The idea came up last week, posed by the neighbors and opponents of the Hyatt project, that they would accept a three-story hotel with underground parking. One opponent suggested this was a “workable compromise.”
But there is some question about the viability of the project with those changes. As Will Arnold stated at the council meeting a week ago, “My understanding is that underground parking is a no go and that going down to three stories would result in sacrificing a lot of the things that we find very beneficial about this project, including many of its environmental attributes,” he explained.
It is hard to evaluate the feasibility of such proposals and several have noted that sometimes what developers claim they cannot afford, becomes feasible.
As a caveat for what I’m about to propose, I will note that I have not discussed this idea with either developers or neighbors, but I throw this out as a sort of outside-the-box thinking that I think we need to start considering.
If the neighbors believe that underground parking will help reduce impacts to their neighborhood, have they considered funding it themselves?
Before you dismiss the idea, consider the following.
The Trackside project is largely crowdfunded. There are no huge financial backers there. Instead, the development team got a huge amount of people to contribute something on the order of $30,000 and made a whole bunch of people, who would never think of becoming developers, into investors.
Why couldn’t a similar concept work for the hotel?
Instead of neighbors standing by passively hoping to gain a few concessions from the developers, what if they each plopped down $30,000 and became investors? If 30 neighbors each contributed $30,000 each, that alone would be nearly a million. While underground parking is probably more than twice that cost, the neighbors would be meeting the developers in the middle.
In addition, they would go from merely being neighbors, to stakeholders – people with a vested interest in making sure the project works. While underground parking would not deal with the privacy issue, it would deal with concerns that, on heavy days, parking would spill onto Cowell and perhaps into the neighborhood (at least with employee parking).
While I do not believe a straight three stories would be doable, some have suggested that it go to three and a half stories, with no rooms on the backside. That would further address the privacy issue by eliminating the ability for fourth-story windows to look into the backyards of those neighbors who back up to the greenbelt.
My other thought on that would be, instead of eliminating the rooms altogether, why not build the fourth-story rooms without backside windows? The hotel could offer the rooms at a discount to guests who are not concerned with having windows – allowing the hotel to retain the use of the rooms but not impacting the privacy of the neighbors.
There has been some question and discussion about how much the neighbors have worked to create a possibility of compromise. It was noted to me early in the process that the view of the neighbors was, “I don’t want to discuss the hotel project. I want the hotel project to go away.”
Understandable, but now at this point the council clearly sent the message that there is going to be a hotel project, and the question is now how to make it the best possible project with the least amount of impacts.
And by the way, to the neighbors, you definitely want this project to succeed because, worse than having a hotel blocking your view, is to have an empty hotel that blocks your view and becomes blight.
The question now is whether there are ways forward to make this a win-win and I think that calls for some thinking outside of the box. If you think that underground parking makes things better, then consider funding it and taking ownership of the project.
—David M. Greenwald reporting
I’ve got to believe there’s health and safety regulations that wouldn’t allow that, but I don’t know for sure.
I’ve stayed in hotel rooms that are interior rooms.
Were they newer construction or older hotels that were built before increased regulation?
The only time I have stayed in a room without windows was on a cruise liner.
I have stayed in hotels across the country of all price points and I have never herd of a hotel room without windows. Once at the Waldorf Astoria I had a room with a tiny window placed in an awkward corner of the room opening up on to what could only be described as a shaft – but it had a window. I highly doubt it is legal to build hotel rooms without windows in California.
In any case, this suggestion is no more or less credible a solution than the rest of this asinine article.
Why do you find the proposal that the neighbors invest in the project to be implausible?
Chamber Fan, do you really belive that 30 neighbors have $30,000 each to throw around speculatively? Even if they did and wanted to invest would Hyatt even want more investors? At what point does the return on their investment get too diluted due to too many investors?
BP, other neighborhoods in Davis have stepped up to try to do something similar in the past. Their approach was slightly different. They attempted to purchase the parcel from the developer, but the “banding together” concept is the same.
Sorry Matt, I give this about a .0001% chance of ever happening.
BP – It’s unlikely, but I think we ought to look into out of the box approaches here. Put your money where your mouth is.
How many investors for Trackside?
