Loan Papers Reveal Hillcrest Ripoff
by Charles Pine
An application for a City loan filed by Domus Development for the Hillcrest site in Oakland’s Dimond district reveals a series of ripoffs: a ripoff of neighborhood parking, a ripoff of street capacity to bear traffic, a ripoff of pleasant vistas for the eye, and an old-fashioned ripoff of public money.
Domus Development, a new operation that appears to consist of Meea Kang and her assistant, would put a three-story complex of 80 units plus a senior service center atop the hill crest at MacArthur Blvd. and Lincoln Ave.
The apartments, all one bedroom, would be rented to people 55 and older. Most of the units (55 out of 80) would rent for $859 per month, to be raised 2.5% per year. The tenants must be low income, and the developer hopes to qualify the units as Section 8 housing.
Get ready for Parking Survivor
Many residents would own cars, while tenants without a vehicle would receive visits by home health aides and housekeepers, most of whom would have cars, too.
There’s more. Domus would co-own the project with the Self Help for the Elderly agency (SHE). It would operate a service center offering “an extraordinary number” of amenities and services: adult day services, case management, senior employment training, health insurance counseling, a computer center, and educational classes. Imagine the tutors, aides, health specialists, administrators, and other staff coming and going, nearly all by car.
For the estimated 120 residents and several dozen staff, Domus would provide only 35 parking spaces. The project would remove some or all of the nine current parking spaces on the property’s MacArthur Blvd. frontage. At 11 a.m. one Saturday morning this writer saw seven cars parked there. Parking wars on the surrounding residential streets are about to begin — if we let this project go forward.
Tangled traffic
Currently, the intersection of MacArthur and Lincoln is the most obvious pinch point. However, cars would enter and leave the garage on Lincoln and Boston Avenues, not MacArthur Blvd. Vehicles would make left turns from the garage onto Lincoln, or from Boston onto MacArthur, creating additional points of snarled traffic. There also appears to be a loading and unloading zone for vans and mini-buses on the MacArthur Blvd. side. Add in the vehicles leaving the 7-11 convenience mart across MacArthur, which already find it difficult to get back on the Boulevard, and you have a traffic disaster.
Walls towering over you
The three-story structure would run almost the entire length of the MacArthur Blvd. side of the property, right next to the sidewalk, and continue for much of the Lincoln Avenue side, too.
Ten townhomes on this lot would be separate buildings. The proposed Lincoln Court complex is a massive hulk, a towering wall that running solidly along the edge of the property.
It no longer takes money to make money
The proposed financing for the Lincoln Court project is a marvel of bold greed.
As presented, Lincoln Court is a $16.5 million project. What would Domus put up as equity to obtain ownership? Apparently nothing, except perhaps some short-term bridge funds. A $4 million loan from U.S. bank and a $3.5 million City of Oakland loan (more on this in a moment) would be supplemented by $5.6 million of tax credit equity, money that people or companies invest in return for credits against taxes on their other income.
This is $13 million of cash. Although Domus brands the entire project at $16.5 million, including $2.5 million of equity for itself and SHE, its budget shows less than $12 million to build (construction, soft, carrying, and syndication costs). It seems that after selling the investor tax credit equity, Domus would invest no longterm cash! Wouldn’t you like to build yourself an apartment complex for no money down, with none of your money at risk?
The City of Oakland is asked to bless the project with a $3.5 million loan. The money would come from scarce funds that should go to worthy projects really needing public aid and really providing a benefit to the community, not traffic and parking nightmares. Furthermore, Domus expects sweet terms verging on giveaway. Besides a low 3% interest rate, the City would grant Domus a 14-year grace period when no payments for interest or principal would be made. During that time, the nominal $3.5 million principal would swell to nearly $4.5 million.
An even $1 million of the $16.5 million is called a Deferred Developer Fee. Oddly enough, this money is not put into the project but rather taken out. By coincidence, it is exactly the entire free cash flow in the first 14 years, the same period when the City would receive no loan payments. This amount exceeds the City maximum for developer fees.
Adding insult to injury, after year 14, Domus and SHE would take out $25,000 every year for a so-called Partnership Asset Management Fee — separate from the property management company’s charges!
Included in the project costs is $2.2 million to buy the land from the owners of the infamous crime- and prostitution-infested Hillcrest Motel. This is an outrageous price for a lot that should properly hold about ten single-family homes or townhomes. Also, Domus reports in its application that it paid nothing for the option to buy the land; why would a seller let a potential buyer tie up property for free? Something smells bad here.
