, unfinished underground parking structure, while the rest of the land consists of a couple of paved streets, lots of weeds and scattered maintenance debris.
Like all redevelopment projects, Pacific City’s main purpose, as far as city planners and city council members are concerned, is to bring in more tax revenue for the city, especially during hard times that bring budget cuts and fewer city services.
The city had hoped to finance the estimated $23 million cost of a proposed senior center with required developer fees that are based on the project’s residential property values. The city assessed Makar $44 million in park fees, about half of which would be used for the senior center with the rest going for maintenance of other park facilities in the city. But the developer sued and the judge ruled that the correct fee assessment was $22 million.
City officials and public documents confirm that by mutual agreement between Makar and its lender, Canadian based Cadim Note Inc., the original $129,970,243 loan, along with major ownership of the project property, has been transferred over to Farallon Capital Management, a San Francisco based company and the 12th largest Hedge fund in the world. Farallon specializes in restructuring or recapitalizing high risk companies that are failing to pay their debts.
The property transfer took place in March, but city officials have not announced the change yet, stating that the city is not required to disclose transactions between private companies.
“This is a private exchange, so we would not typically notify the public,” Lauri Payne, the city’s Community Relations Officer, told the Voice via e-mail. “We will, of course, notify the public if the project changes as it goes through the planning process,” she added.
The city does not know when construction of the project will resume, Payne said.
Economic Development Director Stanley Smalewitz told the Voice that Farallon has been “tight lipped” about its plans. “They are reviewing the original concept and will be talking to various developers, and when they are ready, they will call us to discuss.”
But economic conditions have declined considerably since the project was approved in 2004, and the owner may want to reconsider the size of the project accordingly, a fact noted by some critics of the project who say it should be redesigned and renegotiated.
Smalewitz acknowledged that possibility. “It’s unknown at this time what will happen, but it won’t be surprising if changes are made to the OPA (Owner Participation Agreement).”
Smalewitz also said that a smaller sized residential project would mean a corresponding drop in the amount of park fees the new owner would be required to pay under California law, a change that could affect the already troubled prospects for the planned senior center, which, another court ruled, cannot be built in Central Park as planned.
As City Council Member Don Hansen noted, Farallon is making the required landscaping improvements along the sidewalks that form the parameter of the project, helping to hide the eye-sore with a wall of pretty plants.
“As for construction timelines or adjustments to the project, there are no specifics at this time,” he added. “I believe all of this is dependent on the market and the economy’s ability to rebound in the next 18-24 months.”