BP: I believe that Tia has suggested something similar. Although it might be an interesting brain-storming-type idea, I see problems (in addition to what you’re stating). For example, it might pit “neighbor against neighbor”, between those who can afford to invest, vs. those who cannot.
If it actually resulted in the project being “improved” (from the point of view of most neighbors), perhaps there wouldn’t be any conflict. However, what the article seems to be suggesting is that the neighbors essentially “pay for” mitigation, themselves:
You will find an abundance of windowless rooms in any warship, particularly submarines.
LOL, but I did ride a submarine at Disneyland once that had windows.
There is no unmitigated privacy issue. The applicant changed the design to block the views from the 3rd and 4th story windows and has agreed to plant more trees and shrubs to complete the screening. Besides all of that, there are now new fangled products on the market and available to the neighbors collectively known as ‘window treatments’ (curtains, shades, blinds) that completely block all visual access into their bedrooms if they so choose.
As my late business partner used to say ‘never accept as an investor someone you wouldn’t want to see at the parties.’
Good advise.
Ron,Mark West ,and Frankly
“I believe that Tia has suggested something similar. Although it might be an interesting brain-storming-type idea, I see problems (in addition to what you’re stating). For example, it might pit “neighbor against neighbor”, between those who can afford to invest, vs. those who cannot.”
I have indeed suggested something similar. I believe that allowing those most affected to “have skin in the game” would be beneficial all the way around. I would not limit it to any arbitrary number but allow anyone who wanted to invest to do so.
Mark has posted this comment about “someone you would want to see at parties” previously. Well that is a sure way to make sure that people who are less affluent or less well connected than you are never have the opportunity to invest. If your goal is solely to enrich yourselves and your close social associates, then that is a great strategy. If you would truly like to promote economic well being, it is a terrible attitude.
Tia wrote:
> Mark has posted this comment about “someone you would
> want to see at parties” previously. Well that is a sure way to
> make sure that people who are less affluent or less well
> connected than you are never have the opportunity to invest
Reading this it sounds like Tia must only invite “affluent and well connected” people to her parties…
After reading posts from Mark is sounds like he is like us and would invite “nice fun to be around” people to his parties (and not really care if they are “affluent and/or well connected”.
P.S. I’m wondering if Tia can tell us the minimum new worth and number of prominent connections she was thinking of as a minimum to come to a party when she wrote: “that is a sure way to make sure that people who are less affluent or less well connected than you are never have the opportunity to invest”?
Once again, you have absolutely no idea what you are talking about, but don’t let that stop you…
If you are going to take on investors, you will very likely be spending a great deal of time with them over the life of a project. If you don’t enjoy their company, or don’t want to hear from them on a regular basis, you may want to look elsewhere for your money. It is a simple as that. I did not know most of the investors in our company when we started, but I found that I enjoyed each and every one of them, whether they had written a check for $5,000 or $100,000. There were others, some with quite a bit of wealth, who we did not bother asking to invest because we did not want to see them on a regular basis. Their investment simply wasn’t worth the cost.
If you are interested in investing in development projects you need to understand that you cannot force someone to take your money. If you are a pain in the ass, or you are someone who demands an undue amount of attention or hand-holding, you should not be surprised if you are not invited to join in.
That was in the plan before the planning commission (the planting replaced several parking spaces lowering the total parking) but inexplicably removed from the plan put before the Council. Maybe they will put it back. Mark might have advanced insight on this from discussions with the developers but as the plan currently stands publicly, with the landscape requirement waived from the South Davis Specific Area Plan there is essentially no landscape area on the proposed Cowell hotel property in its current draft.
No ‘advanced insight,’ just the comment from the applicant to the CC at the meeting Tuesday stating that they were willing to add more screening. You were there, but maybe you were talking too much to hear.
lol.
So as stated, the current publicly presented plan has essentially no landscaping, and no place for additional trees and shrubs.
The plan that was presented at the 3rd planning commission meeting had additional landscaping, but also had less parking on a hotel project that already has fewer parking spaces than hotel rooms.
Grok said . . . “with the landscape requirement waived from the South Davis Specific Area Plan”
Grok, have you looked at the landscape requirement of the PD #2-12 zoning that controls the parcel, and was passed by the Council on August 21, 2014? Reading that zoning language, it appears that there does not appear to be any current “waiving of the landscape requirement from the South Davis Specific Area Plan.”
