Planning and Building Agency
www.santa-ana.org/planning-and-building
Item # 30
City of Santa Ana
20 Civic Center Plaza, Santa Ana, CA 92701
Staff Report
November 19, 2024
TOPIC: 4th and Mortimer Mixed-Use Development Project Located at 409 and 509 East Fourth Street
AGENDA TITLE
Third One-Year Extension of Site Plan Review No. 2020-03 and Variance No. 2020-06 for the 4 th and Mortimer Mixed-Use Development Project Located at 409 and 509 East Fourth Street
RECOMMENDED ACTIONS
1. Adopt a resolution approving a third and final one-year extension of Site Plan Review No. 2020-03 and Variance No. 2020-06 to December 15, 2025.
RESOLUTION NO. 2024-XXX entitled A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF SANTA ANA APPROVING A THIRD ONE-YEAR EXTENSION OF SITE PLAN REVIEW 2020-03 AND VARIANCE NO. 2020-06 FOR THE 4TH AND MORTIMER MIXED-USE DEVELOPMENT LOCATED AT 409 AND 509
EAST FOURTH STREET
2. Determine that, pursuant to the California Environmental Quality Act (CEQA) and the CEQA Guidelines, the extension for this project is exempt pursuant to Section 15061(b)(3). This determination has been made as it has been determined that the proposed action to extend the existing, approved entitlement does not have the potential to cause a significant effect on the environment, as the existing, approved entitlement has already been evaluated pursuant to CEQA.
GOVERNMENT CODE §84308 APPLIES: Yes
DISCUSSION
On October 12, 2020, the Planning Commission unanimously approved Site Plan Review No. 2020-03, for a development project over four stories in height, and Variance No. 2020- 06, to allow an increase in the allowable building size and massing, to facilitate the construction of a new mixed-use residential and commercial development project located at 409 and 509 East Fourth Street. On October 22, 2020, an appeal (Appeal No. 2020- 02) to the project was filed by Michael Lozeau with Lozeau Drury, LLP, on behalf of the Supporters Alliance for Environmental Responsibility (SAFER). On December 1, 2020,
4th and Mortimer Mixed-Use Development Project Located at 409 and 509 East Fourth Street
November 19, 2024
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the City Council denied Appeal No. 2020-02, upholding the determination of the Planning Commission to approve the subject entitlements.
Pursuant to Section 41-647 of the Santa Ana Municipal Code (SAMC), entitlements such as variances automatically become void should the property owner fail to institute an action to comply with the provisions of the entitlements within two years of its approval.
This section also allows the property owner to request an extension of the entitlement up to a period of three years from the date of the expiration.
The subject entitlements were in effect until December 15, 2022. However, the applicant experienced delays in moving the project forward and constructing the development.
During this time, a state of local emergency was declared stemming from the COVID-19 pandemic, which provided relief to residential developers by extending approvals of residential entitlements to December 31, 2022.
By September of 2022, the applicant had not obtained the required building permits for development of the project. As a result, on September 9, 2022, the applicant submitted a request for a one-year extension to ensure the entitlements remain valid by the time permits were ready for issuance. On December 6, 2022, the City Council voted unanimously to extend the entitlements for the development for a period of one year to December 15, 2023. On August 1, 2023, the applicant obtained all required building permits for development of the project, including demolition permits for existing buildings at both project sites, and paid over $4.5 million in City permitting and impact fees.
On September 27, 2023, the applicant filed a request for a second one-year extension through December 15, 2024. This was due to increased cost of materials, changes in construction loan interest rates, labor shortage, and market changes affecting the applicant’s ability to develop the project. Specifically, increases in interest rates impacted construction loans and land development costs, resulting in additional delays to the project’s ability to begin vertical construction by December 2023. On December 5, 2023, the City Council voted unanimously to extend the entitlements for the development for a period of one year to December 15, 2024. Lastly, although vertical construction of the project did not commence in 2023, the applicant did complete demolition of all existing onsite buildings, including the former Northgate market, so that the site will be ready for development once ready to proceed with construction.
Analysis
To date, the applicant has been unable to secure acceptable construction financing to start the project. Similar to 2023, this is due to high interest rates affecting construction loans and land development costs, resulting in additional delays to the project’s ability to begin vertical construction. Current loan interest rates have been 300-500 basis points above historical norms, which not only increases the cost of construction financing, but also constricts the flow of lender dollars for construction projects. However, given the drop 4th and Mortimer Mixed-Use Development Project Located at 409 and 509 East Fourth Street
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in inflation measures and the Federal Reserve’s recent 50-point rate drop, the applicant has expressed optimism to staff that rates will continue to fall and more favorable construction financing terms will be available in 2025. As a result, the applicant is requesting a third and final one-year entitlement extension pursuant to Section 41-647 of the SAMC.
On June 11, 2024, the project building permits were extended until January 31, 2025, by the City’s Building Official. Therefore, the applicant intends to begin vertical construction by the first quarter of 2025, in order to effectuate its entitlements within a timely manner.
The applicant remains committed to building this project, as evidenced by their choosing to pull building permits and paying over $4.5 million in permitting and impact fees to date.
Since the applicant has obtained building permits, paid permitting and impact fees, and completed demolition, the Planning Division recommends that the entitlements for the development be extended for a period of one year to December 15, 2025.
ENVIRONMENTAL IMPACT
In accordance with the California Environmental Quality Act, the approval of the time extension is exempt from CEQA per Section 15061(b)(3). This determination has been made as it has been determined that the proposed action to extend the existing, approved entitlement does not have the potential to cause a significant effect on the environment, as the existing, approved entitlement has already been evaluated pursuant to CEQA.
FISCAL IMPACT
There is no fiscal impact associated with this action.
EXHIBIT(S)
1. Resolution Extending SPR No. 2020-03 and VAR No. 2020-06 for One Year
2. Original Resolution No. 2020-093
3. Resolution No. 2022-093 (1 st One-Year Extension)
4. Resolution No. 2023-088 (2 nd One-Year Extension)
5. Full project plans
Submitted By: Minh Thai, Executive Director of the Planning and Building Agency Approved By: Alvaro Nuñez, City Manager