Domus budgets $500,000 for architecture and engineering, most of which would presumably go to Y. H. Lee, an Oakland architect firm. Considering that the property became a hot prospect only last Spring, how many person-years of work has this project required? Three by the end of construction? That leaves a hefty margin for Y.H. Lee, who was chair of the City planning commission and who still has a Suzie W. Lee of his firm on the commission. Mr. Lee is listed on Web sites as an endorser of both Jean Quan and David Stein in the 2002 council election. His firm also donates to Jerry Brown, Wilma Chan, Don Perata, and Ignacio de la Fuente. Domus appears to be paying Y.H. Lee as much for politics as for blueprints. Certainly, Y. H. Lee knows the game. In a controversial decision on Port of Oakland construction, he and his partner took the award for a job away from the low bidder despite an independent reviewer’s recommendation to the contrary. (Oakland Tribune, Oct. 29, 2003)
Domus asks the City for scarce money on sweetheart terms so that Domus can collect $1 million in fees and wind up with millions in ownership equity for which Domus advances no serious cash. The greed is bold beyond belief. Actually, the belief seems to be that if you share the loot with a true scofflaw — the landowner of the Hillcrest Motel era — and with well-connected insiders, you can get away with anything. Domus, Y. H. Lee, and the motel owner tuck away handsome profits taken from a program intended to use scarce public funds for low-income housing.
More problems festering
Although a citizen team examined the Domus application filed with the City, the outrages discussed so far are not a complete list. Problems that would need further examination, if this project deserved serious consideration, include:
—Site preparation: The submitted budget lists $0 for site clearance, but costs may be buried under the heading of construction. How much dirt would be removed from the hill, and what are the risks during this phase?
—Additional City expense: Domus’s application states that sidewalks would be widened, street lights installed, and landscaping added. Domus budgets a piddling $15,000 for off-site improvement — leaving the rest to the City? Also, whose land would accommodate the widened sidewalks?
—Pedestrian safety: The MacArthur-Lincoln intersection is dangerous for every pedestrian right now and would become more so with a jump in traffic. Could MacArthur Blvd. remain a major thoroughfare? If not, what street would cars use? If yes, can pedestrian safety be ensured?
—Market-rate housing: The project would be subsidized by the federal government’s Low Income Housing Tax Credit program, which allows a property sale after only 15 years. Unless a public agency buys the property, it becomes market-rate housing. The City appears to have no serious provisions to get long-term low-income senior housing out of this deal.
By the way, “The idea for senior housing, [Domus’s] Kang said, partly came from 2000 Census information, which shows that 22 percent of the Dimond district’s population is older than 55.” (Contra Costa Times, Nov. 21, 2003) The Census also reports that 24% of the entire U.S. population is older than 55.
Given the ripoff nature of the whole project, these questions are merely clues to further outrages. The Lincoln Court proposal cannot be salvaged. It should be denied all approvals, sending a message to the Hillcrest Motel landowners that they cannot get $2.2 million. Let new proposals come forward.
Will Jean Quan respect the “civilians”?
Domus’s application letter asserts, “Council Member Jean Quan strongly welcomes and supports affordable senior housing with supportive services.” This weasel wording does not specifically claim Quan’s endorsement of the Lincoln Court project, but no one else has proposed senior housing and services on the Hillcrest site. Is Domus correct to claim Quan’s strong support for its ripoff project, or does Quan need to fault Domus for mis-using her name?
Back in October Quan correctly said that paying $2.2 million just for land was “outrageous,” but in the next breath she implied a threat to neighbors: either accept the Domus project or live with a vacant lot for five years. (Oakland Tribune, Oct. 11, 2003) Quan said this when Domus proposed not 80 but 120 units. Less than a week later, Quan said she was excited by the Domus proposal. (Montclarion, Oct. 17) She and Domus promoted the project at a community meeting. Quan put Domus materials on her Website (jeanquan.org), although the links to these pages vanished in early December as community criticism of the proposal intensified.
The time is now, not Spring
In October Quan told the community to go home until she calls another community meeting in the Spring, after Domus obtains required approvals for the project. No thank you, Oakland residents can speak out against this monstrosity now. They are not passive “civilians” (City Hall slang for people who are not insiders in Oakland politics).
Domus’s Lincoln Court project and others are scheduled to go before the City Council, in session as a housing committee, late in January. The competing proposals that seek City funds add up to considerably more than the City has to loan. The Lincoln Court proposal is a ripoff and deserves no City money.
In addition, as a major housing project, the proposal must go before the Planning Commission. We should oppose it there, too.