I am not a lawyer, and I know my limits, so I have asked a zoning/land use lawyer to look at the language to give me their expert opinion when/if I hear back I will pass on the result.
Matt, are you suggesting that staff recommendation 3 from the November 1 staff report is wholly unnecessary?
I’m not suggesting it Grok. I’m asserting it. I asserted it in the Hyatt House item public comment on Tuesday. I have asserted it in other public hearings. I have asserted it in writing multiple times here in the Vanguard, the most recent of which was Saturday (see HERE) I continue to actively assert it.
“Instead of neighbors standing by passively hoping to gain a few concessions from the developers, what if they each plopped down $30,000 and become investors. ”
In risk-averse Davis? Good luck finding 30 of them.
Just for giggles, let us look at the numbers (all of which are made up here).
If you have a project that requires a $20 million equity investment and your financier requires you to show that the project will return 20 percent annually after the initial 5 years, then the project has to have an annual net income of at least $4 million after 5 years (20% of initial investment).
If you want to add underground parking at a cost of $4 million to the initial project and increase the equity investment to cover that new expense (neighbor’s investment), then the total equity investment is now $24 million, and your annual net income required to meet the 20% ROI is now $4.8 million, or a 20% increase. How does a hotel project increase revenues by 20%? By increasing the number of rooms by 20% (or more). You would need a larger project to produce the returns required to justify the greater initial investment.
The only way that this ‘idea’ could function would be if the neighbors did not invest in the hotel, but simply paid for the mitigation with no expectation of receiving a share of future earnings. The ‘return’ on their investment would not be in the form of future income from the property, but simply the value of not having to look at parked cars.
Mark: Holy cow! I would personally love to have that kind of return on investment.
What kind of normal investment returns 20% annually (which might also increase in the future)? How can I get in, on this?
Are you kidding me?
First, the numbers are made up, as I said.
Second, the projected ROI (not the actual return) required by the financiers is dependent on the risk associated with the investment.
Third, a town full of noisy, willfully ignorant ‘neighbors’ who choose political games over engagement (and a CC that plays along) will dramatically increase the ‘risk’ of a project. Just ask the folks at Nishi.
Mark:
It seems to me that a loan would not go through, if the proposal is not approved. Therefore, the “noisy, willfully-ignorant neighbors” that you’re referring to would not be much of a factor, regarding the success of an approved proposal.
I’m having difficulty being concerned about a potential lender’s (theoretical?) “required 20%” annual return on investment, and that a possible, suggested mitigation is therefore too “unaffordable” to implement.
Perhaps other communities “roll-over” whenever a developer proposes something like this, which essentially enables lenders to set such standards. (“Hey – I can get 20% down the road in the next town, so why should I agree to your mitigations?”)
No wonder cities are often “broke” (or close to it), while developers end up with the money (and power). Maybe the city can get a few crumbs, at least. (Regarding the neighbors, perhaps the developers will be “generous enough” to reduce the size of their upper-floor windows, if they’re so inclined?)
The numbers were made up.
Willful ignorance.
I understood that, but I recall a similar figure used as an example in other Vanguard articles, as well.
It would be interesting to know what the actual “required” return on investment is, for developments such as this. (That might help communities know whether or not a developer is being “forthcoming”, regarding the affordability of a given mitigation.)
And Mark – let’s be honest. Development money/interests are firmly in control, in most communities. (Even Davis, to some degree.) And, cities are left with crumbling infrastructure. Essentially “beggars”, hoping for a few crumbs from developers.
Ron said . . . “It would be interesting to know what the actual “required” return on investment is, for developments such as this. (That might help communities know whether or not a developer is being “forthcoming”, regarding the affordability of a given mitigation.)”
That “requirement” established by the lender varies from project to project. Lending institutions have standard algorithms that they use to model risk for each individual project. The higher the risk, the higher the “requirement.” Here are two examples.
First you have the Mission Residences on B Street. There are no unique contingencies that have been placed on that project. There are the normal risks associated with the City’s inspection and certification process, but beyond that the only risk is the sale-ability of the units, which in the Davis housing market is very low risk. A lending institution looks at a project like Mission Residences and says “low risk” and sets a relatively lower “requirement” for any loan there.
