Thomas J. Leary
Senior Vice President & Chief Legal Officer
[email protected]
T 714.377.3245
F 714.377.3246
17360 Brookhurst Street
Fountain Valley, California 92708
memorialcare.org
September 28, 2022
Via Email ([email protected])
Ms. Jennifer Savage, AICP, CTP
Assistant to the City Manager
City of San Clemente
910 Calle Negocio
San Clemente, California 92673
Re: Master Project MP22-089, 654 Camino De Los Mares, San Clemente, California Dear Ms. Savage:
This letter is submitted with reference to Master Project MP22-089, General Plan Amendment GPA22-097, Site Plan Permit SPP22-103, Tentative Parcel Map TPM22-099, Zoning Amendment ZA22-098, Architectural Permit AP22-101, Conditional Use Permit CUP22-100 and related applications with respect to the proposed development of a mixed-use project with 250 for-rent senior residential units and a 7,500 square foot medical office at 654 Camino de los Mares in San Clemente, California (collectively, the “Application”).
You have asked us to provide reasons for our request for the incentives, concessions, waivers and reductions of the City’s development standards relating to the Application, as identified in the Development Standards Matrix, San Clemente Senior Housing and Health Center, Master Project (MP) 22-089, dated September 26, 2022 and submitted to you by Mr. Ted Frattone in the form enclosed with this letter (collectively, the “Incentives and Waivers”), and as such are required to be granted by the City under California Government Code Section 65915 (the “Density Bonus Law”).
Among the Incentives and Waivers requested by the Applicant and required under the Density Bonus Law are relief from the City’s design standards associated with building height limitations, elevator shaft height limitations, floor area ratios, parking ratios, and private and group open space standards.
The Incentives and Waivers are required to enable the project to accommodate the number of units sought by the Applicant and to create sufficient parking for the project’s residential units and medical office building, given the physical and topographical constraints of the subject property.
To make the project financially feasible, and to justify the investment necessary to design, build and operate the project, the rents to be generated by the project must be sufficient to pay for the ATTACHMENT 6
Ms. Jennifer Savage
September 28, 2022
land value, hard and soft construction costs, financing costs, and the costs and expenses of marketing, leasing and operating the property. Particularly given that the City will require from the project a number of affordable units, the units provided for in the Application will also create a source of revenue sufficient to support those costs and expenses, as well as the subsidy necessary to offset the financial impact of the designated affordable units.
While, nationwide, increases in the consumer price index are approaching 9% per annum, hard construction costs (for such things as concrete, steel, wood, drywall and labor) are rising even faster. CBRE’s Construction Cost Index projects a 14.1% year-over-year increase through the end of 2022. As inflation accelerates, interest rates, which govern construction borrowing costs, have risen too. A median bank construction borrowing rate today would be approximately 6.50%, up several hundred basis points from 2021. Other factors, including rising soft costs (costs of, for example, design, engineering, applications and permits) and international supply chain problems, have made real estate projects of all kinds more expensive and riskier.
The project’s anticipated cost of construction, at around $84,000,000, are high and likely to increase. Reducing the number of units would reduce available residential revenues, and our design professionals point out that construction costs are unlikely to be reduced proportionately to compensate for the loss in revenue. Ensuring that the project is planned with the critical mass of units provided for in the Application, which number is achievable only with the Incentives and Waivers, will better ensure that the construction and other project and operating costs are paid for by an adequate number of rent-producing apartments. Moreover, spreading the construction costs across a larger number of units will ultimately help to improve the affordability of those units to all renters.
We acknowledge that, as construction costs have risen consistently over the last few years, rents in Southern California have largely kept pace with those increases. We believe, however, that this trend is unlikely to continue. Among the primary goals of the Federal Reserve in pushing up interest rates as much as it has this year is to dampen wage growth. Weak wage growth, or wage stagnation, will reduce the rents tenants can afford. In addition, with inflation rising, seniors on fixed incomes will spend more for life’s basic needs, putting further downward pressure on rents in the process.
Higher construction and financing costs alongside weaker rent growth will challenge this project.
Finally, the number of senior apartment builders in the United States is smaller than the number of non-age-restricted apartment builders by as much as one-half. The senior housing market’s limited size amplifies design and economic concerns simply because fewer bidders are available to compete for property. Any perception that the number of units in a project might be insufficient to pay for construction and other project and operating costs, together with a reasonable margin ATTACHMENT 22
Ms. Jennifer Savage
September 28, 2022
to protect an owner/operator from risks associated with market conditions and economic instability, can disproportionately affect the economic viability of a project and the prospects for it to move from the design stage to reality.
We believe this project is right for San Clemente. It will create inviting, beautiful apartment homes for seniors, and allow them to stay and thrive in San Clemente, near their children and grandchildren, and enjoy all that the City has to offer. In addition, it will help the City meet its obligations under applicable state residential and affordable housing laws, which has been a goal and key driver of this project from the outset. The Incentives and Waivers are necessary to ensure the project’s feasibility and to enhance its prospects for success and service to the community.