The City office reviewing the Lincoln Court loan application for the Council’s housing committee is:
Housing Development Section, CEDA
Janet M. Howley, Manager
250 Frank Ogawa Plaza, Room 5313
Oakland, CA 94612-2093
jmhowley@oaklandnet.com
Fax: (510) 238-3691
Oh yes, those annoying citizens. If only they would just shut up and let us have our way with the city.
Everything about this project stinks to high heaven. I think they believed that the neighbors hated the Hillcrest so much that they would welcome almost anything in its place- and also that the neighbors were so exhausted from dealing with the Hillcrest that there would be no energy left over to fight an inappropriate replacement.
The project is clearly being railroaded, and it was obvious at the first public meeting. And I was distressed that the DIA wrote a letter supporting the project, which, although there were a few reservations expressed, was clearly viewed as expressing nearly unqualified support.
I believe that if this project is de-railed, and the neighborhood expresses strong support for less dense single-family or townhouses, the developer will find a way to make that feasible.
I was amused by Yui Hay Lee's explanation of why single family or townhouses wasn't financially feasible- it was based on 2000 square foot, three bedroom, two bath homes- despite the fact that the site is surrounded by two bedroom, one bath homes ranging from about 800 to 1200 square feet. A masterful act of prestidigitation.
And it pisses me off that the sleazy owner of the Hillcrest will be making money off the property- as far as I'm concerned, he ought to be paying a 2.2 million dollar fine for the damage he's done to the neighborhood.
Posted by: Jane Powell on December 19, 2003 12:34 PMLetter Sent to Ms. Howley
Dear Ms. Howley,
The proposed Senior Housing Development at Lincoln Avenue and MacArthur Blvd does not merit city subsidy. The developer has not addressed the pedestrian safety concerns, neighbors concerns about parking, site landscaping and traffic management. The proposal is to include section 8 units, so all matters which might require police attention will have to be dealt with by the Housing Authority Police not ODP. The cost of the units will start at 860$ per month, which is higher than most seniors living in this neighborhood can afford.
This proposed development would exacerbate many of the problems this community has fought for years to resolve. Please do not misuse public funds by subsidizing this ill-conceived project.
Please write me with your final decision on this development.
Sincerely,
Ann Nomura
C: Oaklandnews.com
Dear Ms. Howley,
As a neighbor of the Hillcrest Motel, I strongly against the proposal of the Senior Housing Development at the Lincoln Ave. and MacArthur Blvd. site.
If this project is allowed to go forward, it will create traffic nightmare and parking wars for the neighborhood. There just aren't enough proposed parking spaces available either. The pedestrian safety will become a great concern as well with increased traffic. The fact that making garage entrance on narrow street such as Lincoln Ave. and Boston Ave. is ridiculous creating additional traffic jam.
The project claims to rent to low income seniors, but can seniors with LOW INCOME really afford a monthly rent of $859 with an INCREASED of 2.5% PER YEAR! If they cannot find seniors who can really afford to live there, they will most likely going to rent to anyone else who may NOT be seniors. Then it defeats the purpose of this project to benefit the low income seniors.
Imagine someone wants to build a massive three story building across your house and which is going to block your once beatiful view, would you like that? I know I don't! And I'm pretty sure the other neighbors don't like that idea either. This project is going to bring to the neighborhood much more pollution; one obvious sign is the increase in traffic in this area.
The proposed financing for this project is very clear that it is ripping off the city of Oakland. I'm not sure about you, but I don't like people ripping off my tax dollars! With today's economy and budget crisis, please do not misuse and waste tax payers money.
Bring down the Hillcrest Motel is an intellegent first step, so continue the good work but PLEASE OPPOSE ANY APPROVAL AND ANY CITY MONEY FOR THE APARTMENT BUILDING PROPOSED BY DOMUS DEVELOPMENT. THE PROJECT IS WRONG FOR THE DIMOND DISTRICT AND WRONG FOR THE CITY TO SUBSIDIZE!
Help make us happy neighbors, thank you!
Sincerely,
John Chen
As neighbors who fought for six years to get the former Hillcrest Motel shut down, we would like to shed some light on claims made by opponents of a senior housing project proposed for the site.
Domus Development and Self-Help for the Elderly have applied for a $3.5 million affordable housing loan from the City of Oakland to help finance an 80-unit project to be called Lincoln Court. All of the units would be rented to low- and very-low-income seniors; there would also be an adult day care center for seniors on the ground floor.
A brochure left on our doorsteps earlier this month (by Charles Pine) accuses the developers of “ask(ing) the City for scarce money on sweetheart terms … greed beyond belief,” and suggests that the fees to be charged by the developer are excessive.