Second you have the Nishi Project prior to the Measure A vote. Needless to say having a project subject to a go/no-go vote of the citizens adds significant additional risk to the Nishi Project that does not exist at Mission Residences. Even if Nishi had passed the Measure A vote, there still was substantial risk associated with the contingencies for the UPRR Underpass to the UCD Campus and the I-80 Richards Interchange Reconfiguration. A lending institution looks at a project like Nishi (either before or after the Measure A vote) and says “very high risk” and sets a much, much higher “requirement” for any loan there.
Matt:
Thanks, but wouldn’t the loan simply not go through, if a given proposal is not approved? (I understand that there may be costs, prior to approval. However, I don’t know if a loan is used to pay these costs.) In any case, costs incurred prior to approval would not equate to the total cost required to construct a proposed development.
Do you have any knowledge regarding the actual, “required” rate of return for any recent development?
It might be a new experience for you, Ron, but I have always been honest in these discussions.
The crumbling infrastructure in Davis has been brought to us by noisy residents who are primarily concerned about their property values and perceived ‘quality of life,’ and a series of City Councils that were more interested in their own political futures than in doing what is necessary to have a fiscally sustainable City.
If you want to know who is responsible, go look in the mirror.
Mark:
It is true that I don’t support the residential development “Ponzi scheme” that created these challenges, and really came to light as a result of the housing crash. Maybe you do.
Are there any actual numbers that you’re aware of and are willing to share, regarding “required” rates of return for recent developments?
The bigger problem was the disproportionate influence of the firefighters and other employee groups. It’s notable that the biggest problems – 4 on an engine, 3% at 50 and eventually the pay increases themselves were done with the support of purported slow growth leaders like Ken Wagstaff, Michael Harrington and Sue Greenwald.
Chamber Fan:
Well, not Sue Greenwald from what I recall, which has already been addressed and debated. Don’t know about the others.
But, I’d like to remain on the question I asked.
Of course you do, even if you are factually wrong about the origins of the massive spending increases on salary and benefits from 1998 to 2005.
Ron said . . . “Thanks, but wouldn’t the loan simply not go through, if a given proposal is not approved?”
Ron I don’t understand your question.
In the case of Mission Residences a loan did go through and the risks were low so the lending institution requirements were low relative to other more risk burdened projects like a Measure A passed Nishi.
In the case of Nishi, if Measure A had been passed (approved by the voters) a loan would have gone through and the ongoing risks regarding the UPRR Underpass and the I-80 Richard Interchange Reconfiguration would still have been there, so the the ongoing, post-election risks were high so the lending institution requirements would have been high relative to other less risk burdened projects like Mission Residences.
Matt:
I understand what you’re stating, regarding Nishi. (A loan would have gone through, had the measure passed.) Since it didn’t pass, I’ll assume that there was no loan, and therefore no loss or risk (regarding a loan).
Regarding Mission Residences (or any other recently-approved or proposed developments), do you have any knowledge regarding the actual “required” rate of return for the loan? Seems like an important thing to know, when negotiating possible mitigations.
The theoretical example provided by Mark (20% annual rate of return) seemed quite lucrative, to say the least. (And again, I believe that I’ve seen that percentage used as an example, previously.)
Ron, you asked a question about the relationship between a project’s “risk” and a lending institution’s return on investment “requirement” for the loan. I’ve given you two crystal clear examples of that concept. Instead of staying focused on the concept you asked to be educated about, you are now comparing (nit picking) differences between the conceptual Nishi example and the real-life, now-dead, Nishi.
With that said, do you now understand the concept? Do you understand how even after approval of the project by the jurisdiction, risk factors can (and will) continue on well past the date of the approval?
Regarding your 20% question, you are attempting to be deterministic in a situation that is highly variable. Each project and each loan is gong to be different. In fact the exact same project will have different “requirements” from the lending institution if the actual amount of the money borrowed increases or decreases.
Matt:
You’re making this more complicated (and bringing up points that I’m not necessarily asking or arguing about).
My question was this:
Do you have any knowledge that you’re willing to share, regarding the actual, “required” rate of return for any recently-approved development?
It’s a yes or no question, followed by an expected annual percentage rate, if you know of an example.