City Denies Developer’s Request for more Upfront Money

City Council members on Monday unanimously denied an affordable housing developer’s request for an additional $1.5 million upfront loan payment for the .

Instead of waiving that amount until the completion of the project, as originally agreed, Pacific West Communities, the developer, asked for the money sooner. 

“The investors are very concerned about the future of redevelopment,” said Housing Manager Armando Sanchez. “Those funds could be gone and their investment could be at risk. So they requested those funds be provided earlier.”

Throughout California, cities' redevelopment agencies are in jeopardy as the state may disband them to save money.

The Millbrae Redevelopment Agency entered into an agreement with Pacific West in June that kickstarted the Dolores Lia apartments renovation, an affordable housing project located at 1275 El Camino Real that was in limbo for years due to the collapse of the real estate market.

The total city loan for the project is $5.7 million, of which approximately $4.2 million has already been disbursed.

“My concern is that the agency puts in all this money, and then what if the project doesn’t come to completion?” said Councilwoman Nadia Holober.

Under that scenario, the city could foreclose on the incomplete project, according to the contract. 

“I’m concerned because typically [a developer] leaves the project when there are some substantial problems with it,” Councilman Paul Seto said. “Then we own this property that is not sellable.”

Disinclined to approve Pacific West’s request but eager to move the project forward, council members proposed a compromise that will sporadically disburse the remaining funds from an escrow account as the builder meets certain construction deadlines. Pacific West was not immediately available for comment on whether it will accept this deal.

In June, the city entertained other offers, including one from HIP, a nonprofit affordable housing developer, which required the $1.5 million upfront. A fundamental reason for awarding the contract to Pacific West in June was so Millbrae would not have to disburse $1.5 million of the total funds at the project’s start.

“[HIP] was obviously not the best deal for the city, we would have needed to come up  with the $1.5 million right away,” said Millbrae Community Development Director Farhad Mortazavi at the time. “We needed to find the best deal for the city.”

Pacific West has until Dec. 9 to accept the city’s deal.