In fact, the terms of the Lincoln Court deal – including delayed interest payments to the city and the collection of a deferred developer fee and a partnership asset management fee (which pays for staff time to deal with agencies who have loaned money to the project) – appear to be within typical parameters for publicly financed affordable housing deals. These “sweetheart terms,” listed in the loan application, are what allow the owners to lower the rent to affordable levels.
The brochure calls the $2.2 million purchase price of the motel site “outrageous,” and claims Domus will not contribute any equity to the project.
In fact, the loan application shows that the property was professionally appraised as being worth $2.2 million, and it shows that Domus will contribute $2.4 million in equity to a $16.5 million project.
The brochure also claims that Lincoln Court could be converted to market-rate housing within 15 years.
In fact, if the developers receive a city loan, state law requires the project to remain affordable for 55 years.
The Lincoln Court loan would come from funds that can only be used for affordable housing. The city has strict criteria for awarding these loans, which can be viewed at www.oaklandnet.com/government/hcd/projects/NOFA2003.html. Lincoln Court will have to compete against other affordable housing proposals to receive the money. If people are unhappy with the terms of the Lincoln Court loan, it might be better for them to work to amend the system for awarding affordable housing funds.
Recent studies say the Bay Area needs to create 200,000 new housing units by 2020 and that Alameda County is producing just 61 percent of the housing it needs to serve its population. As residents of the 3500 block of Boston Avenue, we support the idea of affordable housing on the Hillcrest site. So far, the developers have shown themselves willing to adapt their project to address our concerns about traffic on our block. We think this project will help revitalize our neighborhood and be a welcome change from the drug dealing, prostitution, noise and litter we had to live with before.
Sincerely,
Marcel DeGross & Geri Haslett
Nate & Meliss Grover
Mary Mazzocco
Kerry & Monika Rose
Marilyn Miller & Gisela Merker
Deborah Roberto
Bernard Corday
Whitney & William Mumford
Val Valuch
William, Lisa & Tina Ma
Tito Tayco
Alberto Quiroz
Briefly in reply to Ms. Mazzocco:
1. The brochure that Ms. Mazzocco attempts to refute is essentially the same text as the above article on OaklandNews.com to which these comments are attached. You can see how she omits details that are inconvenient to her conclusions.
2. Ms. Mazzocco offers us the wrong choice: either an 80-unit monolith that creates traffic and parking nightmares, or the crime of the Hillcrest Motel. The motel is demolished, and we can get a decent proposal for the site. The first step is to stop the Domus Development.
3. In the Domus proposal, 55 of the 80 one-bedroom units would rent for $859 a month, going up 2.5% a year. This is not housing for the very low income, which Oakland desperately needs. The profits, developer fees, operating and replacement reserves, management fees, and other gains to the developer need to be cut back in order to make the rents affordable.
4. Perhaps the whole process of allocating housing funds needs reform, as Ms. Mazzocco suggests. That is no reason to give Domus Development a ripoff deal, destructive of the neighborhood, right now.
5. At least one name on Ms. Mazzocco's list of co-signers is someone who, on her own initiative, wrote the City OPPOSING the 80-unit monolith, so we must question Ms. Mazzocco's candor when obtaining and listing signatures. I have received copies of letters sent by area residents to the City who oppose the Domus Development project, so please do not take the list of signers from Ms. Mazzocco to represent community opinion.
6. According to a letter Ms. Mazzocco wrote me awhile ago, she would like to have a member of her family move to Oakland and live near Ms. Mazzocco in the proposed Domus project. While I know from experience that it is difficult for Oaklanders to find such a convenient and affordable arrangment for beloved elders, we must oppose the Domus project for its harm to the Dimond district, for the financial ripoff, and for failing to address the housing needs of truly low income people.
Charles Pine
chpine2(at)earthlink.net
Will Council reject ripoff at Hillcrest Motel site Jan. 27?
Note sent to Oakland Councilmembers or their aides:
Please stop a giveaway to the notorious Hillcrest Motel site. It comes up at the Jan. 27 CEDA Committee:
Lincoln Court Project
Affordable Housing Developer Funding, sub-items 8 and 9 (03-0213g and 03-0213h)
Please vote NO on these sub-items Tuesday.
1. This is NOT low-income senior housing that Oakland desperately needs
All the units are one bedroom, but only 16 units would rent at a price that truly low-income seniors can afford: $483 a month. Most of the units - 55 of them - would rent for $859, with a compound increase of 2.5% every year.
If you vote CEDA loan funds for this project, you take money away from the real low-income housing that Oakland needs.
