A downtown Monterey Park mixed-use project that has sat on the books for the past eight years nearly got pulled last month after the developer was hit with a loan default letter.
The Monterey Park City Council agreed Monday to give developer Magnus Sunhill Group until Aug. 1 to show they paid back the loan, but threatened to rescind a recently approved development agreement if Magnus fails to make good on its promises.
Magnus was set to develop the Towne Center project, a proposed five-story residential and retail building with a partially-underground parking structure scheduled to be built on a 2.19 acre razed lot at the corner of Garvey Avenue and Garfield Boulevard. The project would revitalize Monterey Park’s downtown area and provide the city with additional revenue, especially if the developer brings in “high-quality,” nationally-recognized retail tenants, according to city officials.
But just one week after the city council’s May 29 approval of a development agreement with Magnus, the city received a letter from lender Trustee Corps, saying Magnus owed $2.3 million on a loan related to the project. Trustee Corps’ letter said they plan to foreclose on Magnus’ property on Aug. 6.
Citing the default as a violation of the development agreement, the city council on June 25 approved the first step toward rescinding its development agreement, but instructed the city attorney to work with the developer to come up with a way to resolve the issue.
David Wan, a representative from Magnus, assured the city at Monday’s special city council meeting that they have the money and will be able to pay back the loan in a matter of a “couple of days.”
City council members expressed concern that Magnus may have failed to mention the loan default when they entered into the development agreement in May. Wan responded to those accusations by waving around two postmarked letters from the lender to show they had only just recently been made aware of the lender’s intent to collect. Wan told EGP they were under the impression the lender was willing to work with them on modifying the loan or finding alternative methods for paying it back, and said they were blindsided by the lender’s actions.
The Towne Center project was first proposed in 2004 by the city’s former redevelopment agency. The developers say they have already sunk millions of dollars into the project. Magnus in recent years worked with the agency to clear out the existing businesses and properties on that corner.
As part of its previous development and disposition agreement with the agency, the developers would have gotten $1 million from the city for public improvements. But after the state eliminated redevelopment agencies in February, the project became a private venture, and the city and Magnus drew up a new agreement, this time without the public improvement money. The city agreed to sell the developer an adjacent city-owned parking lot, which the developer said was necessary for attracting big name retailers.
The new development agreement approved on May 29 requires the developer to bring in major retailers to fill up at least 51 percent of the commercial space. The contract consists of a wish list of possible retailers that include names like Trader Joe’s, Sephora, Urban Outfitters and Lucille’s Smokehouse BBQ.
Businesses deemed unsuitable for the project include tattoo parlors, drug or ginseng stores, banks, thrift shops, fitness centers, and 99-cent stores.
Prior to approving the development agreement with Magnus in May, Mayor Mitchell Ing said the city has had a poor history of bringing in national retail stores, and pointed to the example of the recently built Atlantic Times Square project.
“The national retail stores we were hoping to get never came to fruition,” he said, adding that he could not decide if it may be best to “let market dictate” or be a “stickler for the 51 percent” rule of bringing in national retail stores. He said residents who “have not bought anything on Garvey Avenue for the last 40 years” are requesting bigger names stores, and that tax revenue from those stores is necessary “to help the city survive.”
The developer had at one time worked to secure a Fresh and Easy grocery store, but said talks with the retailer and others were hampered by the long delays the project has faced.
In recent weeks, the city and the developer leveled threats of action, legal or otherwise, against each other, but on Monday both parties attempted to cooperate. The developer’s representatives dialed back their angry words at the possible rescinding of the development agreement. Council members, still wary of the developer, were satisfied after issuing their ultimatum approved on Monday, and were eager to get the project finished.
“There was no time during our discussion that any of us wanted to end this project,” said Ing. “This is an important project in the heart of our city.”
Prior to the loan default notice, the developer had estimated the project would realistically begin construction in early 2013.