Very truly yours,
Thomas J. Leary
Senior Vice President & Chief Legal Officer
Memorial Health Services
on behalf of MemorialCare Saddleback Medical Center
ATTACHMENT 22
Development Standards Matrix
San Clemente Senior Housing & Health Center
Master Project MP22-089
September 26, 2022
Development
Standard
CC4 Zone
Requirement
Senior Housing
Projects Requirement
Proposed Project Required Exception &
Findings
Minimum Lot Area 6,000 sq. ft. 6,000 sq. ft.
Senior Housing – 268,408 sq. ft.
Health Center – 20,387 sq. ft.
None
Minimum Lot Width 60 ft. -
Senior Housing – 500 ft.
Health Center – 145 ft.
None
Minimum Front Setback 0 ft. 10 ft.
Senior Housing – 15.5 ft.
Carports – 10 ft.
Health Center – 14 ft.
None
Minimum Interior Side
Setback 0 ft. 0 ft.
Senior Housing – 46 ft.
Carports - 0 ft.
Health Center – 44.5 ft.
None
Minimum Street Side
Setback 0 ft. - n/a None
Minimum Rear Setback 0 ft. 0 ft.
Senior Housing – 143.5 ft.
Carports – 35 ft.
Health Center – 46 ft.
None
Maximum Lot Coverage 60% of Lot Area 80% of Lot Area
Senior Housing – 44%
Health Center – 20% None
Floor Area Ratio 0.50 0.50
Senior Housing – 0.89
Health Center – 0.37
Two Alternatives:
(1) CC4 zone allows the
applicant to seek exception to
FAR (up to 2.0 FAR) for a senior
project.
(2) State Density Bonus Law
Development Standards
Waiver (GC 65915 (d) and (e))
Residential Density (dwelling
units per acre) - 45 dwelling units per acre
Senior Housing – 40.6 dwelling
units per acre
Health Center – n/a
None
Height Limitation
45 ft. Top of Roof;
37 ft. Plate;
3 Stories
45 ft. Top of Roof;
37 ft. Plate;
3 Stories
Senior Housing:
Building 1
Max. Height (4th Story) – 51’-6”
Max. Plate (4th Story) – 43’-3”
# of Stories – 3 & 4
Building 2
Max. Height – 49’-6”
Max. Plate – 40’-4”
# of Stories – 3 & 4
Health Center:
Top of Roof – 32’-6”’
Plate – 26’
# of Stories – 2
State Density Bonus Law
Development Standards
Concession or Incentive (GC
65915 (d))
Elevator Shaft Height
51 ft. (6 ft. above maximum
building height of 45 ft. per
Table 17.24.080B, SC
Zoning Code – Section
17.24.080)
51 ft. (6 ft. above maximum
building height of 45 ft. per
Table 17.24.080B, SC
Zoning Code – Section
17.24.080)
Senior Housing:
Building 1
Elevator Shaft – 56’-2”
Building 2
Elevator Shaft – 57’-9”
Health Center:
Elevator Shaft – less than 45 ft.
Senior Housing:
State Density Bonus Law
Development Standards
Waiver (GC 65915 (d) and (e))
Health Center: None
Parking Medical Office - 1 space per
200 sq. ft.
Manager’s unit – 2 spaces
per unit (uncovered)
Senior units – 1 space per
unit (covered)
Guest Spaces – 1 space per
5 units or 0.2 spaces per
unit (Manager’s & Senior
units)
Senior Housing:
Manager’s unit – 2 spaces per
unit (uncovered) / 2 spaces
Senior units – 1 space per unit
(covered) / 249 covered spaces
Guest Spaces – 0.092 space per
unit (Manager’s & Senior units) /
23 spaces*
Health Center:
1 space per 200 sq. ft. /
38 spaces*
*Shared Parking (Senior Guest
Spaces & Health Center):
61 shared spaces
Two Alternatives:
(1) Exceptions to parking
requirements substantiated by
a parking study may be
approved through the
discretionary review required
for a senior housing project (SC
Zoning Code - Section
17.28.280);
Shared Parking (SC Zoning
Code -Section 17.64.120
(2) State Density Bonus Law
Development Standards
Waiver (GC 65915 (d) and (e))
Percentage of Total Parking
Area to be Landscaped (50+
stalls)
12% 12% 12% None
Open Space (Design
Guideline)**
** Not a zoning requirement
-
Private Open Space: 100 sq.
ft. per unit / 25,000 sq. ft.
Group Open Space: 100 sq.
ft. per unit / 25,000 sq. ft.
Private Open Space: 14,610 sq.
ft.***
Group Open Space: 35,590 sq. ft.
Total Open Space: 50,200 sq. ft.
***200 units have private open
space
Two Alternatives:
(1) Design Guidelines allow for
common/group open space to
be substituted for 64 sq. ft. of
the 100 sq .ft. of private open
space per unit.
(2) State Density Bonus Law
Development Standards
Waiver (GC 65915 (d) and (e))
ATTACHMENT 22