2. Deal rewards Hillcrest Motel owner for breaking law
The deal is a reward, in the form of an outrageous $2.2 million land price (for 1.1 acre!), to the owner of the infamous crime-ridden Hillcrest Motel. This is no way to use public money and tax credits.
3. Traffic and parking nightmares
Neighbors are outraged at the prospect of traffic and parking nightmares. For years to come, the problems emanating from a three-story monolith will remind us of the history.
See the selection of neighbors' protest letters below. This project would be an insult after the decade that neighbors put into winning back their streets from the crime-ridden motel.
4. Huge developer profits should go to hold down rents
The developer, for-profit operator Meea Kang in a joint venture with Self Help for the Elderly of SF, collects a developer fee of $950,000 or more plus all sorts of padded profits (management fees, an inflated estimate of the vacancy rate, operating and replacement reserves, over-estimated property taxes, etc.) -- while putting up as equity a mere 7% of the total cost.
Please avoid the scandal that would arise if this project were to move forward. Please reject the loan. Demand that project be revised to fit the neighborhood and restructured so that after a strictly worded, reasonable return to the developer, surpluses are used to hold down the rents and make the housing more affordable to the desperately needy.
Sincerely,
Charles Pine
chpine2@earthlink.net
----Selection of neighbors' letters and emails to Janet M. Howley, CEDA:
Dear Ms. Howley,
We are against the apartment building proposed by Domus Development at the site of the former Hillcrest Motel. It is much too large for this neighborhood and does not provide enough parking. The lack of capacity on the streets where the garage exits lie will endanger children going to nearby schools and motorists going to and from work.
Developers would have us believe that only one person, not two persons with TWO cars would live in each apartment and that people 55 and older do not work or drive! We do not want to exchange one nightmare for another at this location. Thank you for your careful consideration of this matter.
Sincerely,
Bruce and Ruth Harteneck
Damuth St.
---
Dear Ms. Howley,
As a neighbor of the Hillcrest Motel, I am strongly against the proposal of the Senior Housing Development at the Lincoln Ave. and MacArthur Blvd. site.
If this project is allowed to go forward, it will create traffic nightmare and parking wars for the neighborhood. There just aren't enough proposed parking spaces available either. The pedestrian safety will become a great concern as well with increased traffic. The fact that making garage entrance on narrow street such as Lincoln Ave. and Boston Ave. is ridiculous creating additional traffic jam.
The project claims to rent to low income seniors, but can seniors with LOW INCOME really afford a monthly rent of $859 with an INCREASE of 2.5% PER YEAR! If they cannot find seniors who can really afford to live there, they will most likely going to rent to anyone else who may NOT be seniors. Then it defeats the purpose of this project to benefit the low income seniors.
Imagine someone wants to build a massive three story building across your house and which is going to block your once beatiful view, would you like that? I know I don't! And I'm pretty sure the other neighbors don't like that idea either. This project is going to bring to the neighborhood much more pollution; one obvious sign is the increase in traffic in this area.
The proposed financing for this project is very clear that it is ripping off the city of Oakland. I'm not sure about you, but I don't like people ripping off my tax dollars! With today's economy and budget crisis, please do not misuse and waste tax payers money.
Bring down the Hillcrest Motel is an intellegent first step, so continue the good work but PLEASE OPPOSE ANY APPROVAL AND ANY CITY MONEY FOR THE APARTMENT BUILDING PROPOSED BY DOMUS DEVELOPMENT. THE PROJECT IS WRONG FOR THE DIMOND DISTRICT AND WRONG FOR THE CITY TO SUBSIDIZE!
Help make us happy neighbors, thank you!
Sincerely,
John Chen
---
Dear Ms. Janet Howley:
As a neighbor of the Hillcrest Motel Site, I oppose any approval and any city money for the apartment building proposed by the Domus Development. The project is wrong for the Dimond district and wrong for the city to subsidize. There is already limited parking on the block of Boston Avenue and this project will make the situation even worse; causing a nightmare on Boston Ave, MacArthur Blvd, and Lincoln Ave. Further, a Section 8 housing will create more crime and danger for the block, as well as under appreciating the value of the homes on the block. The residents on Boston Ave does not approve of this project and you will hear from more of "us"...
Sincerely a Boston Ave resident,
Lisa Ma
---
Dear Ms. Howley
As a neighbor of the Hillcrest Motel site, I oppose any approval and any City money for the apartment building proposal by Domus Development. The project is wrong for the Dimond District and wrong for the City to subsidize.
Sincerely,
Gavin Struk
Lincoln Avenue
*This discussion has been closed. No more comments may be added.*